Sticky inflation impacted demand for American Eagle Outfitters’ garments and accessories, which are frequently offered at full price, and the company missed Wall Street projections for quarterly sales on Wednesday.
Following the bell, American Eagle’s stock dropped more than 8% even though the business kept its fiscal 2024 projections same.
The company’s quarterly gross margin increased by 240 basis points due to decreased transportation and product costs, but demand is still bumpy as consumers stretch their budgets to cover rising living expenses.
The company’s overall ending inventory, which amounted to $681 million, rose 9% year over year due to an increase in end-of-season products as it continues to refine a more successful stock clearing plan.
According to Rachel Wolff, an analyst at Emarketer, “the company’s revenue miss is an indication that economic pressures are driving consumers to spend more carefully, particularly in discretionary categories like apparel.”
Peers Abercrombie & Fitch and Dick’s Sporting Goods also increased their yearly sales projections earlier in the day due to strong demand for stylish apparel and footwear, although American Eagle’s performance trailed behind them.
American Eagle stated that it still anticipates sales growth of 2% to 4% for the fiscal year 2024. In a post-earnings call, the company’s management stated, “It’s really more of a cautious guide for the back half of the year as we lap some of the better results that started with back to school last year.”
Nevertheless, a 4% increase in retail revenue during the quarter was aided by a spike in springtime shopping, with 12% growth in internet revenue.
According to LSEG statistics, the company’s net sales for the quarter ended May 4 increased 6% to $1.14 billion, slightly less than analysts’ average forecast of a 6.4% increase to $1.15 billion. The earnings per share for the first quarter was 34 cents, as opposed to the 28 cents that experts had predicted.
