By Dhirendra Tripathi
Investing.com – American Eagle (NYSE:AEO) stock plunged 13% Thursday after the retailer forecast a decline in earnings for the first half of 2022, hobbled by surging freight costs and the fading impact of federal stimulus.
The retailer faced multiple headwinds in the quarter ended January 29 as the closure of supplier factories in Vietnam stretched delivery times. The apparel chain used pricier air freight to ensure shelves were stocked in the holidays. Notwithstanding those efforts, inventory flow remained uneven, including in its high-margin Aerie leggings business and its namesake American Eagle brand. The high-priced flights cost the company around $60 million out of the $80 million in elevated freight costs.
The company said it is pleased with the early performance of its spring collections but still taking a cautious view of 2022. It expects operating profit for the year to be higher at $555 million at the midpoint of its guidance range with no plans to use costly air freight, according to Reuters.
The company also plans to discount more in the spring season after historically low levels last year when stimulus-loaded customers enthusiastically spent at its stores.
Adjusted profit per share in the fourth quarter was 35 cents on total net revenue of $1.51 billion which rose 17%. Both profit and sales were short of estimates.
Revenue at American Eagle's namesake division posted an 11% rise to $1 billion. Its Aerie line, which makes capes and sarongs, swimsuits and sunglasses, recorded a 27% jump to $428 million.