American Eagle Outfitters' (AEO) long-term growth trajectory remains intact despite providing weak sales outlooks, with the clothing retailer set to see an acceleration in revenue growth once macro headwinds diminish, UBS Securities said in a Thursday client note.

The company on Wednesday outlined guidance for mid- and low-single-digit declines in its fiscal first quarter and 2025, respectively. The ongoing three-month period started off slower than expected due to "less robust demand and colder weather," Chief Executive Jay Schottenstein said in a statement, while acknowledging an "uncertain consumer and operating landscape."

UBS' surveys suggest American Eagle's brand is strong and well placed to adapt in an evolving retail environment in the US. The brokerage projects a 4.1% compound annual growth rate in sales over a five-year period.

"Despite the weak (first-quarter and fiscal 2025) guide, we think long-term growth trajectory is intact," UBS analysts led by Jay Sole wrote in the note. "Once current macro headwinds abate, we expect to see (American Eagle's) sales growth rate accelerate, leading to upward (earnings per-share revisions)."

For fiscal 2025, UBS now estimates American Eagle's sales to fall 1.7%, compared with the brokerage's prior forecast for 3.8% growth. Sales are set to be down about 4% in the first half due to a slow start to the year, combined with the adverse impacts of a strengthening US dollar and tariffs on China, according to UBS. The brokerage expects some sequential recovery in the second half.

UBS models a 5.1% sales drop in the first quarter, down from its previous estimate for a decrease of 0.6%, reflecting tariffs uncertainty and foreign-exchange headwinds.

American Eagle Outfitters late Wednesday reported fourth-quarter earnings of $0.54 per share, up from $0.03 a year ago. Net revenue fell to $1.60 billion from $1.68 billion even as comparable sales grew 3%.

The retailer's American Eagle and Aerie brands recorded comparable sales growth of 1% and 6%, respectively, in the fourth quarter, suggesting product assortment is resonating with customers, UBS said. The latest quarterly report also showed that American Eagle is continuing to control costs "effectively," according to the brokerage.

UBS reiterated its buy rating on American Eagle's stock and lowered the 12-month price target to $28 from $32.

The company is mid-teens-plus annual EPS grower, according to Sole. "With stock already down (about 31% year-to-date), we see the current stock price as an attractive buying opportunity."