American Eagle Outfitters shares drop 11% as weak denim demand cuts profit margins
The apparel retailer cut quarterly gross margin outlooks amid excess inventory and declining sales at its main brand despite strong revenue growth.
Shares of American Eagle Outfitters fell approximately 11% on Thursday following a forecast for flat quarterly gross margins. The company indicated it would likely offer discounts to clear excess inventory, citing weak demand at its namesake brand. This weakness has contributed to a roughly 36% decline in the company's stock price this year. While revenue in the second quarter exceeded expectations, annual comparable sales forecasts remained unchanged as of Wednesday. Analysts from Raymond James, including Rick Patel, noted that investments in denim, such as the 'Great Jeans' campaign with actor Sydney Sweeney, have not offset losses at the primary label. Competitors like Abercrombie & Fitch and Gap raised their full-year sales or profit forecasts recently. Strength in the Aerie brand could not compensate for uneven demand in women's denim, according to industry observers.
