American Eagle’s Holiday Guidance Falls Short Amidst Value-Conscious Consumers
The retail landscape is shifting, and American Eagle is no exception. On Wednesday, the apparel retailer issued weaker-than-expected holiday guidance, citing a challenging market where consumers are only willing to open their wallets during key shopping moments.
Third Quarter Performance: A Mixed Bag
American Eagle’s third-quarter results were a mixed bag. While the company narrowly missed Wall Street’s expectations on sales, it managed to beat on the bottom line. Net income for the three-month period ending November 2 came in at $80 million, or 41 cents per share, down from $96.7 million, or 49 cents per share, a year earlier. Excluding one-time charges, the company posted an adjusted profit of 48 cents per share.
Sales Slump Continues
Sales dropped 1% to $1.29 billion, marking the third consecutive quarter that American Eagle has failed to meet Wall Street’s sales targets. This trend is likely to continue, with the company expecting comparable sales to rise just 1% in the holiday quarter, with total sales down 4%.
CEO Schottenstein Cautiously Optimistic
Despite the lackluster performance, CEO Jay Schottenstein remains optimistic about the company’s prospects. “We have entered the holiday season well positioned, with our leading brands offering high-quality merchandise, great gifts, and an outstanding shopping experience across channels,” he said. However, Schottenstein acknowledged that demand remains inconsistent outside of key shopping events.
Industry-Wide Trend
American Eagle is not alone in its struggles. Other retailers, such as Foot Locker and Dollar Tree, have reported similar dynamics, where consumers flock to stores during major shopping events but disappear during non-peak periods.
Full-Year Guidance Revised Downward
As a result of the weak holiday guidance, American Eagle has revised its full-year guidance downward. The company now expects comparable sales to grow 3%, down from prior guidance of 4% growth. Full-year sales are expected to rise just 1%, down from previous guidance of between 2% and 3%.
Aerie Shines Bright
One bright spot for American Eagle is its Aerie brand, which reported an all-time high in third-quarter revenue. Comparable sales for Aerie grew 5%, building on 12% growth from the year-ago period.
Cautious Approach Ahead
As the retail landscape continues to evolve, American Eagle is taking a cautious approach to the back half of the year. With uncertainty surrounding the 2024 election and the overall macroeconomic environment, the company is erring on the side of caution.
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