American Eagle Outfitters Reduces Guidance (AEOS)

Tony Sagami (Harvest Advisors) submits: Teen retailer American Eagle Outfitters dropped its Q4 profit forecast from 76 cents to 73-75 cents. That’s bad enough, but two other details tell me that business is even worse than Wall Street expects:

==> Profit margins were 2% lower in Q3 of this year than Q3 of 2004.
==> Unsold inventory grew by 24% in the last 12 months. That’s a whole bunch of markdowns waiting to happen.

Are American Eagle’s problems a result of fickle teenage fashion taste or is it a manifestation of more serious consumer spending slowdown? Only time will tell, but the evidence is starting to pile up.

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