American Eagle cuts annual revenue forecast on weak apparel demand

Higher rent and product prices in the United States dented consumer spending, hurting demand for discretionary items as cash-strapped shoppers focused on essentials such as groceries.

The company now expects annual revenue to be flat to down low-single digits, compared with its prior forecast of flat to up low-single digits.

That is in contrast with peer Abercrombie & Fitch Co, which lifted its full-year sales forecast earlier on Wednesday, banking on its efforts to fill shelves with in-demand goods and steady demand from its affluent shoppers.

American Eagle, however, saw revenue for Aerie, a division that makes activewear, swimsuits and bralettes and which benefited after the pandemic struck as people stayed at home, jump 12% in the first quarter, while its namesake division posted a 2% fall.

The company posted quarterly gross margin rate of 38.2%, compared with 36.8% a year earlier, benefiting from lower transportation costs, compensation and delivery costs.

Ever since the pandemic began, major U.S. companies had been battling higher transportation and raw material costs, which impacted profit margins in previous quarters.

But gradual easing of such costs and lower clearance discounts have offered some relief to most retailers.

American Eagle's first-quarter revenue rose 2.5% to $1.08 billion, beating analysts' average estimate of $1.07 billion, according to Refinitiv data.

The company posted quarterly adjusted earnings of 17 cents per share, in line with analysts' expectations.