American Eagle (AEO) earnings Q4 2024

American Eagle warned investors on Wednesday that consumers are pulling back on spending and it’s seen a “slower start” to the year than it expected. 

“Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather,” CEO Jay Schottenstein said in a news release. “While we anticipate improvement as the Spring season gets underway, 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.” 

Shares fell about 5% in extended trading.

The downbeat commentary, which came along with weak guidance for the current quarter and year ahead, is the latest warning sign that the consumer might be slowing down as shoppers contend with persistent inflation and concerns around tariffs.

Over the last couple of weeks, a string of other retailers – including both strong companies and ones that tend to struggle – issued weak guidance and cautious commentary about the current macroeconomic conditions and warned 2025 might be a weaker than expected year for sales. 

Beyond its outlook, American Eagle issued mixed holiday results and comparable sales that beat expectations. Here’s how the apparel company did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 54 cents vs. 50 cents expected
• Revenue: $1.60 billion vs. $1.60 billion expected

The company’s reported net income for the three-month period that ended Feb. 1 was $104 million, or 54 cents per share, compared with $6.31 million, or 3 cents per share a year earlier.

Sales dropped to $1.60 billion, down slightly from $1.68 billion a year earlier. Like other retailers, American Eagle benefited from an extra week in the year-ago period, which has negatively skewed results.

Comparable sales, which don’t include the impact of one less selling week, were up 3% during the quarter, ahead of expectations of up 2.1%, according to StreetAccount. Aerie, American Eagle’s intimates and activewear line, drove the company’s growth during the quarter with comps up 6%. Meanwhile, the company’s namesake banner saw comparable sales up 1%.

For the current quarter, American Eagle is expecting to see a mid-single-digit decline in sales, while analysts expected revenue to increase 1.3%, according to LSEG. For the full year, it’s expecting sales to decline by a low single digit, compared with expectations of 3% growth, according to LSEG.

Over the past year, American Eagle has made significant strides in improving profitability but has seen slower sales growth. In the three prior quarters, it missed Wall Street’s sales expectations and on Wednesday, it issued revenue numbers that were in line with analysts’ forecasts but didn’t exceed them. 

In prior quarters, American Eagle has said it’s been contending with an uncertain economic environment and a consumer that tends to only come out and shop during key moments, but now a wide range of other retailers are reporting similar dynamics as cracks in the economy spread.

In February, consumer confidence saw the biggest drop since 2021, job growth slowed more than expected and unemployment ticked up. These signals and the impact they’ve had on the markets have led to concerns that a recession could be coming, especially if President Donald Trump’s trade war with Canada, Mexico and China continues.

A slowing economy is bad news for any retailer but especially those that primarily sell discretionary goods like new clothes. It’s unclear what exactly American Eagle has seen from its consumer, but the company is expected to provide more details during a conference call at 4:30 p.m. ET.