American clothing and accessories store American Eagle seen in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
Budrul Chukrut | Light rocket | fake images
Actions of American Eagle plummeted about 17% on Tuesday after the company issued a holiday forecast that failed to impress.
For its holiday quarter, American Eagle expects sales to increase in the single digits, above the 3.4% sales growth analysts were expecting, according to LSEG. However, it expects its operating income to be between $105 million and $115 million, which is largely below expectations of $114 million, according to StreetAccount.
The forecast was affected by an expected 20% increase in selling and general administrative expenses, the company said.
However, the clothing retailer outperformed in its fiscal third quarter. Here’s how the company fared compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: 49 cents vs. 48 cents expected
- Revenue: $1.3 billion vs. $1.28 billion expected
The company’s reported net income for the three-month period ended Oct. 28 was $96.7 million, or 49 cents per share, compared with $81.3 million, or 42 cents per share, from the previous year.
Sales rose to $1.3 billion, up about 5% from $1.24 billion a year earlier.
During the quarter, American Eagle’s gross margin came in at 41.8%, below the 42.1% analysts expected, according to StreetAccount.
American Eagle managed to achieve a 5% increase in sales despite a general slowdown in the clothing industry, but its performance still failed to impress Wall Street.
A similar dynamic emerged in rival Abercrombie & Fitchwhich also reported earnings on Tuesday and a forecast that failed in the face of surging sales growth.
For the full year, American Eagle projects revenue will be in the mid-single digits, compared to previous guidance of low single digits. Analysts expected full-year sales growth to be around 2.6%, according to LSEG.
The retailer toughened its full-year operating income forecast and expects them to be in the range of $340 million to $350 million, compared to previous guidance of $325 million to $350 million, which is what analysts had expected, according to StreetAccount. Selling, general and administrative expenses are also expected to increase by double digits throughout the year.
Retailers have been on tenterhooks ahead of the crucial holiday shopping season over concerns that demand will be tepid, and the muted comments from American Eagle and Abercrombie & Fitch follow similar comments from other retailers that recently reported earnings.
Also on Tuesday, both Best Buy and Lowe’s cut their forecasts, citing an unpredictable consumer and a continued slowdown in major purchases.
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