American Eagle Shares Slide as Earnings Miss and Tariff Impact Cloud Outlook

American Eagle Outfitters (AEO) shares plunged nearly 8% in after-hours trading Thursday after the company reported weaker-than-expected earnings and issued cautious guidance for the upcoming quarter, citing inventory write-downs and ongoing macroeconomic headwinds.

The teen-focused apparel brand posted a fiscal first-quarter adjusted loss of 29 cents per share, missing analysts' expectations of a 22-cent loss. Revenue matched forecasts at $1.09 billion but declined slightly from $1.14 billion a year ago.

CEO Jay Schottenstein acknowledged the tough quarter, stating, “The first quarter was a challenging period for our business.” He noted that despite disappointing results, the company is working urgently to stabilize performance and strengthen profitability moving forward.

The quarter included a $75 million write-off tied to unsold spring and summer inventory, a result of merchandising missteps and sluggish demand. Operating losses reached $85.18 million compared to net income of $77.84 million in the same period last year.

Comparable sales fell 3%, with the Aerie brand down 4% and American Eagle down 2%. Executives cited muted customer response to seasonal fashion trends and an unseasonably cool spring as contributing factors.

For the second quarter, AEO expects revenue to decline 5%, with comparable sales projected to fall 3%. Operating income is forecast between $40 million and $45 million, and margins are expected to remain under pressure.

The company has also been navigating rising costs linked to President Trump’s evolving trade policies. CFO Michael Mathias said AEO expects a total tariff impact of $40 million this fiscal year. Exposure to China is being reduced, with the fall and holiday season’s sourcing set to drop into the low single digits.

Despite the headwinds, AEO confirmed it is on track to complete its $200 million share repurchase program in the second quarter. However, investor sentiment remains cautious, as the company’s stock is now down roughly 33% year-to-date.

With broader economic uncertainty and shifting consumer behavior, American Eagle’s leadership emphasized their renewed focus on preparing for the back-to-school season, a critical retail period that could determine the trajectory of their turnaround efforts.