What happened

Shares of American Eagle Outfitters (NYSE:AEO) were sharply down on Wednesday, as investors were spooked by less-than-encouraging data related to the ongoing COVID-19 pandemic. The stock closed the day down 6%.

Long-term American Eagle shareholders must feel they just can't catch a break. While the stock has recovered over 60% since lows hit in April, it's still down 38% from 52-week highs.

AEO Chart

AEO data by YCharts

So what

According the U.S Census Bureau, retails sales for clothing and clothing accessories stores were down 87% and 63% year over year in April and May, respectively. American Eagle's fiscal first quarter ran from February to the beginning of May, so its results don't line up perfectly with the Census Bureau data. But Q1 revenue was down 38% year over year, showing how hard the coronavirus is for its business.

American Eagle certainly needs the coronavirus to go away, but new reports show it's stubbornly sticking around. Confirmed cases appear to be on the rise again in big-economy states like Florida and Texas. And both New York and New Jersey are implementing new quarantine restrictions for out-of-state visitors as a response.

If we're headed for new lockdowns, that would be bad for American Eagle's business. Its stock is falling in response to that possibility. 

A man in a white shirt places his hands on his head as he stares at a red, down stock chart.

Image source: Getty Images.

Now what

American Eagle noted in its earnings call that online customers more than doubled in Q1. That's encouraging. But even if e-commerce sales continue to climb, the company still has over 1,000 stores. Real estate is a fixed cost and a liability when it can't be used.

While it would be premature to sell American Eagle stock based on news from a single day, it's fair to admit the future is cloudy because of the coronavirus. And in my opinion, American Eagle isn't one of the better positioned retail companies to weather the storm if it comes.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.