American Eagle Outfitters, Inc. AEO posted second-quarter fiscal 2026 earnings of 79 cents per share, up 75.6% year over year and above the Zacks Consensus Estimate of 21 cents by 276.2%. Net revenues rose 7.5% to $1.38 billion and beat the consensus mark of $1.37 billion by 1%.
The earnings beat was aided by tariff-refund benefits, while Aerie and OFFLINE momentum supported sales growth. Consolidated comparable sales increased 6%, and American Eagle showed sequential improvement from the first quarter.
American Eagle’s shares have lost 8.5% in the past three months compared with the industry’s 17.3% decline.
AEO's Brand Sales Show Uneven Momentum
Aerie revenues increased 25% year over year to $535.8 million, while comparable sales advanced 19%. Management cited broad-based strength across channels and categories, including core apparel, intimates and activewear. OFFLINE also benefited from demand for Cloud Fleece, sports bras and bottoms.
American Eagle brand revenues rose 0.7% to $805.9 million, but comparable sales declined 1%. Men's delivered its fourth consecutive quarter of positive comps. Women's fashion bottoms and newer denim fits gained traction, though the company is still rebalancing older and seasonal inventory.
We had expected Aerie revenues to grow 19.4% year over year to $512.5 million, while AE revenues to dip 1% to $792.1 million.
American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise
American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. Quote
American Eagle's Margins Get Refund Boost
Gross profit climbed 34.4% year over year to $672.1 million, while gross margin expanded 980 basis points to 48.7%. A net $179 million tariff-refund benefit in gross profit contributed 1,300 basis points to the margin expansion. Merchandise margins deleveraged 330 basis points, with Aerie improvement offset by American Eagle markdowns.
Selling, general and administrative expenses increased 19% to $408.4 million and rose 290 basis points, as a percentage of sales, to 29.6%. The quarter included $18 million of tariff refund-related incentive compensation expense. The remaining increase primarily reflected planned advertising investments.
Operating income rose 105.1% year over year to $211.4 million, while operating margin increased 730 basis points to 15.3%. The quarter included a $161 million net operating income benefit from tariff refunds.
American Eagle's Balance Sheet Shows Inventory Build
This Zacks Rank #1 (Strong Buy) company ended the quarter with $148 million in cash and cash equivalents. Total liquidity, including the revolver, was $783 million. Merchandise inventory was $817.9 million, up 13.9% year over year, while units increased 9%.
Capital expenditures were $66 million in the quarter. The company also returned $21 million to shareholders through its quarterly cash dividend of 12.5 cents per share.
AEO's Q3 Guide Points to Continued Aerie Growth
For the fiscal third quarter, AEO expects comparable sales growth in the mid-to-high single digits. Management sees Aerie and OFFLINE comps in the high teens to 20% range, while American Eagle is expected to be approximately flat.
Gross margin is projected to be roughly flat year over year, with SG&A expenses rising in the high-single digits. Operating income is forecast between $110 million and $115 million.
American Eagle's Fiscal 2026 Outlook Includes Refunds
For fiscal 2026, the company expects comparable sales to increase in the mid-single digits and gross margin to rise year over year. SG&A expenses are projected to grow in the low-double digits, while depreciation and amortization is expected to be about $215 million.
Operating income is forecast between $540 million and $550 million, inclusive of tariff-refund benefits, with a weighted average share count in the low 170 million range. Capital expenditures are expected between $250 million and $260 million.
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American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report
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