American Eagle flags demand woes, says tariffs may dent margins
By Ananya Mariam Rajesh
(Reuters) -American Eagle Outfitters forecast annual revenue below expectations on Wednesday, becoming the latest U.S. apparel maker to signal a demand slowdown for clothing and accessories as well as a hit to margins from President Donald Trump's tariffs on China.
Shares of the Aerie activewear brand maker fell 5% in extended trading.
Apparel makers and retailers such as Walmart and Target have struck cautious expectations for the year as an uncertain economy, burdened by Trump's seesaw tariff announcements, has turned shoppers discerning on buying non-essential items.
"Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather," said CEO Jay Schottenstein.
In early March, Abercrombie & Fitch also flagged a weaker start to 2025.
American Eagle expects fiscal 2025 revenue to decline in the low-single digit percentage range, while analysts were expecting a 2.97% rise to $5.49 billion, according to data compiled by LSEG.
The company sees annual operating income to be in the range of $360 million to $375 million, compared to $427 million in 2024.
CFO Michael Mathias noted on the post-earnings call that tariffs would have an adverse impact of $5 million to $10 million.
In March, Trump increased tariffs on all Chinese imports to 20% from the previous 10% levy, further fueling a trade war expected to raise prices of products in the United States.
"We're also actively working to further diversify our supply chain to mitigate tariffs," Mathias said.
He added the company is working to make imports from China in the single-digit percentage range towards the back half of this year, from the current high-teens percentage.
Its quarterly revenue fell 4.4% to $1.61 billion, compared to estimates of $1.60 billion. Profit per share of 54 cents came ahead of expectations of 50 cents.
"AEO represents yet another company posting a solid holiday quarter but opting to guide cautiously in light of the uncertainty in the market, echoing the general theme seen across retail earnings this cycle," BMO Capital Markets analyst Simeon Siegel said.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Alan Barona)
