American Eagle’s shares fell by 13% in after-hours trading on Wednesday following the company’s disappointing holiday sales forecast and a reduction in its full-year outlook. The retailer reported weaker-than-expected sales and cut its forecast for the remainder of the year, citing cautious spending patterns among value-conscious shoppers.
While American Eagle saw strong demand during the back-to-school season, the company mentioned that consumer spending has been uneven between major shopping events. The company’s Aerie brand stood out with impressive growth, achieving 5% comparable sales growth, building on last year’s 12% growth.
Financial Performance
For the third quarter, American Eagle reported the following results:
- Earnings per share: 48 cents (adjusted) vs. 46 cents expected
- Revenue: $1.29 billion vs. $1.30 billion expected
Net income for the quarter was $80 million, or 41 cents per share, down from $96.7 million, or 49 cents per share last year. Despite the slight revenue drop of about 1% compared to last year, the company managed to exceed expectations on its earnings per share.
However, this marked the third consecutive quarter that American Eagle failed to meet Wall Street’s sales targets, signaling ongoing challenges in maintaining consistent growth.
Weak Holiday Guidance
CEO Jay Schottenstein acknowledged a solid back-to-school shopping season but cautioned that consumer demand remains unpredictable during off-peak periods. The company forecasted 1% growth in comparable sales for the holiday quarter, but total sales are expected to drop by 4%. This includes an $85 million impact from one fewer selling week and a later start to the holiday season.
As a result, American Eagle revised its full-year sales expectations, now projecting 1% sales growth (down from the previous forecast of 2-3%) and 3% comparable sales growth (down from an earlier estimate of 4%).
Outlook and Industry Trends
American Eagle’s cautious approach mirrors trends across the retail industry, where demand fluctuates around major shopping periods. Foot Locker and Dollar Tree have reported similar patterns, with strong sales during key events followed by sharp declines during quieter periods.
Despite the overall disappointing outlook, American Eagle is seeing strong performance from its Aerie brand, which reported record revenue for the third quarter and continued growth in comparable sales.
The retailer’s cautious stance on the remainder of the year reflects uncertainty around the broader economic environment, with factors such as the 2024 election influencing consumer confidence and spending behavior. However, competitors like Abercrombie & Fitch and Dick’s Sporting Goods have shown more optimism in their recent reports, highlighting a potential divergence in market conditions.
