American Eagle Outfitters Plans to Cut Staff and Expense After Quarterly Loss

Scott Peters
08 Sep, 2022
New York City

American Eagle Outfitters Inc dropped 10.2% to $10.14 after the apparel retailer's second quarter results fell short of expectations. 

Revenues in the fiscal year 2022 second quarter ending in July were flat at $1.2 billion. 

From a year ago,  consolidated store revenue declined 2% and total digital revenue declined 6% and compared to pre-pandemic first quarter 2019, store revenue increased 1% and digital revenue increased 60%.

Gross margin declined to 30.9% from 42.1% a year ago largely on higher markdowns and rising freight costs. 

In the quarter, the apparel retailer swing to a loss of $42.5 million from a profit of $121.5 million a year ago. equally driven by Aerie and American Eagle brands. 

 

Inventory 

At the end of the second quarter, total ending inventory at cost increased 36% to $687 million from $504 million last year, 

Total apparel units increased only 22%, reflecting earlier receipts because of the improved supply chain flows.  

 

Capital Expenditures 

During the second quarter capital expenditures totaled $69 million and $128 million year-to-date. 

For the year, management now expects to spend approximately $250 million, lower than the previous estimate of $275 million.

 

Stock Buybacks 

The company repurchased 17 million shares as a part of its accelerated stock repurchase program and guided weighted average share count of 198 million in the third quarter.  

 

Guidance and Outlook 

The retailer guided third quarter gross margin is expected to be in the mid-thirties and in the fourth quarter in the low-thirties reflecting higher markdowns on more promotional retail environment. 

The company also plans to cut store payroll, corporate expense, professional services and advertising and save $100 million annually, higher than the previous target of $60 million. 

This translates to SG&A expenses remaining "relatively flat" to last year in the second-half, compared to previous guidance for "low-to-mid-single digit growth."