A customer, let’s call him Bob, walks into an American Eagle store in sunny Miami, Florida on April 4, 2025. The store is filled with trendy clothes and accessories, but little does Bob know about the financial woes that the company is currently facing. American Eagle announced on Tuesday that they are waving goodbye to a whopping $75 million worth of spring and summer merchandise. Yikes! On top of that, they are also saying sayonara to their full-year guidance due to slow sales, heavy discounts, and an uncertain economy. Sounds like tough times ahead for the iconic apparel retailer.
Financial Troubles and Sales Slump
In the first quarter, which ended in early May, American Eagle is expecting revenue to hit around $1.1 billion. That’s a 5% drop compared to the same period last year. The company is also bracing for a 3% decline in comparable sales, with their intimates brand Aerie taking the biggest hit at an expected 4% drop. Shares are taking a nosedive, plunging more than 17% in extended trading. Ouch!
CEO Jay Schottenstein expressed disappointment in their first-quarter performance, blaming it on poor merchandising strategies that led to higher promotions and excess inventory. The company is expecting an operating loss of $85 million and an adjusted operating loss of $68 million for the quarter due to excessive discounting and a $75 million inventory charge related to unsold spring and summer goods. It’s like a clearance sale gone wrong!
Looking Ahead and Uncertain Future
Despite the gloomy outlook, Schottenstein is optimistic about the future. He mentioned that they are in a better position going into the second quarter with more aligned inventory and are actively working on improving product performance and buying principles. However, due to macro uncertainty and the disappointing first-quarter results, American Eagle has decided to withdraw its fiscal 2025 guidance. It’s like sailing into uncharted waters without a compass.
Tariff Troubles and Inventory Woes
The recent tariff policy changes might have had an impact on American Eagle, but the company stated that they were well-prepared with a solid inventory position. However, at the start of the first quarter, they faced some inventory outages and had to supplement stock in key categories, especially at Aerie. It’s like trying to catch a wave on a surfboard that’s missing a fin. The uncertainty of the economy and changing customer preferences are making it challenging for American Eagle to stay afloat in the turbulent retail sea.
