American Eagle Faces Challenges Amid Holiday Season #

American Eagle issued weak holiday guidance and lowered its full-year forecast due to value-seeking consumers who prefer spending during key shopping moments. Although the apparel retailer narrowly missed expectations on sales, it surpassed profit estimates.

For the third fiscal quarter ending November 2, the company’s net income was $80 million, or 41 cents per share, compared to $96.7 million, or 49 cents per share, the previous year. Adjusted profit, excluding one-time charges, was 48 cents per share. Sales decreased to $1.29 billion from $1.3 billion a year earlier, marking the third consecutive quarter of missed sales targets.

“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. Key selling periods have seen a positive customer response, yet we remain cognizant of potential choppiness during non-peak periods.”

The company anticipates comparable sales for its holiday quarter to rise by around 1%, with total sales down about 4% due to a shortened selling week and a delayed start to the season. These projections fall below expectations of 2.2% for comparable sales growth and a 1% sales decline.

American Eagle now expects full-year comparable sales to grow 3%, revised from 4%, with total sales projected to increase by 1%, down from the earlier guidance of 2-3%. This cautious outlook reflects ongoing uncertainty about the 2024 election and macroeconomic conditions.

Despite the underwhelming prospects, there is robust demand for American Eagle’s Aerie brand. Aerie’s third-quarter revenue hit an all-time high, with comparable sales increasing by 5%, following 12% growth in the prior year.