American Eagle EPS Jumps 15%

Key Points

• American Eagle Outfitters reported EPS of $0.45 for fiscal Q2 2025, up 15% year over year.

• Revenue of $1.28 billion declined less than expected as Aerie comparable sales grew 3%, offsetting core brand softness.

• Operating income and margin both improved year over year, driven by lower promotions and expense control despite ongoing tariff headwinds.

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American Eagle Outfitters (NYSE:AEO), the apparel retailer known for its American Eagle and Aerie brands, reported second-quarter fiscal 2025 results on Sept. 3, 2025. The most important news in this release was an improvement in both earnings and margins, with the company delivering earnings per share of $0.45. Operating income reached $103 million, well above the operating income guidance of $40 million–$45 million issued after the prior quarter’s weak performance. While Q2 revenue of $1.28 billion slipped 1% from last year, it beat earlier company guidance of a 5% revenue decline.

Overall, the quarter marked a rebound in profitability, though total sales (GAAP) remained slightly below prior year levels amid ongoing challenges for the core American Eagle brand.

Source: American Eagle Outfitters. Note: Fiscal 2025's second quarter ended Aug. 2, 2025. Fiscal 2024's Q2 ended July 29, 2024.

Company overview and key success factors

American Eagle Outfitters operates as a specialty retailer focused on casual wear for teens and young adults. Its two main product families are the American Eagle brand—offering jeans and apparel—and Aerie, which features intimates, activewear, apparel, and swim collections. The company’s footprint includes 1,185 consolidated stores and a growing international presence through franchise partners.

Recent strategy has centered on brand differentiation, supply chain efficiency, and investments in digital capabilities. Critical to its business are the strength of the Aerie brand, sustainability initiatives through the Real Good product line, and managing operational efficiency amid changing retail trends. Digital integration and inclusivity policies also support its position in a highly competitive sector.

Quarterly performance and developments

Management reported, “an improvement in the business driven by higher demand, lower promotions, and well-managed expenses, all of which exceeded our expectations.” Diluted EPS (GAAP) rose to $0.45, comfortably outpacing both last year’s figure and analyst forecasts, while operating income (GAAP) reached $103 million, more than double the company’s May guidance.

Gross margin, a key indicator of merchandising and inventory management health, expanded to 38.9%. This was helped by a reduction in promotional activity and improved merchandise margins, despite overall revenue (GAAP) remaining just below the year-ago period. The company’s operating margin also edged up, indicating improved expense control. The Aerie business stood out, delivering a 3.2% increase in net revenue (GAAP) compared to fiscal Q2 2024 and 3% comparable sales growth. In contrast, the American Eagle brand saw net revenue decline 3.3% on a GAAP basis and a 3% drop in comparable sales, offsetting softness in the core brand.

The period also highlighted the benefits of focused marketing, with campaigns featuring celebrities like Sydney Sweeney and Travis Kelce credited for higher customer engagement. Inventory management remained disciplined, with units up only 3%, though inventory costs climbed 8% due to tariff impacts.

The balance sheet reflects some shifts in financial health. Cash and equivalents (GAAP) dropped by nearly $65 million from fiscal Q2 2024, now at $127 million, while long-term debt rose from zero last year to $203 million. The company completed $200 million in accelerated share repurchases, reducing its diluted share count by about 10%. A regular quarterly dividend of $0.125 per share was paid, consistent with prior periods.

Looking ahead: Guidance and investor watch points

Management projected full-year operating income (non-GAAP) in the range of $255 million to $265 million and comparable sales approximately flat. Gross margin is expected to decline year over year, reflecting ongoing input cost pressures—mainly from tariffs. Capital expenditures are forecast to total about $275 million.

Investors should monitor the performance of the Aerie brand relative to core American Eagle. The rising debt level and cash outflows, especially with ongoing buybacks and dividends, also warrant ongoing attention. The quarterly dividend was maintained at $0.125 per share.

Note: Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.