American Eagle Outfitters Faces Slower Q1 After Strong Holidays, Analyst Trims Forecast

Core Viewpoint - Telsey Advisory Group analyst Dana Telsey has reiterated a Market Perform rating on American Eagle Outfitters Inc (AEO) and reduced the price target from $18 to$12, reflecting concerns over the company's future performance amid a challenging macro environment [1]. Financial Performance - AEO's quarterly sales decreased by 4.4% to $1.605 billion, which was slightly better than the anticipated 4.6$142.3 million, surpassing both consensus and guidance, marking the highest operating income in over a decade [2]. Future Outlook - The FY25 outlook for AEO is weaker than expected, with a projected low single-digit revenue decline, contrasting with the previous consensus of a 3% increase [3]. - The company has cited slower demand and cold weather impacting first-quarter FY25 sales, although it anticipates improvement by spring [3]. - Sales have softened due to a weaker consumer environment and unfavorable weather, with limited visibility for improvement [4]. Guidance and Challenges - AEO's guidance indicates an expected decline in gross margin and a contraction in SG&A, with operating income projected between $360 million and$375 million, significantly lower than the consensus estimate of $454 million [4]. - Despite management's efforts to boost sales and reduce costs, both FY25 and first-quarter guidance are well below prior expectations [4]. - The uncertain macroeconomic backdrop poses a significant challenge, although AEO has shown strong performance during peak periods [5].