Please ensure Javascript is enabled for purposes of website accessibility

American Eagle Outfitters Furloughs Employees, Cuts Inventory, Defers Dividends

By Rhian Hunt – Apr 3, 2020 at 1:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With its wings clipped by the pandemic’s effects, the retailer looks to sharply reduce costs.

Finding the economic wind beneath its wings weakening following coronavirus lockdowns and store closures, American Eagle Outfitters (AEO 2.43%) announced yesterday it is taking a multi-pronged approach to slashing its expenses during the crisis. Elements of its plan include deferring payment of the first-quarter 2020 cash dividend on its shares, suspending its stock buyback program, and furloughing many of its workers starting on Sunday, April 5.

Before the full force of the COVID-19 outbreak gripped the United States, the company reported continuing growth, driven in part by the strong success of its Aerie brand. Now, the company is battening down the hatches to preserve its financial position through the coronavirus crisis. It has fortified its liquidity by drawing down $330 million from its available revolving credit and withdrawn its March 4 guidance.

A red descending arrow on top of hundred dollar bills.

Image source: Getty Images.

Beginning April 5, the company intends to furlough an unspecified percentage of its associates without pay, on a temporary basis. These include not only in-store personnel but also corporate employees and field employees. It also does not indicate the length of the furlough, though it notes it will continue paying 100% of health insurance premiums for these individuals "at least" through the end of April.

Previously, American Eagle announced a $0.138 dividend per share for fiscal Q1 2020. In yesterday's announcement, it said it still means to pay these dividends, but the actual payments are deferred until April 23, 2021. American Eagle says it could potentially defer payment further based on the coronavirus and how its own financial situation changes in the future.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

American Eagle Outfitters, Inc. Stock Quote
American Eagle Outfitters, Inc.
AEO
$10.10 (2.43%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.