In the US, American Eagle confirms sales forecast; shares fall 10%
American clothing retailer American Eagle Outfitters confirmed its annual forecast for mid-single-digit growth in comparable sales. Following this, the company’s shares fell by about 10% in after-hours trading. According to Asharq Al-Awsat, the company also expects gross margin in the current quarter to remain at last year’s level.
Pressure on seasonal assortment
American Eagle reported continued pressure on the seasonal product categories of its namesake brand amid unstable demand for discretionary purchases. Due to inflation and macroeconomic uncertainty, shoppers are spending more on essentials, including fuel and groceries, while clothing and accessories are more often purchased during promotions.
Jennifer Foyle, executive creative director of American Eagle and Aerie, said the company is experiencing some pressure on American Eagle brand seasonal merchandise and expects it to persist in the third quarter. According to her, the retailer is adjusting inventory levels.
Inventory issues and the need for promotional activity in the third quarter, Foyle said, primarily concern certain seasonal categories, including shorts. The company needs to sell off part of the merchandise in this assortment.
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Inventory, revenue and tariff reimbursements
The cost of inventory for the quarter ended August 1 rose 14% year on year, taking into account the impact of additional tariffs. American Eagle Outfitters plans to reallocate inventory among brands and product categories throughout the year.
The company’s quarterly revenue was $1.38 billion, slightly exceeding analysts’ forecast of $1.37 billion, according to LSEG data. The company also raised its annual operating profit target after accounting for $196 million in tariff reimbursements received in the second quarter.
Third Bridge analyst Patrick Ricciardi said that American Eagle is lagging behind Levi’s and Abercrombie because of less clear brand positioning and assortment strategy.
