An American Eagle Outfitters store in New York, USA, on Monday, May 27, 2024.
Stephanie Keith | Bloomberg | Getty Images
american eagle The company said on Wednesday it was working to improve its product offerings and adjust operations to make progress on improving profitability. Still, fiscal first-quarter sales fell short of Wall Street expectations.
The company said in a press release that although revenue was slightly lower than expected, it grew 6% from the same period last year and set a new record for the company.
The stock fell more than 10% in after-hours trading Wednesday.
Here’s how the apparel company performed compared to Wall Street expectations, according to a survey of analysts by LSEG:
- Earnings per share: 34 cents Expected to be 28 cents
- income: $1.14 billion vs. $1.15 billion expected
The company reported net profit for the three months ended May 4 that nearly quadrupled compared with the same period last year. American Eagle reported net income of $67.8 million, or 34 cents a share, compared with net income of $18.5 million, or 9 cents a share, a year earlier.
Sales increased to US$1.14 billion, an increase of approximately 6% from US$1.08 billion in the same period last year.
American Eagle said full-year operating income is expected to be between US$445 million and US$465 million, with revenue increasing 2% to 4% compared with the previous year. According to StreetAccount, the figure was slightly below expectations for 3.4% growth.
Treasurer Mike Mathias told CNBC that American Eagle is taking a “cautious” view of the second half of the year, preparing for some tougher comparisons, awaiting the Fed’s rate decision and preparing for the upcoming presidential election. “Noise” prepares for the election.
He added that the company is waiting to see how the back-to-school shopping season progresses to get a better idea of what the rest of the year will look like.
According to LSEG, American Eagle expects operating income in the range of $95 million to $100 million for the current quarter, reflecting high-single-digit revenue growth, which is in line with the 7.4% growth analysts had expected.
The clothing company, which owns its namesake banner and lingerie brand Aerie, is developing a new strategy to spur growth over the next three years.
Some of these efforts are already starting to bear fruit. In the first fiscal quarter, American Eagle’s gross profit margin increased by 2.4 percentage points. Drivers of gains include better inventory management, lower product and shipping costs and leverage on expenses such as rent, delivery, distribution and warehousing.
American Eagle’s strategy also focuses on improving its product assortment, removing products that don’t fit customers and digging deeper into categories that resonate.
Jennifer Foyle, American Eagle’s president and executive creative director, told CNBC that the company was simply “hyperbuying” — meaning it had too many different individual products (often called SKUs in the industry) for consumers to choose from.
“We know we can do more with less,” Foyle said. “So we invested more deeply in bottoms but with fewer SKUs so that we can serve our customers based on the fit they require.”
The company has also been working to remodel its stores and introduce new formats. The company recently implemented a new store design for American Eagle “faster than the chain could balance,” Foyle said.
“We’re excited to revamp our stores with a new brand feel, which I think is exactly what we’ve been doing,” Foyle said. “Based on the results, it’s clear customers like what they see in the store design.”
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