Shares of American Eagle plunge 13% as firm points weak vacation steering

American Eagle shares dropped about 13% in prolonged buying and selling Wednesday after the corporate reported third-quarter earnings during which it issued weak vacation steering and lower its full-year forecast. The corporate mentioned it is contending with value-seeking shoppers who’re solely prepared to spend throughout key procuring moments. 

The attire retailer narrowly missed Wall Road’s expectations on the highest line, however beat on the underside line. 

Here is how American Eagle carried out throughout its fiscal third quarter in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG:

• Earnings per share: 48 cents adjusted vs. 46 cents anticipated
• Income: $1.29 billion vs. $1.30 billion anticipated

The corporate’s reported internet earnings for the three-month interval that ended Nov. 2 was $80 million, or 41 cents per share, in contrast with $96.7 million, or 49 cents per share, a 12 months earlier. Excluding one-time prices associated to restructuring and impairment prices, American Eagle posted an adjusted revenue of 48 cents per share. 

Gross sales dropped to $1.29 billion, down about 1% from $1.3 billion a 12 months earlier. 

Whereas it was slender, Wednesday’s miss is the third quarter in a row that American Eagle has not met Wall Road’s gross sales targets.

In a press release, CEO Jay Schottenstein touted a “robust” back-to-school procuring season however mentioned demand stays inconsistent between main procuring occasions. 

“We’ve got entered the vacation season nicely positioned, with our main manufacturers providing high-quality merchandise, nice presents and an excellent procuring expertise throughout channels,” Schottenstein mentioned. “Key promoting durations have seen a optimistic buyer response, but we stay cognizant of potential choppiness throughout non-peak durations.” 

Shoppers popping out for key procuring moments adopted by gross sales sharply dropping off has been a constant theme throughout the retail trade. Foot Locker cited the same dynamic when reporting earnings earlier Wednesday, as did Greenback Tree.

For its vacation quarter, American Eagle is anticipating comparable gross sales to be up round 1%, with complete gross sales down about 4%, together with an $85 million influence from having one much less promoting week and a later begin to the vacation procuring season. The outlook is beneath the two.2% comparable gross sales development StreetAccount was in search of and the 1% gross sales decline LSEG had anticipated. 

Consequently, American Eagle is now anticipating comparable gross sales to develop by 3% for the total 12 months, down from prior steering of 4% development and beneath StreetAccount’s estimate of 4.1%. It is now anticipating full-year gross sales to be up 1%, down from earlier steering of between 2% and three% and beneath LSEG expectations of two.5% development. 

Much like different retailers, American Eagle had taken a cautious method to the again half of the 12 months because it contended with uncertainty across the 2024 election and the general macroeconomic surroundings. However in contrast to its rivals, it has stored that cautious tone.

Each Abercrombie & Fitch and Dick’s Sporting Items, which issued cautious outlooks earlier this 12 months, reversed their earlier temper when reporting earnings earlier this month. 

Regardless of the underwhelming outlook and gross sales miss, American Eagle is seeing robust demand for its Aerie model. Third-quarter income for Aerie got here in at an all-time excessive for the corporate, and comparable gross sales grew 5%, on high of 12% development from the year-ago interval.