American Eagle informed investors that consumer spending is slowing down, marking a slower start to the year than anticipated. According to CEO Jay Schottenstein, “Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather.” The company plans to take proactive steps to strengthen its top-line, manage inventory, and reduce expenses while focusing on long-term strategic priorities. Shares dropped approximately 5% in extended trading.
The weak guidance for the current quarter and year ahead reflects concerns about consumer behavior amidst persistent inflation and tariff worries. Several other retailers have also issued cautious outlooks regarding macroeconomic conditions, warning of a potentially weaker sales year in 2025.
Despite the downbeat commentary, American Eagle reported mixed holiday results with comparable sales beating expectations. In the fiscal fourth quarter, earnings per share were 54 cents (vs. 50 cents expected), and revenue was $1.60 billion (in line with expectations). Net income increased to $104 million, or 54 cents per share, compared to $6.31 million, or 3 cents per share, a year earlier. Sales declined slightly to $1.60 billion from $1.68 billion due to an extra week in the prior year’s period.
Comparable sales rose 3%, surpassing the expected 2.1% growth, driven by Aerie, the company’s intimates and activewear line, which saw a 6% increase. The namesake brand experienced a 1% rise in comparable sales. For the current quarter, American Eagle anticipates a mid-single-digit decline in sales, contrasting with analysts’ expectations of a 1.3% increase. For the full year, it expects a low single-digit decline versus a 3% growth forecast.
Over the past year, American Eagle has improved profitability but faced slower sales growth. Economic uncertainty and changing consumer behavior have impacted the company, as seen across the retail sector. Consumer confidence dropped significantly in February, job growth slowed, and unemployment rose, raising recession concerns, especially if trade tensions persist.
More details are expected during a conference call at 4:30 p.m. ET.
— news from CNBC