American Eagle Outfitters, Inc. AEO reported solid first-quarter fiscal 2026 results wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Meanwhile, revenues increased from the prior-year figures.
AEO posted earnings of 14 cents per share in the fiscal first quarter, surpassing the Zacks Consensus Estimate of 11 cents.
American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise
American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. Quote
The company benefited from strong demand across its portfolio, led by continued momentum at Aerie, which delivered standout multi-channel performance and profitability. Management credited compelling product assortments and the ongoing resonance of the “100% Aerie REAL” campaign for deepening customer connection and supporting growth.
An Insight Into AEO’s Q1 Revenues
Total net revenues of $1.20 billion jumped 10% year over year and surpassed the Zacks Consensus Estimate of $1.18 billion. This was backed by consolidated comparable sales (comps) and positive results across Aerie brand. Comps edged up 8% in the quarter. Our model predicted positive comps of 7.4% for the fiscal first quarter.
Brand-wise, revenues inched down 2.2% year over year to $678.5 million at the American Eagle brand. Also, comps for the brand declined 2%.
Revenues jumped 33.6% year over year to $480.8 million for the Aerie brand. Comps for the Aerie brand rose 25%. We expected sales growth of 4.1% year over year at the American Eagle brand and a 13.3% rise at Aerie for the reported quarter.
An Insight Into AEO’s Margins & Expenses
Gross profit inched up 41% year over year to $456 million. The gross margin of 38.2% expanded 860 basis points (bps) from the prior-year period, reflecting a meaningfully stronger merchandise margin profile and better cost leverage. The gain was mainly driven by a 710-basis-point lift in merchandise margins, largely because the prior-year period included a $75 million inventory write-down. In addition, buying, occupancy and warehousing (BOW) costs improved by 150 bps, helped by higher sales and ongoing cost-optimization efforts.
Selling, general and administrative (SG&A) expenses increased 11% year over year to $376 million. As a percentage of sales, SG&A expenses increased 40 bps year over year. The increase was led by planned investments in advertising, somewhat offset by leverage in the rest of the expense base.
Operating income came in at $28 million, a notable improvement from an operating loss of $85 million a year ago, and management noted that operating profit exceeded first-quarter guidance.
AEO’s Financial Health Snapshot
American Eagle ended the fiscal first quarter with cash and cash equivalents of $103.3 million. Total shareholders’ equity was $1.64 billion as of May 2, 2026. Ending inventory rose 27% year over year to $817 million, while inventory units increased 5%. Management said the higher inventory cost reflects this year’s tariff impact and the fact that last year’s inventory balance was reduced by an inventory write-down. Capital expenditures were $61 million in the fiscal first quarter.
AEO bought back nearly 3 million shares for about $53 million. Additionally, the company distributed $21 million to its shareholders through its quarterly cash dividend of $0.125 per share.
AEO’s Q2 & FY26 Outlook With Tariff Assumptions
American Eagle noted that all guidance is based on estimates and bakes in tariff assumptions of 10% on second-quarter receipts and 15% for the back half of fiscal 2026, while excluding any benefit from IEEPA tariff refunds.
For the second quarter of fiscal 2026, the company expects comparable sales to increase at a mid-to-high single-digit rate, gross margin to decline year over year, SG&A expenses to rise in the mid-teens, and depreciation and amortization to be in the mid-$50 million range. Operating income is guided to $45 million to $50 million, with a weighted average share count in the low 170 million range.
For fiscal 2026, AEO sees comparable sales to rise by mid-single digits, gross margin to increase year over year, SG&A to grow by high-single digits, depreciation and amortization to total around $220 million, and operating income to range between $390 million and $410 million, again assuming a low 170 million weighted average share count. AEO expects capital expenditure of $250-$260 million for fiscal 2026.
Shares of the Zacks Rank #4 (Sell) company have lost 25.2% in the past six months compared with the industry’s drop of 0.3%.
AEO Stock 6-Month Price Peformance
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Key Picks
Some better-ranked stocks in the retail space are Tapestry, Inc. TPR, Victoria's Secret & Co. VSCO and Levi Strauss & Co. LEVI.
Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tapestry’s current fiscal-year earnings and sales indicates growth of 36.3% and 13.8%, respectively, from the year-ago actuals. TPR delivered a trailing four-quarter average earnings surprise of 15.6%.
Victoria's Secret is a specialty retailer of women's intimates, sleepwear, apparel, sport and swimwear, and prestige fragrances and body care. It currently has a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Victoria's Secret’s current fiscal-year sales and earnings indicates growth of 6.2% and 16.3%, respectively, from the year-ago reported numbers. VSCO delivered a trailing four-quarter earnings surprise of 55.1%, on average.
Levi Strauss designs and markets jeans, casual wear and related accessories for men, women and children. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Levi Strauss’ current fiscal-year earnings and sales suggests growth of 11.9% and 5.2%, respectively, from the year-ago actuals. LEVI delivered a trailing four-quarter average earnings surprise of 21.4%.
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American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).