American Eagle announced on Tuesday that it will be writing off $75 million in merchandise from its spring and summer collections, prompting the retailer to withdraw its guidance for the full fiscal year. The company is grappling with sluggish sales, significant markdowns, and a challenging economic landscape.
The retailer projects revenues for the first quarter, which concluded in early May, to be approximately $1.1 billion—a decrease of around 5% from the same quarter last year. American Eagle is also expecting a 3% drop in comparable sales, largely driven by an anticipated 4% decline from its intimates line, Aerie. Previously, the company had forecasted a mid-single-digit percentage decline in sales for the first quarter and a slight decrease for the full year.
The news led to a sharp decline in the company’s shares, which fell over 17% in after-hours trading.
Consequently, American Eagle is anticipating an operating loss of approximately $85 million for the quarter, with an adjusted operating loss—excluding restructuring-related charges—estimated at about $68 million. This loss is attributed to “higher than planned” discount rates and the substantial $75 million inventory charge linked to the write-down of spring and summer merchandise, the retailer noted.
CEO Jay Schottenstein expressed disappointment regarding the company’s performance in the first quarter. “Merchandising strategies did not yield the results we anticipated, resulting in increased promotions and surplus inventory. Consequently, we have enacted an inventory write-down on spring and summer goods,” he stated.
Looking ahead, Schottenstein noted, “We have entered the second quarter in a better position, with inventory more closely aligned to sales trends. We are actively reviewing our forward plans as our teams work diligently to enhance product performance and refine our purchasing strategies.”
American Eagle also indicated that it is retracting its fiscal 2025 guidance due to macroeconomic uncertainties and as management reevaluates its forward strategies in light of the recent first-quarter results. The impact of recent changes in tariff policies on the company remains uncertain.
While some retailers procured inventory earlier in anticipation of higher tariffs, American Eagle maintained in March that it was well-positioned in terms of inventory, allowing it to respond effectively to shifting customer preferences.
Initially, during the first quarter, the company encountered some inventory shortages and needed to replenish stock in certain key areas, especially at Aerie, a crucial growth segment for the brand.
