American Eagle Falls 9% On Earnings; 104 ETFs Affected

May 31, 2022

American Eagle Outfitters, Inc. (AEO) dropped 9% on Tuesday, marking more of the same from last week after the release of its disappointing earnings report. AEO was trading as high as $14.25 last week prior to its earnings report, but has dropped more than 17% in total. 

The five ETFs with the most AEO exposure include the WBI Power Factor High Dividend ETF (WBIY) (3.32%); the Alpha Architect U.S. Quantitative Value ETF (QVAL)  (1.76%); the Ballast Small/Mid Cap ETF (MGMT) (1.61%); the SPDR S&P Retail ETF (XRT) (0.86%); and the First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) (0.85%). 

 

 

U.S.-listed ETFs hold 25.3 million shares of American Eagles in aggregate, with the top five holding nearly 50% of those shares. The iShares Core S&P Mid-Cap ETF (IJH)  tops the list, with 4.37 million; the iShares Russell 2000 ETF (IWM) is in second, with 3.32 million; followed by the Schwab U.S. Dividend Equity ETF (SCHD) (1.77 million); the Vanguard Small-Cap ETF (VB) (1.38 million); and the Vanguard Small-Cap Value ETF (VBR) (1.32 million). 

 

 

Strategywise, vanilla, cap-weighted ETFs account for roughly one-quarter of the funds holding AEO (27). Active management ETFs (19), multifactor ETFs (12), fundamental ETFs (11) and value ETFs (10) round out the list. 

On Thursday, AEO reported earnings of $0.16 per share, significantly below expert estimations, which were $0.24 to $0.26 per share.  

Tuesday's report also showed the company adjusted their outlook for 2022. It anticipates operating profit that exceeds its fiscal 2019 figure of $314 million—a far cry from its initial predicted operating income of $550 million to $600 million. 

But that’s not all that’s dragging down the stock: Morgan Stanley and Barclays also both downgraded American Eagle Outfitters, Inc. today, following a similar move by J.P. Morgan on Friday.  

AEO cited weakened consumer demand and a shifting macro environment due to supply chain issues as their two main earnings culprits. Gross profit margins were severely impacted due to higher freight costs, while operating margins also took a hit due to increased selling and administrative expenses. 

The company opened seven new American Eagle and 12 new Aerie stores in the first quarter of fiscal year 2022, two moves that had many optimistic at the beginning of the year—and perhaps made the lower earnings report last week feel even more stark, prompting a sell-off. 

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