American Eagle Outfitters stock dives after earnings miss
Yahoo Finance Live anchors discuss second-quarter earnings for American Eagle Outfitters.
Video Transcript
[AUDIO LOGO]
BRIAN SOZZI: How can we not start here by pulling apart the, let's say, dreadful quarter out of American Eagle Outfitters? Just the latest retail to not get it done in the most recent quarter. Seeing that stock down 13% here in the premarket. In the top three on the Trending Ticker page here at Yahoo Finance.
Quarter was pretty bad. At the Aerie Intimates brand, same-store sales down 6%. Same-store sales at the core American Eagle brand down 10%. Inventory up 32%. They cut their dividend to save cash. They're cutting back expenses. Cut their CapEx. Just everything you didn't want to hear from a company, they told you.
JULIE HYMAN: I mean, what's happening here is what's happening at many, many different of these retailers. But I guess it's a little bit supersized it seems like at American Eagle. And that is high promotions-- high inventory leading to high promotions and lower gross margins. And that's kind of the theme that we've seen writ large over the bulk of this earnings season for the retailers. And American Eagle--
I mean some of these retailers are just more vulnerable to those kinds of things. And so now the company is saying, in the third quarter, the gross margin rate's gonna be in the mid-30s. Fourth quarter is gonna be in the low 30s. So not only is it happening now, it's gonna continue and even get a little worse.
BRIAN SOZZI: Yeah, absolutely. And margins were down over 1,000 basis points, gross margins for American Eagle. That is just really not good. No. But look, yesterday, I spent the whole day at this Goldman Sachs retail conference. And it was just interesting to hear the tones of the luxury group CEOs.
So Neiman Marcus rolling up to our interview chair in probably a $600 pair of Valentino's telling us, his business is doing well. Seeing strong double-digit growth. Dani Reiss CEO of Canada Goose saying, growth is strong. So there does appear to be just a divergence in trend. Despite the pressure on the stock market, these high-end luxury brands seem to be doing well and are keeping with their optimism into the holiday shopping season.
Canada Goose, they-- he just flat out told us, we see a strong holiday season. Now, he is essentially reiterating comments he told investors a couple of weeks ago in earnings. No slowing on demand.
JULIE HYMAN: Yeah, so if you look at that in contrast with something like an American Eagle, right? If you look at the core consumer of an American Eagle, it's a younger person, a teen, or a parent--
BRIAN SOZZI: It's not me anymore.
JULIE HYMAN: --of a teen, right? No? No, you can still-- I allow you to still shop there. But the point is, is that if you're talking about a teen and their own discretionary spending, and prices are going up everywhere, their pie to begin with is smaller, right?
They don't have that much discretionary income from an extra job, or allowance, or what have you. The parents are obviously under a lot of pressure from rising grocery costs and everything else. So that consumer is, you know, right in the crosshairs of all of these pressures that we've been talking about.
BRIAN SOZZI: So sometimes you have to make tough choices, Julie. You can either get the $15 double meat Chipotle bowl if you're an 18-year-old or you can go out and buy the $50 pairs of American Eagle jeans. I mean, these are tough choices that our generation-- or no longer my generation, that generation has to be making.
JULIE HYMAN: Yes.
BRIAN SOZZI: I'm kind of going with the Chipotle bowl. Go with the Chipotle bowl.
JULIE HYMAN: Yeah, I know you always go with the Chipotle bowl.
