American Eagle Shares Plummet As the Retailer Clips Its Own Wings Heading into Holiday Season...

American Eagle Outfitters just dropped its fiscal third-quarter results, and let’s just say, the report hit like my lukewarm Peppermint Mocha this morning (don’t judge)—somewhat satisfying but not the jolt I sold my kidney for. The teen retailer managed to sprinkle in a few victories but stumbled where it matters most: revenue and holiday optimism. Wall Street, being the bipolar devil it is, reacted accordingly—pumping the stock up 4% during regular trading, only to gut it by 13% in after-hours trading after weak holiday guidance stole the vibe.

(Source: Giphy) 

For starters, the good news is that American Eagle did beat expectations on the bottom line, posting a net income of $80 million, or 41 cents per share. That’s down from $96.7 million (49 cents a share) a year ago, but hey, who’s counting? Adjust for one-time costs like restructuring, and they actually hit 48 cents per share, beating Wall Street’s forecast of 46 cents. A minor win, but a win nonetheless. 

(Source: CNBC) 

Now the not so good news: revenue.  Clocking in at $1.29 billion, it missed the $1.3 billion target analysts had been banking on. Sure, it’s just shy of the mark, but when you’re a retailer in today’s cutthroat market, every penny feels like a punch to the gut. This marks the third straight quarter of falling short on sales expectations, which is starting to feel less like a hiccup and more like a pattern.

CEO Jay Schottenstein tried to hype up the report, pointing to a “strong” back-to-school season, but even he couldn’t dress up the fact that the holiday outlook is looking pretty meh. The company slashed its full-year guidance, now expecting comparable sales growth of 3% (down from 4%) and total revenue growth of just 1%, shaving off the prior range of 2%-3%. Why the pessimism? Blame the “value-seeking consumers,” aka shoppers who are basically holding out for discounts like they’re coupon shoppers on steroids.

(Source: Giphy) 

But, but, but… the silver lining here: Aerie, baby.  The loungewear and intimates brand continues to be the golden child of American Eagle’s portfolio, posting its highest-ever quarterly revenue. Comparable sales jumped 5% on top of last year’s 12% gain, proving that comfort and stretchy pants are still undefeated. Meanwhile, the core American Eagle brand held its own with a 3% comp increase—modest, sure, but lighting the world on fire? Nah. 

Overall, despite these pockets of strength, the overall vibe is cautious. CFO Mike Mathias touted the company’s “Powering Profitable Growth Plan” as proof that things are moving in the right direction, but he couldn’t ignore the elephant in the room—slow demand outside of peak shopping moments and a consumer base that’s clearly clutching its wallets.

(Source: Yahoo Finance) 

Unlike Abercrombie & Fitch, which has been on a tear, or Dick’s Sporting Goods, which is shoving its athletic dominance down everyone’s throats, American Eagle is playing it safe. Maybe it’s the economy, or maybe it’s the looming uncertainty of Trump's policies (read: Tariffs). Regardless, the company is bracing for impact… wherever it may come from. But hey, scared money doesn't make money, amirite? And given Schottenstein’s bold vision of doubling the business from $5 billion to $10 billion, he’s going to have to be a little more aggressive than just riding on Aerie’s coattails. 

(Source: Giphy) 

But for now though, it’s clear that American Eagle is stuck in retail purgatory: not bad enough to panic, but not great enough to pop bottles. The holiday season is make-or-break time, and the retailer has everything to prove in the next few weeks. Bottom line: American Eagle is acting like it’s own self-fulfilling doom—American Eagle’s results feel a lot like waiting for a sale—it’s good enough for now, but you’re really holding out for something better.

In the meantime, do what you will with this information, and place your bets accordingly. As always, stay safe and stay frosty, friends! Until next time… 

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Stocks.News does not hold positions in companies mentioned in the article.