By Senad Karaahmetovic
Shares of American Eagle Outfitters (NYSE:AEO) are down about 15% in premarket Thursday after the retailer reported mixed earnings and paused dividends.
AEO reported a Q3 EPS of $0.04, a large miss compared to the analyst estimate of $0.14. Revenue for the quarter was reported in line at $1.2 billion. The company also said it will pause quarterly dividend payouts “to provide additional financial flexibility.”
The company shared the following thoughts on the outlook:
“Quarter-to-date, demand trends remain difficult, with brand revenue down in the high-single digits following exceptional growth and a record Back-to-School season last year. Assuming current trends continue, the third quarter gross-margin rate would be in the mid-30s and fourth quarter in the low-30s. This reflects higher markdowns in anticipation of a more promotional retail environment and the company’s seasonal clearance cadence which is more weighted to the fourth quarter.”
A JPMorgan analyst cut the price target to $12 from $14 after weak results.
“While we view Aerie’s double-digit top-/bottom-line profile as compelling, we see recent moderating sales & profitability across both American Eagle and Aerie as a driver of inconsistent results and execution risk,” the analyst said in a client note.
A BofA analyst reiterated an Underperform rating and an $8 per share price target to reflect the Q2 miss. The analyst sees “continued uncertainty on the medium term trajectory of sales and margins.”
“We are lowering our F22/F23 EPS ests by $0.37/$0.32 to $0.64/$0.82 to reflect the 2Q miss, less visibility on demand trends in 2H, and a more severe markdown environment,” the BofA analyst added.