American Eagle missed Wall Street’s sales targets for the second quarter in a row, but managed to grow its profit by nearly 60%. The company reported a net income of $77.3 million, or 39 cents per share, up significantly from $48.6 million, or 25 cents per share, a year earlier. Sales rose to $1.29 billion, an 8% increase from the previous year. This growth in profit was attributed in part to lower product costs, leading to a higher gross margin of 38.6%.
While American Eagle missed Wall Street’s revenue expectations of $1.31 billion with $1.29 billion in revenue, its sales gain was positively impacted by a calendar shift, which added $55 million to second-quarter sales. The company’s two main brands, Aerie and American Eagle, saw revenue growth of 9% and 8% respectively. The gross margin of 38.6%, higher than the prior year, was in line with analyst expectations.
American Eagle issued a better-than-expected outlook for the current quarter, with expectations of comparable sales growth between 3% and 4%. However, its forecast for the full year fell short of analyst expectations. The company anticipates total revenue to be flat to slightly up for the third quarter, in line with expectations. For the year, American Eagle expects comparable sales to increase by approximately 4%, with total revenue up by 2% to 3%.
To combat slowing demand for discretionary items, American Eagle aims to protect profits by cutting costs and boosting efficiencies. The company unveiled a new strategy earlier this year to grow profits and is targeting an annual sales growth of 3% to 5% over the next three years. CEO Jay Schottenstein expressed optimism about the future, stating that the company could double its current size to a $10 billion business in the next few years.
During the back-to-school season, American Eagle saw a strong performance and expects the trend to continue into September and pick up again after Labor Day. The company is leaning into women’s and denim categories, while also focusing on expanding into new trends. The menswear business is also showing signs of improvement. President and Executive Creative Officer Jennifer Foyle emphasized the company’s commitment to adapting to market trends and leveraging its strengths in different product categories.
While American Eagle may have missed its sales targets for the second consecutive quarter, the company’s strong profit growth and optimistic outlook indicate resilience in the face of challenging market conditions. By focusing on cost-cutting, efficiency improvements, and strategic growth initiatives, American Eagle is positioning itself for long-term success and continued expansion in the retail industry.