American Eagle (AEO) Earnings Q4 2024

American Eagle Warns of Slower Start to Year, Shares Fall 5%

Company Sees Less Robust Demand and Colder Weather

American Eagle, the popular retailer, warned investors on Wednesday that consumers are pulling back on spending, leading to a "slower start" to the year than expected. The company’s CEO, Jay Schottenstein, stated that the first quarter is off to a slower start, reflecting less robust demand and colder weather.

Weak Guidance and Cautious Commentary

The downbeat commentary, which came with weak guidance for the current quarter and year ahead, is the latest warning sign that the consumer might be slowing down as shoppers contend with persistent inflation and concerns around tariffs. Over the past couple of weeks, a string of other retailers, including both strong companies and ones that tend to struggle, have issued weak guidance and cautious commentary about the current macroeconomic conditions and warned 2025 might be a weaker than expected year for sales.

Holiday Results and Comparable Sales

Beyond its outlook, American Eagle issued mixed holiday results and comparable sales that beat expectations. Here’s how the apparel company did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 54 cents vs. 50 cents expected
• Revenue: $1.60 billion vs. $1.60 billion expected

Quarterly Results

The company’s reported net income for the three-month period that ended Feb. 1 was $104 million, or 54 cents per share, compared with $6.31 million, or 3 cents per share, a year earlier. Sales dropped to $1.60 billion, down slightly from $1.68 billion a year earlier. Comparable sales, which don’t include the effect of one less selling week, were up 3% during the quarter, ahead of expectations of up 2.1%, according to StreetAccount.

Outlook and Challenges

For the current quarter, American Eagle is expecting to see a mid-single-digit decline in sales, while analysts expected revenue to increase 1.3%. For the full year, it is expecting sales to decline by a low single digit, compared with expectations of 3% growth, according to LSEG. The company is also expecting Aerie sales to be positive for the year but that growth will be offset by a steeper decline at the American Eagle banner. Tariffs are also expected to weigh on results, with a $5 million to $10 million hit from the new duties in fiscal 2025.

Strategic Priorities

As the company navigates through an uncertain consumer and operating landscape, it will remain focused on its long-term strategic priorities, including strengthening its top line, managing inventory, and reducing expenses. The company has made significant strides in improving profitability over the past year but has seen slower sales growth.

Conclusion

American Eagle’s warning of a slower start to the year is a sign that the consumer might be slowing down due to persistent inflation and concerns around tariffs. The company’s mixed holiday results and comparable sales that beat expectations are a positive sign, but its weak guidance and cautious commentary are a concern. As the company looks to the future, it will need to continue to focus on its long-term strategic priorities to stay competitive in a challenging retail landscape.

Frequently Asked Questions

Q: What did American Eagle warn investors about?
A: American Eagle warned investors that consumers are pulling back on spending, leading to a "slower start" to the year than expected.

Q: What is the company’s outlook for the current quarter and year ahead?
A: American Eagle expects to see a mid-single-digit decline in sales for the current quarter and a low single-digit decline in sales for the full year, compared with expectations of 1.3% growth.

Q: What are the company’s strategic priorities?
A: The company will remain focused on strengthening its top line, managing inventory, and reducing expenses as it navigates through an uncertain consumer and operating landscape.