“As we noted in our preliminary release, the first quarter was a challenging period for our business. While we are disappointed with the results, we are taking actions to better position the company and drive stronger performance in the upcoming quarters. Our brands remain resilient. The team is executing with urgency as we look to strengthen both the topline and profit flow-through,” said Jay Schottenstein, AEO’s executive chairman of the board and chief executive officer.
Gross profit for Q1 was $322 million, with a gross margin of 29.6 per cent, down significantly from 40.6 per cent the previous year. The 960 basis point decline in merchandise margins was primarily due to inventory write downs, higher in-season markdowns, and increased product costs. Additionally, Buying, Occupancy, and Warehousing (BOW) expenses rose as a percentage of sales, deleveraging by 140 basis points, the company said in a press release.
Selling, general and administrative expense of $339 million increased 2 per cent and deleveraged 190 basis points as a percentage of sales. Lower compensation and incentives costs were offset by increased advertising.
For the second quarter of fiscal 2025, the company expects a 5 per cent decline in revenue and a 3 per cent drop in comparable sales.
ALCHEMPro News Desk (RR)
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