In its preliminary report for the first quarter, American Eagle Outfitters said its performance was “disappointing”, which has led to a reconsideration of its strategy for the upcoming months.
AEO expects revenue for full year to decline by low-single-digit decline, with anticipated operating income ranging between $360m and $375m.
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AEO chief executive officer and board executive chairman Jay Schottenstein said: “We are clearly disappointed with our execution in the first quarter. Merchandising strategies did not drive the results we anticipated, leading to higher promotions and excess inventory. As a result, we have taken an inventory write down on spring and summer goods.”
Initial financial data for Q1 suggests a projected revenue of approximately $1.1bn, representing a 5% decline from the previous year’s corresponding period.
Comparable sales also fell by an estimated 3%, with American Eagle brand sales down by 2% and Aerie by 4%.
AEO anticipates reporting a GAAP operating loss around $85m for the quarter, with an adjusted operating loss of about $68m. The adjusted loss reflects heightened promotional activity and includes an inventory charge nearing $75m due to discounts on seasonal merchandise.
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By GlobalDataIn its fiscal 2024 report released this March, revenue for the first quarter was expected to decline mid-single-digit decline and operating income was projected to be between $20m and $25m.
The GAAP operating loss encompasses an additional charge of nearly $17m for asset impairment and restructuring costs, primarily linked to shutting down two distribution centres as part of AEO’s supply chain optimisation efforts.
Schottenstein added: “We have entered the second quarter in a better position, with inventory more aligned to sales trends. Additionally, we are actively evaluating our forward plans. Our teams continue to work with urgency to strengthen product performance, while improving our buying principles.”
