American Eagle Outfitters Reports Strong Q2 Numbers

In the second quarter ending August 2, 2025, American Eagle Outfitters (AEO) announced a net revenue of $1.28 billion, reflecting a minor dip of 1% from the previous year. Nevertheless, this figure exceeded industry expectations by 4.07% during their earnings call.

Aerie Shines While American Eagle Faces Challenges

While the overall revenue saw a slight decline, AEO's Aerie line bucked the trend, reporting a 3% rise in comparable sales. In contrast, the American Eagle line experienced a 3% drop. CEO Jay Schottenstein expressed confidence about the brand's performance, highlighting improvements driven by better inventory management and reduced promotions.

Financial Highlights from Q2 FY25

AEO saw its gross profit increase slightly to $499.96 million, up from $498.89 million last year. The gross margin expanded by 30 basis points, reaching 38.9%, largely due to lower markdowns.

Selling, general and administrative expenses remained flat at $342.21 million, benefiting from reduced compensation costs despite ongoing investments in advertising. Operating profit rose by 2% to $103.09 million, with an operating margin improvement to 8.0%.

Net income saw a modest increase to $77.63 million from $77.26 million year-over-year, and diluted earnings per share climbed 15% to $0.45.

Inventory and Shareholder Returns

At the end of the quarter, inventory levels were up 8% to $718 million, driven by tariff impacts. In a bid to enhance shareholder returns, AEO completed a $200 million accelerated share repurchase agreement, translating to approximately 18 million shares bought back this quarter. Overall, the company has repurchased shares worth $231 million this fiscal year.

Outlook for the Future

Looking ahead, AEO anticipates low single-digit growth in comparable sales, though it expects gross margin to decline year-over-year. CFO Mike Mathias noted that tariffs will have a significant impact, estimating a $20 million hit in Q3 and an additional $40-$50 million in Q4.

For Q3, operating income is projected between $95 million and $100 million. While the full fiscal year outlook suggests stable comparable sales, the company remains cautious about margins.

Schottenstein enthusiastically added, "The fall season is starting strong, buoyed by our successful marketing campaigns featuring Sydney Sweeney and Travis Kelce. We're excited about leveraging our iconic brands for greater profitability and sustained growth moving forward."

Conclusion

American Eagle Outfitters may face challenges from tariffs, but its strong Q2 performance and strategic marketing initiatives position it well for continued success. Investors and shoppers alike will be watching closely as the brand navigates its path forward.