American Eagle Outfitters Inc. (NYSE:AEO) shares moved lower as it issued weak guidance for the first quarter of 2025, citing slower demand amid macroeconomic uncertainty and colder weather.
The clothing retailer expects a mid-single digit decline in sales for Q1, compared to analyst estimates of a 1.3% increase.
For the full year, American Eagle projected a low-single digit drop compared to expectations of 3% growth.
American Eagle CEO Jay Schottenstein said the first quarter is “off to a slower start than expected,” with improvement expected in the spring.
“We are also taking proactive steps to strengthen the top-line, manage inventory and reduce expenses. As we navigate through an uncertain consumer and operating landscape, we will also remain focused on our long-term strategic priorities,” Schottenstein said.
For the fourth quarter, sales decreased 4% to $1.6 billion, in line with estimates. Earning per share of $0.54 beat estimates of $0.50.
Buying opportunity
Analysts at UBS repeated their ‘Buy’ rating on American Eagle post-earnings but lowered their price target to $28 from $32.
Shares of American Eagle traded down 2.6% at about $11 shortly after Thursday’s opening bell.
The analysts see the current stock price as an attractive buying opportunity.
“American Eagle’s Aerie brand remains a share gainer, and the company's Q4 report showed it continues to control costs effectively,” they wrote.
They expect full-year sales to be down 1.7% compared to their prior forecast of up to 3.8% growth.
“The slower start to the year in February combined with the adverse impact from strengthening dollar and US tariffs on China are reflected in our lower sales growth outlook,” analysts noted.
Despite the weak 1Q and fiscal year 2025 guidance, UBS believes the company’s long-term growth trajectory is intact.
“Once current macro headwinds abate, we expect to see American Eagle's sales growth rate accelerate, leading to upward EPS revisions and price-to-earnings (P/E) expansion,” they wrote.