Miami, Florida – American Eagle Outfitters announced significant changes Tuesday, revealing plans to write off $75 million in spring and summer merchandise, prompting a withdrawal of its full-year financial guidance. The apparel retailer cited sluggish sales, aggressive discounting, and an unpredictable economic environment as major factors influencing its decision.
The company anticipates a revenue drop to approximately $1.1 billion for the first fiscal quarter, which concluded in early May, representing a decline of about 5% from the same period last year. Comparable sales are expected to decrease by 3%, largely driven by a 4% dip in sales at its intimates brand, Aerie. Initially, American Eagle had projected only a moderate decline and expected full-year revenue to fall by a low single-digit percentage.
Following this news, shares of American Eagle fell more than 17% in after-hours trading. In its earlier fiscal fourth-quarter report from March, the retailer highlighted an unexpectedly slow start to the first quarter, attributing it to a combination of lackluster demand and unseasonably cool weather. As conditions deteriorated, the company resorted to deep discounts to clear excess inventory.
The projected operating loss for the quarter stands at around $85 million, with an adjusted operating loss—excluding one-off restructuring expenses—estimated at about $68 million. The company attributes this financial setback to higher-than-expected discounting and the recent inventory write-off.
“We are clearly disappointed with our execution during the first quarter. Our merchandising strategies did not yield the anticipated results, leading to more promotions and increased inventory levels,” said CEO Jay Schottenstein. He expressed optimism for the second quarter, indicating that inventory levels have begun to better reflect sales trends.
In response to the challenges faced, American Eagle is under a comprehensive review of its future strategies, focusing on improving product performance and refining purchasing practices. The company has decided to withdraw its financial outlook for fiscal 2025, citing macroeconomic uncertainties and the need for an assessment based on first quarter performance.
Amid concerns over recent tariff policy changes, it remains unclear how these developments have impacted American Eagle’s operations. While some retailers adjusted their inventory strategies in anticipation of increased duties, American Eagle previously stated that it maintained a solid inventory position and effectively adapted to shifting consumer preferences. However, in light of recent circumstances, the company noted that earlier in the first quarter, it experienced some inventory shortages and required supplementary stock in key categories, particularly for Aerie, a brand central to its growth strategy.
Looking forward, American Eagle aims to reposition itself in the market by aligning its inventory with evolving sales trends and enhancing its merchandising strategies, all while navigating a challenging retail landscape.