American Eagle Outfitters (AEO) saw its stock price plummet 7.87% in after-hours trading on Thursday following the release of disappointing first-quarter fiscal 2025 results and a weak second-quarter outlook. The apparel retailer reported a significant earnings miss and provided a gloomy forecast for the upcoming quarter, causing investors to reassess their positions.

For the first quarter, American Eagle Outfitters reported a loss per share of $0.36, falling well short of analysts' expectations and representing a stark reversal from the $0.34 earnings per share posted in the same period last year. Revenue for the quarter came in at $1.089 billion, slightly below estimates and down 5% year-over-year. The company's net income for Q1 was a concerning -$64.899 million, reflecting challenging market conditions and operational difficulties. Comparable sales decreased by 3%, with the Aerie brand seeing a 4% decline and the American Eagle brand dropping 2%. The company's gross margin contracted significantly to 29.6% from 40.6% a year ago, primarily due to inventory writedowns, higher markdowns, and increased product costs.

Adding to investor concerns, American Eagle Outfitters provided a weak outlook for the second quarter of fiscal 2025. The company anticipates a 5% decline in revenue and a 3% drop in comparable sales for Q2. Operating income is expected to be between $40 million and $45 million, indicating continued pressure on profitability. These projections, coupled with the poor Q1 performance and ongoing macroeconomic uncertainties, have led to a significant sell-off in AEO shares during after-hours trading. The company's decision to withdraw its full-year outlook due to difficulties in predicting consumer spending has further intensified investor anxiety about the retailer's near-term prospects in a challenging retail environment.