American Eagle Outfitters continues to be plagued by inflationary pressures and other macro headwinds.
“In a shifting macro environment, we are focused on controlling the controllables,” he added. “We entered the second half with inventory levels in a much better position and an assortment that is current for the fall season. Given ongoing external uncertainties, we have taken additional actions to improve financial performance. We have made more expansive expense reductions and are pulling back further on capital expenditures.
“To improve profitability and cash flow we have paused noncritical spending,” he explained. “This includes a hiring freeze and optimizing expenses within store compensation, professional services, travel and advertising. We have also lowered capital spending for the remainder of the year and into 2023.”
AEO’s operating income was $14 million for the quarter, compared with nearly $168 million last year, which included a $30 million impact from higher end-of-season selloffs, $25 million from higher freight costs and a $9 million loss from Quiet Logistics. Still, current quarter demand trends remain challenged, the company said, with brand revenues down in the high-single digits. As headwinds persist, the company is anticipating more promotional activity in the back half, with its third- and fourth gross-margin rates in the mid-30s and low-30s ranges, respectively.
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