A shopper walks past the store of American Eagle, an American clothing and accessories retailer, in Hong Kong.
Budru Chukrut | Light Rocket | Getty Images
american eagle On Thursday, the company missed Wall Street sales targets for the second consecutive quarter, but profit increased nearly 60%, in part due to lower product costs.
The stock fell more than 5% in premarket trading Thursday.
Here’s how the apparel company’s fiscal second-quarter performance compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: 39 cents vs expected 38 cents
- income: $1.29 billion vs. $1.31 billion expected
The company reported net income of $77.3 million, or 39 cents a share, for the three months ended Aug. 3, compared with $48.6 million, or 25 cents a share, a year earlier.
Sales increased to US$1.29 billion, an increase of approximately 8% from US$1.2 billion in the same period last year. The sales increase would have been smaller were it not for calendar adjustments, which had a positive impact of $55 million on second-quarter sales.
In the quarter, revenue at American Eagle’s lingerie line Aerie grew 9%, while its namesake brand grew 8%.
American Eagle’s gross profit margin was 38.6%, 0.9 percentage points higher than the previous year and in line with analysts’ expectations. The gross margin increase was driven by “favorable product costs,” indicating that American Eagle spent less to produce its products during the quarter. It’s unclear whether it has lowered prices as a result.
The venerable mall brand issued a better-than-expected outlook for the current quarter, but its full-year forecast fell short of expectations, suggesting the company is still bracing for a tumultuous second half.
According to StreetAccount, American Eagle expects comparable sales to grow 3% to 4% in the current quarter, which is better than analysts’ previous forecast of 2.8% growth for the company.
The retailer expects total revenue to be flat or slightly higher in the third quarter, in line with expectations, according to London Stock Exchange Group (LSEG).
The company expects comparable sales to grow about 4% this year, with total revenue growing 2% to 3%, below analysts’ expectations. Wall Street expects full-year comparable sales to grow 4.2% and overall sales to grow 3.5%, according to StreetAccount and LSEG.
In May, Treasurer Mike Mathias told CNBC that American Eagle was taking a “cautious” view of the second half of the year, awaiting the Fed’s interest rate decision and bracing for the “noise” of the upcoming presidential election. Be prepared.
Like other retailers grappling with slowing demand for discretionary goods, American Eagle is looking to cut costs and improve efficiencies to protect profits amid sluggish sales. Earlier this year, the company unveiled a new strategy to increase profits and aims to increase sales by 3% to 5% annually over the next three years and operating margins to about 10%.
This quarter, American Eagle made some progress toward that goal. Operating income reached US$101 million, an increase of 55%, and operating profit margin increased by 2.4 percentage points to 7.8%. Without calendar adjustments, operating income would have been lower, which would have had a $20 million positive impact on the metric.
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