American Eagle Outfitters (NYSE: AEO) tanked 15.2% in after-hours trading on Wednesday as the specialty retailer’s Q2 earnings fell short of Street expectations. The company reported revenues of $1.2 billion in Q2, flat year-over-year but in line with analysts’ expectations.
The retailer’s adjusted earnings came in at $0.04 per share in Q2, falling short of the Street estimates of $0.13 per share. Gross profit margin also contracted to 30.9% in Q2 versus 42.1% in the same period last year driven by higher markdowns and rising freight costs.
AEO’s management cited a “tougher macro environment” that is “impacting consumer spending behavior.”
The company’s Executive Chairman and CEO, Jay Schottenstein commented, “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.”
AEO also paused its quarterly cash dividend to ” strengthen our cash position.”
Is AEO a Good Stock to Buy?
Wall Street analysts remain sidelined on the stock with a Hold consensus rating based on three Buys, six Holds, and one Sell.
AEO’s average price prediction of $13.22 implies that the stock offers 14.1% upside potential.
