American Eagle Outfitters Downgraded to Underperform from Neutral by B of A Securities

American Eagle Outfitters Downgraded to Underperform from Neutral by B of A Securities

Bank of America (BofA) has downgraded American Eagle Outfitters (AEO) to "underperform" from a previous rating of "neutral" on Monday. The research firm cited the current challenging operating environment, including higher tariffs and lower sales of its activewear brand Aerie, as primary reasons for the downgrade [1].

The downgrade has had an immediate impact on AEO's stock, with shares down nearly 4% in premarket trading. The company is expected to report its second-quarter results on September 3, with estimates indicating quarterly net revenue of $1.23 billion and earnings per share (EPS) of $0.20 [2].

BofA also lowered its price target on AEO to $10 from $11, reflecting its concerns about the company's earnings outlook. The firm's fiscal 2025 and 2026 EPS estimates were cut by 8% and 30%, respectively. The downgrade underscores BofA's belief that AEO is a long way from achieving normalized earnings in the current environment [2].

American Eagle's stock has been under pressure this year, losing 23% of its value, and has declined by 43% in the last 12 months. Despite the company's recent marketing efforts, such as a new jeans campaign featuring Euphoria star Sydney Sweeney, BofA expects the boost from this campaign to be offset by higher tariffs [1].

Meanwhile, rival Abercrombie & Fitch (ANF) has announced a multi-season partnership with Pittsburgh Steelers linebacker TJ Watt and his wife, former professional soccer player Dani Watt, for its activewear brand, Your Personal Best (YPB). The first release of the co-designed collection is available as of last week [2].

References:
[1] https://seekingalpha.com/news/4488709-bofa-cuts-rating-on-american-eagle-citing-tough-current-operating-environment
[2] https://stocktwits.com/news-articles/markets/equity/american-eagle-slips-4-premarket-as-bofa-downgrade/chssYdJRd1M