American Eagle shares dropped more than 17% in extended trading Tuesday after the retailer announced it is writing off $75 million in spring and summer inventory and pulling its full-year guidance amid sluggish sales, heavy discounting, and broader economic uncertainty.
The company expects first-quarter revenue to come in around $1.1 billion, roughly a 5% decrease from the same period last year. Comparable sales are projected to fall 3%, including a 4% drop at its Aerie brand. Earlier forecasts had already anticipated a mid-single-digit decline for the quarter and a low-single-digit drop for the full year, but results appear to have underperformed even those expectations.
Back in March, following its fiscal fourth-quarter report, American Eagle had warned that the first quarter was off to a slow start due to soft consumer demand and unseasonably cold weather. Since then, conditions worsened, prompting the company to offer deep discounts to move stagnant merchandise.
As a result, American Eagle is bracing for an operating loss of approximately $85 million and an adjusted operating loss—excluding restructuring-related charges—of about $68 million. The company attributes much of that to the higher-than-anticipated markdowns and a $75 million inventory impairment tied to unsold spring and summer goods.
“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,” said CEO Jay Schottenstein.
He 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.”
American Eagle also announced the withdrawal of its fiscal 2025 outlook, citing macroeconomic uncertainty and the need to reassess plans based on first-quarter performance. It remains unclear if recent tariff policy changes have influenced the company’s financial position. While some retailers stocked up early in anticipation of higher duties, American Eagle had stated in March that it felt confident in its inventory levels and could pivot with shifting consumer preferences.
Earlier in the quarter, the company reported inventory shortages in select categories, especially at Aerie, which has been a major growth engine. Those issues prompted supplemental stocking efforts that may have contributed to the excess now being written off.
