Shares of American Eagle Outfitters have cratered 48.3% this yr, and additional draw back is in retailer, in keeping with Morgan Stanley. Analyst Kimberly Greenberger downgraded the retail inventory to underweight from equal weight, citing dangers to margins and gross sales. Greenberger additionally slashed her value goal on American Eagle to $8 per share from $22, implying draw back of practically 39%. “Our evaluation suggests heightened danger to topline progress at each AE & aerie, and important danger to 2022 margins & EPS, that put even administration’s lowered 2022 monetary targets out of attain,” Greenberger stated in a be aware Tuesday. “Moreover, administration has but to decrease its optimistic 2023 monetary targets, which suggests to us that adverse earnings revision danger extends into subsequent yr.” American Eagle lately reported quarterly outcomes that missed analyst expectations. And, in contrast with different mall retailers corresponding to Macy’s — which beat estimates within the latest quarter — AEO’s miss is probably going a results of “product execution & poor planning processes relatively than a macro problem,” Greenberger wrote. The corporate’s full-year steering on working earnings additionally presents a possibility for extra misses, she added. As inflation surges and a possible recession looms, shopper demand continues to dwindle. Between that and “outsized orders” spurred by provide chain delays, Greenberger believes American Eagle can have additional stock which might drive the corporate to extend promotions and reductions. “Customers who had been educated to pay full ticket value will rapidly understand they are often extra price-selective, making it much more tough for retailers to extract value will increase as they try to offset enter price inflation & elevated freight expense,” she wrote. “With so many retailers clearing stock on the identical time, we see danger that items might have to be extra deeply discounted than regular clearance requires.” — CNBC’s Michael Bloom contributed reporting
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