American Eagle’s stock fell by almost 16% on Tuesday following the release of an unimpressive holiday forecast by the company.
American Eagle anticipates sales growth in the high single digits for the holiday quarter, exceeding the 3.4% growth in sales that analysts had projected, as reported by LSEG. However, according to Street Account, it anticipates operating income of between $105 million and $115 million, largely below expectations of $114 million.
According to the company, a 20% increase in selling and general administrative expenses was anticipated, which hurt the forecast.
But in the third quarter of its fiscal year, the clothing retailer did better. Based on an analyst survey conducted by LSEG, formerly known as Refinitiv, here is how the company performed in comparison to what Wall Street was expecting:
- Profits per share: 49 cents as opposed to 48 cents anticipated
- Revenue: $1.3 billion versus the anticipated $1.28 billion
For the three months that concluded on October 28, the company reported net income of $96.7 million, or 49 cents per share, as opposed to $81.3 million, or 42 cents per share, for the same period the previous year.
From $1.24 billion to $1.3 billion in sales, there was a roughly 5% increase in sales.
According to Street Account, American Eagle’s gross margin for the quarter was 41.8%, which was less than the 42.1% that analysts had predicted.
Although American Eagle was able to maintain a 5% increase in sales in spite of the general slowdown in the apparel industry, Wall Street was unimpressed with the company’s performance.
Rival Abercrombie & Fitch experienced a similar dynamic, releasing earnings on Tuesday along with a forecast that was flat against the company’s explosive sales growth.
Compared to prior guidance of up low single digits, American Eagle is projecting revenue to be up mid single digits for the entire year. LSEG reports that analysts had projected full-year sales growth of about 2.6%.
According to Street Account, the retailer revised its operating income forecast for the entire year, which was previously expected to be between $325 million and $350 million. Instead, the retailer now expects operating income to be between $340 million and $350 million. For the entire year, SG&A costs are predicted to increase by low to mid-double digits as well.
Before the critical holiday shopping season, retailers have been nervous, fearing that demand will be weak. Abercrombie & Fitch and American Eagle have both made cautious comments, echoing other retailers who have recently released their earnings reports.
Additionally on Tuesday, Best Buy and Lowe’s lowered their projections, citing erratic consumer behavior and an ongoing decline in large-ticket sales.
