American Eagle Expects Long-Term Headwinds

American Eagle Outfitters isn’t celebrating the success of its first-quarter earnings for long. Instead, the company is looking ahead to the second quarter of the fiscal year — the three months ending July 31 — and bracing for the impact of expected inventory backlogs, higher freight costs and supply chain snags.

“The first quarter proved challenging, with demand well below our expectations, pressuring operating profit,” said Jay Schottenstein, AEO’s executive chairman of the board and CEO, in the company press release Thursday (May 26).

“Comparisons from an extraordinary spring last year driven by stimulus payments and pent-up customer demand were compounded by rising inflation, higher gas prices and a stronger-than-anticipated pivot to other discretionary categories. In hindsight, our plans entering the year were too optimistic,” he said. “We are taking swift measures to adjust our inventory and expense base with a firm goal of entering the second half better aligned with demand trends.”

American Eagle’s total net revenue increased 2% to $1.055 billion year over year. Aerie revenue grew 8% to $322 million in the three months ending April 30, and American Eagle revenue fell 6% to $686 million from the same time in 2021.

AE’s consolidated store revenue increased 2%, while its total digital revenue declined 6%. Store revenue was up 1% from the first quarter of 2019, while digital revenue grew 48% in that time.

Related: Wantable on Giving Cancellation Power to the Subscriber to Drive Loyalty

Possibly driving the trend are consumers who are changing how they shop for clothes. New findings in PYMNTS’ latest “Subscription Commerce Tracker” show that making it difficult for subscribers to quit may actually backfire on businesses, with Wantable’s Jalem Getz saying “goodwill” goes a long way.

Consumers have an overwhelming amount of choice when it comes to how they stock up their wardrobes. In today’s economy of subscription services, many are opting to trust those decisions to services that will mail them clothes to try on based on their preferences — including new items they might not have tried otherwise.

This type of customer relationship relies on the trust and value that a brand brings to the customer, and while many consumers can be trusting, it only takes a bit of friction in a checkout experience to send a potential or existing customer to a competitor.