By Granth Vanaik
(Reuters) -American Eagle Outfitters on Wednesday joined rival Abercrombie & Fitch in raising its annual revenue forecast, betting on steady demand for its wide-legged pants, tops and accessories despite still-high inflation.
Its shares fell about 3% in extended trading, after the company reported second-quarter revenue in line with expectations. The stock has gained more than 45% in the quarter to date.
The forecast lift comes at a time when several companies such as Macy's (NYSE:M) have taken a cautious stance towards the second half as U.S. consumer spending strains under high prices and borrowing rates.
"(American Eagle (NYSE:AEO)'s) decision to purposefully keep inventory levels low has enabled it to be more responsive to emerging trends, which in turn is helping it win more sales and avoid excessive promotional activity," said Insider Intelligence analyst Rachel Wolff.
Inventories fell 7% in the quarter from year-ago levels. The company has also been stocking its shelves with newer styles in its fleece, activewear and seasonal tops categories in a bid to attract more shoppers.
In August, it said demand had picked up late in June and continued as the clothing retailer introduced its early fall collection in July across its Aerie and American Eagle segments.
"It's encouraging to see positive momentum continue into the third quarter, across brands and channels," said CEO Jay Schottenstein.
The company also expects third-quarter revenue to rise in the low-single-digit range, compared with estimates for a fall of 0.9%, according to LSEG data.
Sales for Aerie, a division that makes activewear, swimsuits and bralettes, recorded a 2% quarterly rise, while its namesake division posted a 1% fall.
American Eagle now expects annual revenue to rise in the low single digits, compared with its prior forecast for a flat- to low-single-digit decline.
Its profit of 25 cents per share was higher than estimates of 16 cents.