Down 53%, Is This Stock a Buy?
This year, retail stocks have been punished by fears of recession and a slowdown in consumer discretionary spending. The S&P Retail Select Industry Index has seen a 29.2% decline in 2022. Continued inventory issues have also plagued retail stocks this year. Young adult apparel retailer American Eagle Outfitters (NYSE: AEO) is no exception.
Beyond the broader issues, American Eagle has taken on debt for the first time in its history in 2020 as a cushion at the onset of the coronavirus pandemic. Now it's looking to take on more. The stock is down more than those of other retailers and may look like a bargain. Here's why it may not be.
After COVID-19-related stimulus checks hit consumers' checking accounts, they had extra money to burn. At the same time, discretionary spending was also fueled by stay-at-home orders that saved folks money that would've otherwise been spent on dining out, going to the movies, or traveling. The extra padding in checking accounts provided a banner year for American Eagle in 2021. The company ended the year with record sales topping $5 billion.
Source Fool.com
