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American Eagle Outfitters(AEO) - 2026 Q1 - Earnings Call Transcript
AEOAmerican Eagle Outfitters(AEO)2025-05-29 21:32
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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% [20][21] - Adjusted operating loss for the quarter was 68 million, with an adjusted loss per share of 0.29[5][22]−Grossprofitdollarswere0.29 [5][22] - Gross profit dollars were 322 million, with a gross margin of 29.6%, impacted by approximately 75millionininventorywrite−downs[21][22]BusinessLineDataandKeyMetricsChanges−AmericanEaglecomparablesalesweredown275 million in inventory write-downs [21][22] Business Line Data and Key Metrics Changes - American Eagle comparable sales were down 2%, while Aerie comparable sales declined by 4% [5][20] - Aerie faced challenges in soft apparel, particularly in fleece tops and shorts, while experiencing growth in intimates and offline categories [12][14] - American Eagle saw improvements 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 up across brands and channels, but the company faced pressure from lower average unit retails (AURs) and conversion rates [20][21] - The company is working to reduce sourcing exposure to China to under 10% this year, with plans to further diversify its supply chain [24] Company Strategy and Development Direction - The company is focused on optimizing operations and strengthening its supply chain, including closing two Edge fulfillment centers, which is expected to generate annualized savings of approximately 5 million [7][8] - Capital allocation priorities include investments for long-term growth while returning capital to shareholders, including a 200millionacceleratedsharerepurchaseprogram[9][23]−Thecompanyiscommittedtoimprovingproductperformanceandispreparingfortheback−to−schoolseasonwithfreshmerchandise[24][38]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpresseddisappointmentwithfirst−quarterperformancebutremainsoptimisticaboutthesecondhalfoftheyear,hopingforeconomicstimulationfrompotentialtaxplans[28][29]−Thecompanyhaspausedfull−yearguidanceuntilthereisgreatervisibilitybutexpectsimprovementastheyearprogresses[8][24]OtherImportantInformation−Thecompanyrecordeda200 million accelerated share repurchase program [9][23] - The company is committed to improving product performance and is preparing for the back-to-school season with fresh merchandise [24][38] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with first-quarter performance but remains optimistic about the second half of the year, hoping for economic stimulation from potential tax plans [28][29] - The company has paused full-year guidance until there is greater visibility but expects improvement as the year progresses [8][24] Other Important Information - The company recorded a 75 million inventory write-down due to product misses and higher costs, leading to increased promotions [5][12] - SG&A expenses increased by 2% due to higher advertising investments, with a focus on customer-facing spend [22][66] Q&A Session Summary Question: What is the company's view of the consumer today and its impact on the retail landscape? - Management is optimistic about the consumer outlook and believes that potential tax plans could stimulate the economy in the second half of the year [28][29] Question: Can you break down the assumptions for gross margin and promotional activity for the second quarter? - The company expects to maintain promotional activity to clean inventory for the back-to-school season, embedding a negative 3% comparable sales expectation [30][31] Question: What are the merchandising issues and how quickly can the company get back on trend? - Management acknowledged product issues but is working swiftly to address them, focusing on clean inventory for the back-to-school season [36][37] Question: How is the company planning its capital allocation and CapEx expenditures? - The company reduced its CapEx guidance to $275 million, recadencing projects to preserve cash in response to business conditions [46][47] Question: How did digital performance compare to stores during the quarter? - The company saw an uptick in digital channels and is leaning into this area for future growth [71] Question: What is the outlook for promotions and SG&A expenses? - The company anticipates continued promotional activity to clean inventory, with SG&A expected to remain flat for the year, focusing on advertising spend [62][66]