American Eagle Outfitters, Inc. AEO reported fourth-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate while revenues matched the same.

AEO’s earnings of 54 cents per share declined 11.5% from 61 cents earned in the year-ago quarter. However, the bottom line surpassed the Zacks Consensus Estimate of 50 cents per quarter.

American Eagle's shares dropped nearly 5% yesterday in the after-hours trading session, following its fourth-quarter fiscal 2024 earnings release. This can be attributable to a soft outlook for fiscal 2025. Also, both the bottom and top lines declined year over year in the reported quarter. Shares of the Zacks Rank #3 (Hold) company have lost 33% in the past three months compared with the industry’s decline of 23.7%.

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An Insight Into AEO’s Quarterly Revenues

Net revenues of $1.6 billion fell 4% year over year but met the Zacks Consensus Estimate. The decrease can be primarily attributed to an $85 million headwind tied to the retail calendar shift. Consolidated comparable sales (comps) improved 3% compared with 8% growth registered in the year-ago quarter. Our model expected a rise of 0.7% for the fiscal fourth quarter.

Brand-wise, revenues declined 9.1% year over year to $1 billion at the American Eagle brand. However, comps for the brand rose 1%.

American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise

American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. Quote

Revenues jumped 0.4% year over year to $539.7 million for the Aerie brand. Also, comps for the brand were up 6%. We expected a drop of 2.6% year over year at the American Eagle brand and 1.1% at Aerie in the reported quarter.

An Insight Into AEO’s Margins & Expenses

Gross profit dipped 2.5% year over year to $599.2 million. However, the gross margin remained flat year over year at 37.3% on an adjusted basis, including increased freight and product costs, offset by reduced markdowns.

Selling, general and administrative (SG&A) expenses fell 6% year over year to $401.6 million. As a percentage of sales, SG&A expenses decreased 40 basis points (bps) to 25%. The decline in SG&A expenses was backed by lower compensation, including incentive costs, somewhat offset by elevated advertising to aid long-term growth.

Operating income of $142.5 million increased sharply from $9.2 million recorded in the year-ago quarter, including a roughly $20 million adverse impact of the retail calendar and $10 million of adverse impacts from the strengthening of the U.S. dollar. The adjusted operating margin increased 50 bps to 8.9%.

AEO’s Financial Health Snapshot

American Eagle ended the fiscal fourth quarter with cash and cash equivalents of $309 million, with no outstanding debt. Total shareholders’ equity as of Feb. 1, 2025, was $1.8 billion. Inventory dipped 1% year over year to $636.7 million at the end of the reported quarter.

Capital expenditure was $65 million in the fiscal fourth quarter. The company expects capital expenditure of $300 million for fiscal 2025.

In the fiscal fourth quarter, the company returned $24 million to its shareholders through dividends. It paid year-to-date cash dividends of $96 million. The company has repurchased 3.5 million shares for $60 million in the same quarter, bringing fiscal 2024 repurchases to 9.5 million shares for $191 million. On March 11, 2025, the company's board authorized an additional 50 million shares for repurchases under its existing authorization, hence, it has shares of 68.5 million available for repurchases through Feb. 3, 2029.

What to Expect From AEO in Q1 & FY25?

AEO’s outlook includes near-term headwinds related to the consumer and macroeconomic operating landscape, along with proactive measures it is taking to reinforce the top line and lower expenses. For the first quarter of fiscal 2025, American Eagle expects revenues to decline in the mid-single digits. It projects gross margin to drop year over year for the fiscal first quarter. SG&A dollars are likely to remain flat, while operating income is projected to be in the range of $20-$25 million. This reflects nearly $10 million in adverse impacts of the strengthening of the U.S. dollar.

For fiscal 2025, the company expects revenues to dip in low-single digits and the gross margin to decline year over year. SG&A in dollars is likely to fall in the low single digits. Operating income is projected to be in the band of $360-$375 million. The tax rate is likely to come at around 25%. This includes a roughly $20-million adverse impact of the strengthening of the U.S. dollar and about $5-$10 million negative impact from U.S. tariffs on China, net of the mitigation strategies.

Management expects a mid-single-digit revenue decrease in the first half, recovering between flat to slightly up in the back half on better merchandising, easy comparisons and a normalization of year-over-year currency impacts. It also forecasts a decline in profits for the first half, with second-half operating profit flat year over year on improved top-line trends, reduced currency headwinds, and cost savings and tariff-mitigation efforts.

Key Picks in Retail

We have highlighted three better-ranked stocks, namely Boot Barn BOOT, Urban Outfitters URBN and Deckers DECK.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average.

Urban Outfitters, a fashion lifestyle specialty retailer, currently sports a Zacks Rank of 1. URBN delivered an average earnings surprise of 28.4% in the trailing four quarters.

The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 5.9% from the year-ago figure.

Deckers, a footwear and accessories dealer, currently has a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 36.8% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.6% from the year-ago figure.

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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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