On Wednesday, JPMorgan analyst Matthew Boss revised the price target for American Eagle Outfitters (NYSE:AEO) shares, reducing it to $9 from the previous $10, while the stock’s rating remains at Neutral. The adjustment follows American Eagle’s preliminary results for the first quarter of 2025, which revealed a year-over-year revenue decline of 5%, aligning with both market expectations and the company’s own negative mid-single-digit guidance. According to InvestingPro data, the stock appears undervalued despite trading at a P/E ratio of 7.42x, with the company maintaining dividend payments for 22 consecutive years. Despite meeting revenue forecasts, the company experienced a significant profit shortfall, with an adjusted EBIT loss of approximately $68 million, falling short of both the anticipated $24 million by analysts and the company’s guidance range of $20 to $25 million.
The loss was attributed to greater-than-anticipated markdowns and a substantial inventory charge. American Eagle announced a $75 million write-down of excess Spring and Summer merchandise, contributing to the discrepancy between the reported adjusted EPS loss of roughly $0.25 and the $0.11 forecast by the Street. This inventory charge was a key factor in the earnings miss, as it significantly impacted the company’s profitability for the quarter.
In light of these results, American Eagle has also chosen to withdraw its full-year 2025 guidance. The decision to retract the outlook is due to the prevailing macroeconomic uncertainties, particularly concerning tariffs, and the need for management to reassess their forward plans after considering the first quarter’s performance.
The news of the profit shortfall and the withdrawal of the annual guidance reflect the challenges American Eagle is facing in the current retail environment. The company’s management is now tasked with navigating through these uncertainties and recalibrating their strategies to mitigate the impact of market conditions and inventory issues on future performance.
In other recent news, American Eagle Outfitters reported preliminary financial results for the first quarter, indicating a revenue decline to approximately $1.1 billion, a 5% decrease from the previous year. The company also projected an operating loss of around $85 million, with comparable sales falling by about 3%. In a strategic move, American Eagle retracted its fiscal year 2025 guidance, reflecting uncertainty in the market. Jefferies analyst Corey Tarlowe adjusted the price target for American Eagle, initially reducing it to $11 due to concerns over declining sales and promotional activities, before raising it to $113 following the company’s equity forward agreement. This agreement, valued at over $2 billion, was noted as a significant step in reducing financial risks. Meanwhile, Synchrony extended its credit program with American Eagle, continuing their partnership to manage the Real Rewards credit card. Additionally, Stephanie Pugliese stepped down from the Board of Directors to assume a CEO role at another company, leaving a vacancy that American Eagle has yet to fill. These developments reflect the dynamic environment American Eagle is navigating in the retail sector.
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