Why American Eagle Outfitters Stock Fell Today
Key Points
Aerie's sales are surging.
American Eagle, however, is finding it far more difficult to grow revenue.
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Shares of American Eagle Outfitters (NYSE: AEO) sank on Friday after the apparel company's fiscal first-quarter sales metrics disappointed investors.
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Diverging brands
AEO's revenue rose 10% year over year to $1.2 billion in the quarter ended May 2.
The gains were fueled by a 25% jump in sales for the retailer's fast-growing intimate apparel and loungewear brand, Aerie, to $481 million.
However, revenue at the company's namesake American Eagle brand declined by 2% to $678 million. The shortfall came even as AEO invested heavily in marketing campaigns featuring popular actress Sydney Sweeney.
Still, AEO's gross margin improved by 8.6 percentage points to 38.2%, as the retailer recovered from sizable inventory write-downs in the prior-year quarter. That helped it generate an operating profit of $28 million, compared to an adjusted loss of $68 million in the year-ago period.
All told, AEO's first-quarter adjusted earnings per share came in at $0.14 versus a loss of $0.29 last year.
AEO's CEO is confident American Eagle can recover
Looking ahead, management reaffirmed its full-year operating income forecast of $390 to $410 million for fiscal 2026.
During a conference call with analysts, CEO Jay Schottenstein said the company will work to sharpen merchandise selection at American Eagle and prioritize marketing initiatives that more directly convert into sales rather than drive brand awareness.
"We remain highly confident in the relevance and resilience of the overall AE brand and in our ability to strengthen execution and drive better results moving forward," Schottenstein said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.
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