Shares of American Eagle fell by about 13% in after-hours trading on Wednesday following the company’s disappointing holiday sales forecast and a reduction in its full-year revenue guidance. Despite strong performance in the back-to-school season, the apparel retailer is facing shifting consumer behavior, with shoppers hesitant to spend outside major shopping events.
Quarterly Performance
For the third quarter, American Eagle’s earnings per share (EPS) were 48 cents, surpassing the expected 46 cents, while revenue came in at $1.29 billion, slightly missing expectations of $1.30 billion. The company’s net income was $80 million ($0.41 per share), down from $96.7 million ($0.49 per share) during the same period last year. Adjusted earnings, excluding restructuring and impairment charges, stood at 48 cents per share.
Despite a small sales decline (down 1% from the previous year), this marks the third consecutive quarter that American Eagle has missed Wall Street’s sales expectations.
Holiday Sales Outlook
Looking ahead to the holiday season, American Eagle expects comparable sales to increase by around 1%, with total sales dropping by approximately 4%. This decline reflects an $85 million impact from having one less selling week and a later start to the holiday shopping period. The guidance is weaker than expected, as analysts had forecasted 2.2% growth in comparable sales and a 1% sales decline.
For the full year, the company now projects comparable sales growth of 3%, revised down from the previous forecast of 4% growth. Full-year sales are expected to grow by 1%, down from earlier guidance of 2% to 3%.
Aerie Brand Growth
Despite these setbacks, Aerie, American Eagle’s lingerie and activewear brand, continues to see strong demand. Aerie’s revenue reached an all-time high, with comparable sales growing by 5%, building on a 12% growth from the previous year.
CEO’s Statement
CEO Jay Schottenstein acknowledged the strong back-to-school season but noted the ongoing challenge of volatile demand between peak shopping periods. “We have entered the holiday season well positioned, with our leading brands offering high-quality merchandise, great gifts, and an outstanding shopping experience,” Schottenstein said, emphasizing that while customer response has been positive during key selling periods, the company remains cautious about potential fluctuations in demand.
The company’s outlook reflects broader trends in retail, where many consumers are waiting for major sales events and reducing their spending in between.
Conclusion
As American Eagle navigates an uncertain retail environment and changing consumer habits, it faces challenges during the holiday season. While Aerie’s growth is a bright spot, the company is contending with weaker sales expectations and cautious consumer sentiment heading into the end of the year.
