American Eagle Outfitters Cuts Sales Growth Target

By Juveria Tabassum

(Reuters) – American Eagle Outfitters reduced its target for annual comparable sales growth on Wednesday, indicating potential fluctuations in apparel demand during the crucial holiday season, leading to a 14% drop in shares during extended trading.

Competition in the apparel market has intensified as retailers attempt to attract frugal, discerning consumers with fresh styles and creative marketing strategies. A holiday shopping season characterized by high promotions has made retailers cautious about their forecasts.

> "Key selling periods have seen a positive customer response, yet we remain cognizant of potential choppiness during non-peak periods," said American Eagle's CEO Jay Schottenstein.

Retailer Target (NYSE:TGT) reported an increased response to promotions this year, with consumers often delaying purchases until major discount events.

American Eagle now anticipates annual comparable sales growth at approximately 3%, down from its previous expectation of about 4%, reflecting caution regarding holiday quarter demand.

This forecast contrasts with some apparel companies like Gap and Abercrombie & Fitch, which have seen demand spikes for their casual wear products.

> "AEO brands have been fairly successful in getting Gen-Z's attention with seasonal campaigns and compelling promotions, but those same efforts are adding pressure to their margins that could prove unsustainable," said EMarketer analyst Sky Canaves.

Unseasonably warm weather in the U.S. also negatively impacted apparel sales during the third quarter, while increased discounts affected the company’s margins, which has been actively marketing its activewear lines.

American Eagle reported quarterly revenue of $1.29 billion, slightly below estimates of $1.30 billion, according to data compiled by LSEG. The company recorded an $18 million impairment and restructuring charge as it seeks to reduce costs.

Excluding certain items, American Eagle posted a profit of 48 cents per share, surpassing the expected 46 cents per share from analysts.