American Eagle Outfitters says consumers are afraid and cutting spending

Takeaways

• American Eagle Outfitters has said that consumers are concerned about the future and have given weaker guidance than expected.
• Fashion clothing for teenagers and young adults is being sold by a company that explains that government cuts, tariffs and inflation are causing buyers to be more conservative.
• Profit for the fourth-quarter exceeded expectations.

American Eagle Outfitters’ (AEO) stock fell Thursday after the company that makes fashion clothes for teens, young adults and adults warned consumers to cut back on spending due their concerns about the economy.

The company behind American Eagle, Aerie and other brands has predicted that full-year revenues will fall by low single-digit percents. Visible Alpha analysts were expecting an increase of 3%. AEO explained that the guidance "reflects near-term headwinds in the consumer and macroeconomic operating environment."

CEO Jay Schottenstein noted that the first quarter "is off to a slower start than expected, reflecting less robust demand and colder weather." Schottenstein added that while the company anticipates improvement as the spring season gets under way, "we are also taking proactive steps to strengthen the top-line, manage inventory and reduce expenses."

CEO Says Consumers 'Have the Fear of the Unknown'

Schottenstein said on the earnings call with analysts that consumers "have the fear of the unknown," according to a transcript provided by AlphaSense. He argued that it's not just tariffs and inflation, but you "see the government cutting people off. They don't know how that's going to affect them. They see that programs are being cut. They don't know how that's going to affect them. … And when people don't know what they don't know, they get very conservative."

AEO reported a fourth-quarter profit per share (EPS), $0.54, which was ahead of Visible Alpha estimates, and revenue of $1.6 billion, which was in line with forecasts.

Shares of American Eagle Outfitters dropped 1.5% to the lowest level since Spring 2023.