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American Eagle Outfitters(AEO) - 2026 Q1 - Earnings Call Transcript
AEOAmerican Eagle Outfitters(AEO)2025-05-29 21:30

Financial Data and Key Metrics Changes - The company reported a consolidated revenue of 1.1billion,adeclineof51.1 billion, a decline of 5% compared to the previous year, with comparable sales decreasing by 3% [19][20] - Adjusted operating loss for the quarter was 68 million, with an adjusted loss per share of 0.29[4][22]−Grossprofitdollarswere0.29 [4][22] - Gross profit dollars were 322 million, with a gross margin of 29.6%, impacted by approximately 75millionininventorywrite−downs[20][21]BusinessLineDataandKeyMetricsChanges−AmericanEaglebrandcomparablesalesweredown275 million in inventory write-downs [20][21] Business Line Data and Key Metrics Changes - American Eagle brand comparable sales were down 2%, while Aerie brand comparable sales declined by 4% [4][19] - Aerie faced challenges in soft apparel, particularly in fleece tops and shorts, while certain categories like intimates showed improvement [12][14] - American Eagle saw growth in women's business, particularly in social casual dressing and achieved its best quarter ever in fleece [15][16] Market Data and Key Metrics Changes - Traffic was reported to be up across brands and channels, although the overall performance was constrained by lower average unit retails (AURs) and conversion rates [19][30] - The company is focusing on diversifying its supply chain and reducing sourcing exposure to China to under 10% this year [23] Company Strategy and Development Direction - The company is committed to optimizing operations and strengthening its supply chain, including closing two Edge fulfillment centers, which is expected to generate annualized savings of approximately 5 million [6][22] - Capital allocation priorities include investments for long-term growth while returning capital to shareholders, including a 200millionacceleratedsharerepurchaseprogram[8][9]−Thecompanyisfocusedonimprovingproductperformanceandpreparingfortheback−to−schoolseasonwithfreshmerchandise[24][36]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpresseddisappointmentwiththefirstquarterperformancebutremainsoptimisticaboutthesecondhalfoftheyear,hopingforimprovementasthemacroenvironmentstabilizes[4][28]−Thecompanyhaspausedfull−yearguidanceuntilgreatervisibilityisachievedbutexpectstoseeimprovementingrowthandprofitabilityastheyearprogresses[22][24]OtherImportantInformation−Thecompanyrecordedanon−GAAPchargeof200 million accelerated share repurchase program [8][9] - The company is focused on improving product performance and preparing for the back-to-school season with fresh merchandise [24][36] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the first quarter performance but remains optimistic about the second half of the year, hoping for improvement as the macro environment stabilizes [4][28] - The company has paused full-year guidance until greater visibility is achieved but expects to see improvement in growth and profitability as the year progresses [22][24] Other Important Information - The company recorded a non-GAAP charge of 17 million related to the closure of fulfillment centers [6][22] - SG&A expenses increased by 2% due to higher advertising investments, with a focus on customer-facing spend [21][63] Q&A Session Summary Question: What is the view of the consumer today and its impact on the retail landscape? - Management remains optimistic about the consumer outlook, hoping for positive economic stimulation from potential tax plans [28] Question: Can you break down the assumptions for gross margin and promotional activity in Q2? - The company expects to maintain a similar comp expectation as Q1, embedding promotional activity to clean inventory for back-to-school [30][31] Question: What are the merchandising issues and how quickly can improvements be made? - Management acknowledged product misses but is working swiftly to address these issues and prepare for back-to-school [35][36] Question: How is the capital allocation and CapEx expenditure being approached? - The company has reduced CapEx guidance to $275 million, recadencing projects to preserve cash [44] Question: How are both brands trending relative to the Q2 comp guide? - Both brands are trending similarly to the guidance of down 3% for Q2 [82] Question: What is the outlook for promotions and SG&A expenses? - Promotions are expected to continue in the near term to clean inventory, with SG&A projected to be flat for the year [59][63] Question: How did digital performance compare to stores during the quarter? - There was an uptick in digital performance, with the company leaning into this channel during the quarter [67] Question: What are the plans for inventory for the remainder of the year? - The company is planning inventory in line with sales expectations and maintaining flexibility in buying [88]