Why American Eagle Stock Dropped Today
Key Points
American Eagle is struggling to adapt to changing fashion trends.
Discounted merchandise is denting the company's margins.
- 10 stocks we like better than American Eagle Outfitters ›
Shares of American Eagle Outfitters (NYSE: AEO) fell on Thursday after the apparel retailer issued a disappointing profit forecast.
Image source: American Eagle Outfitters.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
New fashion trends are weighing on AEO's results
AEO's total net revenue rose 8% year over year to $1.4 billion in its fiscal second quarter, which ended on Aug. 1.
Yet the retailer's performance was more bifurcated than it might appear at first glance.
Aerie, AEO's intimate apparel brand, saw its comparable sales jump 19%. Aerie's revenue, in turn, surged 25% to $536 million.
Yet the company's namesake American Eagle brand saw comps decline by 1%. Despite an attention-grabbing marketing campaign featuring actress Sydney Sweeney, American Eagle's sales have been slowed by shifting fashion trends.
That's forcing the retailer to discount its wares to clear excess inventory, leading to a 3.3-percentage-point decline in AEO's merchandise margins.
"What we are needing to work through right now is just some of the older fits and really just rebalancing our inventory," president and executive creative director Jen Foyle said during a conference call with analysts.
Lackluster guidance
Looking ahead to the third quarter, AEO is targeting operating income of $110 million to $115 million.
Investors were disappointed by management's guidance, as it fell well short of Wall Street's expectations for operating profit of roughly $124 million.
Should you buy stock in American Eagle Outfitters right now?
Before you buy stock in American Eagle Outfitters, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and American Eagle Outfitters wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $410,024!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,372,815!*
Now, it’s worth noting Stock Advisor’s total average return is 950% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of September 10, 2026.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.
Recommended Articles
