Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on the shares of American Eagle Outfitters Inc AEO and lowered the price target to $15 (33% Upside) from $17.
Telsey moderated the estimates reflecting industry-wide challenges driven by persistent macro pressures weighing on both retailers and consumers.
In both Q2 and the back half of the year, the analyst anticipates a challenging environment for both the top line and margins due to current inflationary cost pressures on both the company and the customer.
Despite expectations for improved margins and profitability in H2 due to more balanced inventory levels and a lower cost base, the analyst views that visibility remains challenging.
The analyst estimates the gross margin to contract 930 bps to 32.8% against the consensus estimate of 33%.
As a result of the softer first-quarter sales, inventory levels were elevated heading into Q2, and increased promotional activity will impact gross margin.
The company will report Q2 earnings on September 7, 2022, after the market close.
Price Action: AEO shares are trading lower by 4.12% at $11.28 on the last check Wednesday.
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