American Eagle Outfitters Pulls Guidance Due to Virus Effects

Apparel retailer American Eagle Outfitters pulled its 2020 outlook because of covid-19's effects on its results and "uncertainty related to its duration."
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Shares of American Eagle Outfitters  (AEO) - Get Report dropped Wednesday after the apparel retailer  detailed the negative impact of the coronavirus pandemic on its operations.

“We expect our results for the current fiscal quarter [ending about May 1] and for fiscal 2020 [ending about Feb. 1, 2021] will be significantly adversely impacted,” the Pittsburgh company said in a statement.

“The longer our stores remain closed to the public, the greater impact it will have on our financial results. We have withdrawn our fiscal 2020 outlook, … because of the negative impact of Covid-19 on our financial results and the uncertainty related to its duration.”

American Eagle closed its stores March 17 but continues to sell online. “Since the first day that stores were closed, our digital sales growth has accelerated, significantly exceeding our expectations,” the company said.

In 2019, its digital business represented some 29% of total revenue.

But problems remain. “Despite the strength in digital, we generate the majority of our revenue through stores, and there can be no assurance that the current performance in our digital sales growth will continue,” American Eagle said.

“The store closures will remain in place until state and local governments allow us to reopen. When we are able to reopen our stores, we cannot assure that in-store customer traffic will return to levels prior to the outbreak of covid-19.”

To ensure it has enough cash, American Eagle said it plans to issue $400 million of five-year convertible senior notes.

Its stock recently traded at $6.90, down 17%. The stock has dropped 53% over the past three months.