“This is an unprecedented time in retail. As we cycle last year’s bumper demand, a more challenging macroeconomic environment is impacting consumer spending behavior. Second Quarter Performance reflected these challenges, limiting revenue and amplifying pressure on margins as we fully eliminated excess spring and summer product,” said Jay Schottenstein, Executive Chairman and CEO of AEO.
American Eagle Outfitters (AEO) gross profit was $370 million in the second quarter of fiscal 2022, down 26% from $502 million in fiscal 2021 and reflects a gross margin of 30.9%. Higher markdowns resulted in 750 basis points of lower rates, with about a third of that reflecting higher end-of-season clearances.
In the second quarter, AEO recorded selling, general and administrative expenses of $308 million, an increase of 5%. General and administrative expenses increased 110 basis points as a rate to sales compared to the second quarter of 2021, primarily due to higher store salaries, corporate compensation, professional services and advertising, partially offset by lower incentive compensation accrued expenses.
“In a changing macro environment, we focus on controlling the controllable. We entered the second half with much better stock levels and an assortment that is fresh for the fall season. Given the ongoing external uncertainties, we have taken additional steps to improve financial performance. We have made deeper spending cuts and are further reducing capital expenditures. As an added precautionary measure, we suspended our quarterly cash dividend to strengthen our cash position. Our brands and products remain highly relevant and sought after by our customers. I am confident that we will be successful in overcoming current challenges and preparing AEO for a stronger future,” explained Schottenstein.
Since the start of the quarter, demand trends remain challenging, with brand revenue down in the high single digits after exceptional growth and a record back-to-school season last year. Assuming current trends, the third quarter gross margin rate would be in the mid 30s and the fourth quarter in the 30s. This reflects higher markdowns in anticipation of a more promotional retail environment and the company’s seasonal clearance cadence which is more weighted in the fourth quarter.
Fibre2Fashion (RR) Press Office
