American Eagle stock plummets after delayed back-to-school season led to disappointing same-store sales growth

Key Points
  • American Eagle reported adjusted earnings of 39 cents, vs 32 cents expected by analysts.
  • It posted revenue of $1.04 billion, vs. $1.01 billion expected.
  • Same-store sales at Aerie grew 16% but fell 1% at American Eagle.
A shopper walks past an American Eagle store in the mall.
Tim Boyle | Getty Images News | Getty Images

Shares of American Eagle Outfitters fell more than 13% Wednesday after a slow start to the back-to-school season and unseasonable weather led to same-store sales growth that missed analyst expectations.

The company said that sales were disappointing during the last two weeks of July, which is typically when it sees the back-to-school season begin. However, it said it finished the season off strong, and August was its strongest month in the quarter. The company's also beat Wall Street's estimates on profit and revenue.

American Eagle also said that although China currently represents 30% of the company's production, it doesn't expect recently enforced tariffs against Chinese goods to have a material impact this year. It believes that figure can be driven down to 20% over the next 12 to 18 months. Its team has been able to negotiate with manufacturing partners in China and move production to other countries.

Here's what the company reported compared with what Wall Street expected, based on a survey of analysts by Refinitiv:

  • Adjusted earnings: 39 cents, vs 32 cents expected
  • Revenue: $1.04 billion, vs. $1.01 billion expected
  • Same-store sales: up 2%, vs. 3.1% gain expected

"We had a number of wins and accomplishments in the second quarter, yet we were disappointed to report operating results below our expectations," CEO Jay Schottenstein said. "We faced challenges largely stemming from underperformance in certain seasonal categories and a delayed start to back-to-school. Despite this, we delivered our 18th consecutive quarter of positive consolidated comparable sales growth."

The company reported net income of $64.98 million, or 38 cents a share, up 7.7% from earnings of $60.33 billion, or 34 cents a share, a year ago. Excluding restructuring charges, the company earned 39 cents a share, topping analyst estimates by 7 cents.

For the quarter ended Aug. 3, American Eagle reported revenue of $1.04 billion, compared with $964.9 billion a year earlier.

By brand, the company's Aerie division was stronger, posting same-store sales growth of 16% and marking the 19th consecutive quarter of double-digit growth. Sames at American Eagle stores open for at least 12 months fell 1%.

The company said Aerie's signature bralettes saw "renewed excitement" after peaking a few years ago, and its new curvy jean size has led to incremental growth because of the preferred fit and silhouette for some customers.

The company's stock has fallen 26% since January, bringing it to a market value of $2.4 billion.