Shares of apparel makers Gap and American Eagle Outfitters dropped 15% and 10% in premarket trade on Friday after weak annual forecasts.
Consumers are curbing discretionary spending amid a tough macroeconomic climate. Gap cut its annual sales forecast, while American Eagle flagged a contraction in current-quarter gross margin.
U.S. inflation posted its biggest increase in three years, and consumer sentiment hit a record low in May. This forced households to tap savings and cut back on discretionary purchases like clothes.
Both companies cited weakness in certain women's seasonal categories. At Gap, pressure centered on Old Navy, where seasonal women's apparel failed to connect with shoppers.
American Eagle also saw pressure as strong demand at Aerie failed to offset weakness at its namesake brand. Barclays noted heavy marketing spending is expected to recur in the second quarter.
