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Introduction & Market Context
American Eagle Outfitters (NYSE:AEO) released its first quarter 2025 investor presentation on May 29, 2025, revealing a challenging period for the apparel retailer. The company reported declining sales across its core brands and an operating loss, while maintaining its market position in key categories. The stock reacted negatively to the results, falling 8.23% in aftermarket trading to $10.26, following a modest 0.81% gain during regular trading hours.
Executive Chairman and CEO Jay Schottenstein acknowledged the difficult quarter in his opening remarks, emphasizing the company’s resilience while highlighting the urgency to improve performance.
"While the first quarter was challenging, we are a resilient company with strong brands and a dedicated team," Schottenstein stated. "We are approaching the business with urgency to strengthen both our topline and profit flow-through."
Quarterly Performance Highlights
AEO reported first quarter revenue of $1.1 billion, representing a 3% decline compared to the same period last year. This decrease included a 2% negative impact from currency and other factors. The company cited traffic growth across brands and channels, which was offset by lower average unit retail (AUR) prices and reduced conversion rates.
The quarterly results showed an operating loss of $68 million on an adjusted basis, with comparable sales declining 3% across the company. By brand, American Eagle posted a 2% comparable sales decrease, while Aerie experienced a steeper 4% decline.
On a GAAP basis, the company reported an operating loss of $85.2 million for the quarter, compared to operating income of $77.8 million in the same period last year. The adjusted figures exclude $17.1 million in impairment and restructuring charges.
Brand Positioning and Strategy
Despite the challenging quarter, AEO maintained strong market positions for its core brands. According to Circana retail tracking data for the period from May 2024 to April 2025, American Eagle holds the #1 position in jeans for the 15-25 age demographic. Aerie ranks #3 in intimates, while OFFLINE by Aerie holds the #2 position in leggings and #3 in total activewear for the 15-35 age demographic.
The company continued its measured store expansion strategy, ending the quarter with 1,176 consolidated stores, up from 1,172 at the beginning of the period. This included 828 American Eagle stores, 321 Aerie locations, 20 Todd Snyder stores, and 7 Unsubscribed locations. AEO also maintained 363 international licensed locations at the end of the quarter.
Forward Guidance and Outlook
Looking ahead to the second quarter of fiscal 2025, AEO provided a cautious outlook, projecting revenue to decline by 5% with comparable sales expected to fall by 3%. The company anticipates operating income between $40 million and $45 million, with gross margin projected to decline while SG&A dollars remain flat.
Notably, the company has withdrawn its guidance for the full fiscal year 2025, signaling continued uncertainty in the retail environment. This move comes as the company faces challenges across its brands and attempts to navigate shifting consumer spending patterns.
Financial Position and Capital Allocation
Despite the operating challenges, AEO continued to return capital to shareholders, with $253 million returned through share repurchases and dividends during the quarter. The company stated it is on track to complete its accelerated share repurchase (ASR) program in the second quarter.
The balance sheet showed $87.9 million in cash and cash equivalents as of May 3, 2025, a significant decrease from $308.9 million at the end of the previous quarter and $300.5 million in the year-ago period. Merchandise inventory stood at $645.1 million, down 5% from the prior year but up slightly from the previous quarter.
The company’s current ratio declined to 1.38, compared to 1.53 at the end of the previous quarter and 1.70 in the year-ago period, indicating a tightening of liquidity while still maintaining the ability to meet short-term obligations.
Revenue breakdown by segment showed American Eagle generating $693.9 million (down from $724.7 million in Q1 2024), Aerie contributing $359.8 million (down from $372.7 million), and other segments accounting for $44.0 million (down from $55.0 million).
As American Eagle Outfitters navigates this challenging period, investors will be closely watching for signs of improvement in the coming quarters, particularly given the company’s withdrawn full-year guidance and the projected continued sales decline in Q2. Management’s ability to execute on strengthening both topline performance and profitability will be critical to reversing the current negative trends.
Full presentation:
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