American Eagle Outfitters AEO shares plunge after earnings report

Shares of American Eagle Outfitters dropped fell Thursday, after the company lowered its full-year outlook, even as it matched Wall Street’s quarterly earnings expectations and beat revenue expectations.

The mall retailer said Wednesday afternoon it now expects operating income to range between $250 million and $270 million, below the $270 million to $310 million range it had predicted in March. It said it anticipates full-year revenue to be flat to down low single-digits, lagging the flat to up single-digits it projected before.

Sales trends slowed as the company began the second quarter, a pattern the retailer factored into its guidance. On an earnings call, Jen Foyle, the company’s executive creative director, said she hopes shoppers will buy more seasonal merchandise as Memorial Day hits and summer weather takes hold.

Here’s how the company did for the three-month period that ended April 29 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

• Earnings per share: 17 cents, adjusted, versus 17 cents expected
• Revenue: $1.08 billion, versus $1.07 billion expected

American Eagle, which includes its namesake brand and the Aerie brand, diverged significantly from its competitor, Abercrombie & Fitch. Earlier Wednesday, shares of Abercrombie shot up as it posted a surprise profit and raised its outlook, lifting American Eagle’s stock with it.

American Eagle lost those earlier gains, as it reported its own quarterly results after the bell, including falling profits. Net income fell about 42% to $18.45 million, or 9 cents per share, compared with $31.74 million, or 16 cents a share, in the year-ago period.

Total net revenue rose about 2% to $1.08 billion from the $1.06 billion it reported in the year-ago period. Store revenue rose 5%. Digital revenue dropped 4%.

Its brands had mixed results. Aerie’s comparable sales increased 2%, but comparable sales for American Eagle’s namesake brand declined 2% compared with the year-ago period.

American Eagle made strides with inventory levels. Many retailers, including Target, Kohl’s and others, got stuck with too much merchandise after shipments got stuck in the supply chain and consumer preferences swung away from categories popular during the Covid-19 pandemic.

Inventory declined 8% to $625 million at the end of the quarter compared to the year-ago period.

In a news release, CEO Jay Schottenstein said the company wants to build back its operating margins and chase profitable growth. He said it is focused on “inventory discipline, cost savings and efficiencies across the business,” particularly with the tougher economic backdrop.