American Eagle Outfitters predicts moderate revenue drops for Q1 FY25

The revenue is forecast to decline in the low-single digits in full fiscal 2025, with gross margin also down YoY. The company’s outlook reflects near-term challenges in the consumer and macroeconomic environment, balanced by proactive measures to strengthen revenue and reduce expenses. SG&A expenses for FY25 are expected to decline in the low-single digits, while depreciation and amortisation (D&A) is projected at approximately $230 million.

The operating income of the company is estimated between $360 million and $375 million, with a tax rate of approximately 25 per cent. The weighted average share count is expected to be in the low 190 million range, and capital expenditures are projected at approximately $300 million, AEO said in a press release.

“Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather. While we anticipate improvement as the Spring season gets underway, we are also taking proactive steps to strengthen the top-line, manage inventory and reduce expenses. As we navigate through an uncertain consumer and operating landscape, we will also remain focused on our long-term strategic priorities,” said Jay Schottenstein, executive chairman of the board and chief executive officer at AEO.

Financial overview of FY24

AEO’s net revenue rose by 1 per cent to $5.3 billion, despite a $60 million adverse impact from one less selling week in full fiscal 2024, ended February 1, 2025. The total comparable sales increased by 4 per cent. The gross profit of the company rose by 3 per cent to $2.1 billion, with gross margin expanding to 39.2 per cent, driven by lower rent, utilities, and delivery costs, partially offset by higher markdowns.

Selling, general, and administrative (SG&A) expenses remained largely in line with last year at $1.4 billion, leveraging 30 basis points (bps) due to lower compensation and incentive costs, partially offset by increased advertising expenses.

Brand-wise, Aerie’s comparable sales grew by 5 per cent, building on 8 per cent growth last year, while American Eagle's comparable sales increased by 3 per cent, following 1 per cent growth.

GAAP operating income reached $427 million, while adjusted operating income stood at $445 million, reflecting an operating margin of 8.3 per cent. GAAP diluted earnings per share (EPS) was $1.68, with adjusted diluted EPS at $1.74, based on an average diluted share count of 196 million.

“2024 demonstrated significant progress on our powering profitable growth plan. The team delivered strong operating profit growth with positive momentum across our brands and channels as well as disciplined expense management and operating efficiencies,” added Schottenstein.

In the fourth quarter (Q4) of FY24, AEO reported a 3 per cent increase in total comparable sales, following 8 per cent growth in the same period last year. However, total net revenue declined by 4 per cent to $1.6 billion, impacted by approximately $85 million due to one less selling week and the retail calendar shift. Aerie’s comparable sales grew by 6 per cent, building on a 13 per cent increase last year, while American Eagle’s comparable sales rose by 1 per cent, following 6 per cent growth in the prior year.

Fibre2Fashion News Desk (SG)