The apparel retailer American Eagle Outfitters ($AEO) announced Q4 2024 financial results this week, revealing robust financial performance with record-breaking revenue and profit growth. The company achieved a 3% increase in comparable sales for Q4 and a 4% rise for the fiscal year. However, the company anticipates some headwinds as it enters 2025, hinting at a less vibrant consumer environment and potential currency impacts. Market participants have latched on to the lackluster near-term outlook, driving the shares down over 12% during the week.
Challenges Ahead
American Eagle Outfitters (AEO) is a prominent specialty retailer recognized for its collection of widely known clothing brands such as American Eagle and Aerie. These brands are renowned for their casual and cozy attire, making them popular among the highly sought-after teen demographic.
The company released its 2024 fourth quarter and fiscal year findings, indicating promising financial standing. During the fourth quarter, the company posted 3% year-over-year growth in comparable sales. The Aerie brand appeared particularly robust, with a 6% increase in sales in the quarter. Over the fiscal year, AEO recorded a total net revenue of $5.3 billion, surpassing the previous year’s revenue by 1%, even considering a shorter selling period.
Moving into the fiscal year 2025, management has projected a challenging start due to an anticipated decrease in demand and colder weather. Despite these obstacles, positive advancements are expected as spring emerges. AEO has already planned proactive steps to manage inventory and expenses during this period, focusing on long-term strategic priorities to successfully navigate the uncertain consumer and operating landscape.
The company announced a quarterly cash dividend of $0.125 per share. This dividend was declared on March 11, 2025, and will be payable on April 25, 2025, to stockholders of record at the close of business on April 11, 2025.
Analysts are Cautious
Analysts following the company have had a mixed response to its recent announcement. Telsey Advisory lowered American Eagle’s price target from $18 to $12 while maintaining a Market Perform rating, noting that although it remains a popular shopping destination during peak demand periods, the company faces challenges sustaining momentum during slower times.
At the same time, BMO Capital has also reduced its price target for AEO from $19 to $15, maintaining the Market Perform rating. They caution that even though the company’s Q4 results exceeded estimates, management noted weaker-than-expected trends for the current quarter due to decreased consumer demand and adverse weather conditions. BMO mentions that much of the positive news for AEO is already priced in.
American Eagle is rated a Hold overall, based on the recent recommendations of 12 analysts. The average price target for AEO stock is $14.82, which represents a potential upside of 34.00% from current levels.
