American Eagle Outfitters Q1 2025 Earnings

American Eagle Outfitters Reports Disappointing Quarterly Earnings

American Eagle Outfitters reported quarterly earnings on Thursday that missed expectations, reflecting a $75 million write-down in spring and summer merchandise, following the retailer pulling its full-year guidance earlier this month due to macroeconomic uncertainty.

CEO’s Statement

"The first quarter was a challenging period for our business," CEO Jay Schottenstein said in a release. "While we are disappointed with the results, we are taking actions to better position the company and drive stronger performance in the upcoming quarters. Our brands remain resilient. The team is executing with urgency as we look to strengthen both the topline and profit flow-through."

Quarterly Results

The Pittsburgh retailer’s results do not come as a surprise for investors, considering it preannounced some of its results two weeks ago. At that time, it also announced it would withdraw its full-year guidance as it manages slow sales, steep discounting and a volatile macroeconomic environment.

Key Figures

• Loss per share: 29 cents adjusted vs. loss of 22 cents expected
• Revenue: $1.09 billion vs. $1.09 billion expected

Prior to the preannouncement, analysts had been expecting earnings per share to be an 11-cent profit.

Operating Loss and Revenue

The company, which makes fashion clothing targeted at teens and young adults, reported an operating loss for the three-month period that ended May 3 of $85.18 million compared with a net income of $77.84 million a year earlier. Excluding one-time charges related to restructuring and a supply chain optimization project, AEO posted an adjusted operating loss of $68.06 million. The loss also reflects "higher than planned" promotions and a write-off of $75 million in spring and summer merchandise.

Comparable Sales and Guidance

Revenue dropped to $1.09 billion, in line with expectations but down slightly from $1.14 billion a year earlier. Comparable sales were down 3% during the quarter, led by a 4% decline at the company’s intimates and activewear line, Aerie. The namesake brand saw comparable sales down 2%. AEO issued downbeat guidance for the second quarter, expecting revenue to be down 5% compared to an estimate of 4%, comparable sales down 3%, and gross margin down year-over-year.

Conference Call and Tariff Impact

Schottenstein said during a conference call with investors on Thursday that he was "disappointed" by the first-quarter results. He said earlier this month that the $75 million write-off is due to miscalculated merchandising strategies resulting in excess inventory and higher promotions. Jennifer Foyle, president and executive creative director for AE & Aerie,! said on Thursday’s call that the brand had misses on the merchandising product in a handful of key categories, which was compounded by a cool spring and a slow start to the quarter in February.

Mitigating Tariff Impact

CFO Michael Mathias said the company is on track to reduce its sourcing exposure to China to under 10% this year, with the fall and holiday season down to low single digits. He said the mitigated tariff impact to the full year is around $40 million, including a "couple million dollars" in the second quarter that is already embedded in the guidance, and the rest is spread out later in the year.

Conclusion

American Eagle Outfitters’ disappointing quarterly earnings reflect the challenges faced by the retail industry due to macroeconomic uncertainty and tariff impacts. The company is taking actions to better position itself and drive stronger performance in the upcoming quarters. With a focus on mitigating tariff impacts and improving merchandising strategies, AEO aims to strengthen its topline and profit flow-through.

FAQs

Q: What was the main reason for American Eagle Outfitters’ disappointing quarterly earnings?
A: The main reason was a $75 million write-down in spring and summer merchandise due to miscalculated merchandising strategies.
Q: How did the company’s comparable sales perform during the quarter?
A: Comparable sales were down 3% during the quarter, led by a 4% decline at the company’s intimates and activewear line, Aerie.
Q: What is the company’s guidance for the second quarter?
A: AEO issued downbeat guidance for the second quarter, expecting revenue to be down 5% compared to an estimate of 4%, comparable sales down 3%, and gross margin down year-over-year.
Q: How is the company mitigating the impact of tariffs?
A: The company is on track to reduce its sourcing exposure to China to under 10% this year, with the fall and holiday season down to low single digits.
Q: What is the expected tariff impact on the company’s full-year results?
A: The mitigated tariff impact to the full year is around $40 million.