American Eagle Outfitters Inc said it expects its earnings to decline in the first half of 2022, as benefits from the federal stimulus fade and freight expenses surge, sending the apparel chain’s shares down 10 percent in extended trading.

The Aerie parent said on Wednesday it used pricier air freight in the latter half of last year to circumvent factory closures in Asia.

The U.S. retail industry has been wrestling with soaring freight prices over several months, and major logistics operators are expecting congestion, tight capacity as well as high freight rate levels to persist well into 2022.

These concerns also led Abercrombie & Fitch Co to warn of weaker margins in 2022 earlier in the day.

The macro environment remains challenging but American Eagle will still show meaningful progress in 2022 compared to the previous years, chief executive officer Jay Schottenstein said in a statement.

American Eagle forecast that its earnings would decline in the first half, followed by a recovery in the second.

The company said it was pleased with the early performance of its spring collections helped by earlier deliveries of shipments to ensure its shelves are sufficiently stocked.

American Eagle reported an adjusted operating income of $92 million for the fourth quarter ended Jan. 29, including $60 million in elevated air freight costs. It had earlier projected an operating income of between $90 million and $100 million.

Total net revenue increased 17 percent to $1.51 billion, in line with Wall Street expectations, according to IBES data from Refinitiv.

American Eagle’s namesake division posted a 11 percent rise, while its Aerie division, a pandemic beneficiary that makes activewear, swimsuits and bralettes, recorded a 27 percent jump.

Adjusted earnings per share came in at 35 cents.

By Praveen Paramasivam and Reshma Rockie George; Editing by Amy Caren Daniel

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