Shares of American Eagle, the popular American clothing and accessories retailer, plummeted approximately 17% in premarket trading following the company’s release of a lackluster holiday forecast. The retailer reported that for its upcoming holiday quarter, it expects sales to increase by high-single digits, surpassing the 3.4% sales growth estimated by analysts. However, American Eagle’s projected operating income of $105 million to $115 million fell mostly below expectations of $114 million.
The unfavorable forecast was primarily driven by a projected 20% increase in selling and general administrative expenses. Despite this, American Eagle outperformed during its fiscal third quarter. The company reported earnings per share of 49 cents, surpassing the anticipated 48 cents, and achieved revenue of $1.3 billion, exceeding the expected $1.28 billion.
Although sales rose by 5% to $1.3 billion compared to the previous year, American Eagle’s gross margin of 41.8% fell short of the estimated 42.1%. The company’s performance, while managing to surpass industry growth trends, failed to impress Wall Street, similar to its rival Abercrombie & Fitch, which also reported disappointing earnings and forecasts on the same day.
Looking ahead, American Eagle projects mid-single-digit revenue growth for the full year, an improvement from previous guidance that expected low single-digit growth. Analysts had predicted sales growth of around 2.6%. Additionally, the retailer revised its forecast for full-year operating income to a range of $340 million to $350 million, aligning with analysts’ expectations of $325 million to $350 million. However, American Eagle anticipates that selling, general, and administrative expenses will rise by low double digits for the full year.
These recent forecasts and earnings reports from American Eagle, Abercrombie & Fitch, and other retailers have raised concerns within the industry regarding tepid holiday demand. Other major retailers, such as Best Buy and Lowe’s, have also revised their forecasts, citing an unpredictable consumer landscape and a slowdown in big-ticket purchases.
1. Why did American Eagle’s stock prices drop?
American Eagle’s stock prices dropped due to the company’s disappointing holiday forecast, which failed to meet investors’ expectations.
2. How did American Eagle perform in its fiscal third quarter?
American Eagle outperformed in its fiscal third quarter, reporting higher earnings per share and revenue compared to Wall Street estimates.
3. What are the future sales expectations for American Eagle?
American Eagle projects mid-single-digit revenue growth for the full year, surpassing earlier guidance of low single-digit growth.
4. What concerns exist within the industry regarding the holiday season?
Retailers, including American Eagle, have expressed concerns about muted holiday demand, which has led to revised forecasts and lowered expectations for the crucial shopping season.