American Eagle Shares Drop 17% on Weak Q1

American Eagle stock dropped by more than 17% on Tuesday following a $75 million inventory write-down and the company’s decision to remove its 2025 guidance because of poor sales and economic instability. The company reported Q1 revenue at $1.1 billion during the period ending early May which represented a 5% decline from the previous year while comparable sales decreased by 3% due to a 4% decline at Aerie. The retailer predicted single-digit sales reductions but experienced deeper price reductions and sluggish market demand because of unfavorable weather conditions. The operating loss reached $85 million because of heavy promotional activities and the spring/summer inventory write-down amounting to $68 million. CEO Jay Schottenstein described the execution as disappointing while stating that the company had better inventory alignment during Q2. The company conducts a strategic review to enhance product performance and buying operations. The pre-tariff stockpiling at American Eagle failed to protect Aerie from inventory shortages which negatively affected sales. The 30% China tariffs imposed by Trump create market uncertainty but their relationship to the guidance withdrawal remains ambiguous. The apparel sector faces cautious consumers because 60% of consumers plan to postpone their major purchases according to a Harris/Guardian poll. The retail industry faces widespread challenges because American Eagle joins General Motors and other companies in reporting tariff-related and economic difficulties.