American Eagle Outfitters Q1 Earnings Call Highlights

Key Points

• American Eagle Outfitters posted a strong first quarter, with revenue up 10% to $1.2 billion, comparable sales up 8%, and operating income of $28 million, ahead of guidance. Growth was driven by Aerie and OFFLINE, which continue to outperform the core brand.
• Aerie and OFFLINE were the clear growth engines, with revenue up 34% to $481 million and Aerie comparable sales up 45%. Management said Aerie surpassed $2 billion in trailing 12-month revenue and expects continued momentum from targeted promotions and stronger merchandising.
• The core American Eagle brand remained mixed, with sales down 2% and women’s bottoms, especially denim, cited as the main weak spot. The company still expects American Eagle to recover later in the year, while full-year guidance calls for mid-single-digit comparable sales growth and operating profit of $390 million to $410 million.

American Eagle Outfitters NYSE: AEO reported first-quarter revenue growth and operating income ahead of its guidance, as continued momentum at Aerie and OFFLINE offset weaker trends in parts of the namesake American Eagle brand.

Executive Chairman and Chief Executive Officer Jay Schottenstein said the quarter “reflected the strength of our portfolio, the power of Aerie, and work underway at American Eagle.” The company reported revenue of $1.2 billion, up 10% from last year, with operating income of $28 million. Comparable sales increased 8%.

Schottenstein said Aerie surpassed $2 billion in revenue on a trailing 12-month basis, while American Eagle saw strength in men’s and tops but weakness in women’s bottoms, including denim. “We are pleased with performance of the quarter,” Schottenstein said, while adding that the company has “identified specific opportunities to better position women’s bottoms.”

Aerie and OFFLINE Drive Growth

Aerie and OFFLINE continued to be the strongest part of the portfolio. Schottenstein said the brands generated revenue of $481 million, up 34% from last year, supported by demand across categories and channels.

Jennifer Foyle, President and Executive Creative Director for American Eagle and Aerie, said Aerie is “firing on all cylinders,” pointing to broad-based category strength and a 45% comparable sales increase in Aerie apparel. She said Aerie’s head-to-toe merchandising strategy across intimates, sleep and apparel is helping simplify outfitting for customers while increasing basket size and average order value.

Foyle said intimates delivered high single-digit comparable sales growth, led by a record performance in the undies business, and sleep continues to scale as a longer-term growth category. She also highlighted a shift away from brand-wide promotions toward more targeted promotions, always-on pricing in key categories and marketing focused on acquiring and retaining higher-value customers.

The company also cited marketing as a contributor to Aerie’s performance, including the 100% AerieREAL campaign featuring Pamela Anderson. Foyle said the campaign reinforces Aerie’s commitment to inclusivity and authenticity, including a promise not to use AI-generated bodies or people in marketing.

OFFLINE also continued to gain traction. Foyle said the activewear brand is seeing customer response to new silhouettes, styles and fabrications, including matching sets and curated color drops. She said OFFLINE is currently the No. 2 legging brand within the company’s core demographic and is “well on its way to becoming its own activewear brand.”

American Eagle Results Mixed as Women’s Bottoms Weigh

The American Eagle brand posted weaker results, with total sales down 2% and comparable sales also down 2%. Chief Financial Officer Mike Mathias said American Eagle’s digital performance was flat, while the comparable sales decline was driven by stores.

Foyle said the American Eagle men’s business delivered its third consecutive quarter of positive growth, with gains across tops and bottoms. Women’s tees and fashion tops also performed well. However, women’s bottoms underperformed expectations and were the primary driver of the brand’s sales decline.

“We know what needs to be corrected, and the teams are aligned and activated to return AE to growth,” Foyle said.

She said the company needs to better distort into specific styles and fits, and that a colder spring hurt demand in seasonal categories. For the back-to-school period, Foyle said the company is refining its bottoms architecture, optimizing key silhouettes and rises, and using chase capabilities to add newness.

During the question-and-answer portion of the call, Foyle said the team has already tested for back-to-school and has identified working rises and fits. She said more recent results in denim have improved, though she did not provide specific figures. Schottenstein said he expects American Eagle to return to positive comparable sales growth in the back half of the year.

Margins Improve, Inventory and Tariffs in Focus

Mathias said first-quarter gross profit increased 41% to $456 million, while gross margin expanded 860 basis points to 38.2%. Merchandise margin improved 710 basis points, primarily due to the comparison against last year’s inventory write-down. Buying, occupancy and warehousing expenses leveraged 150 basis points, aided by sales growth and initiatives to control delivery and distribution costs, including benefits from winding down third-party fulfillment operations.

SG&A expenses rose 11%, driven by planned advertising investments. Interest expense increased due to a transaction agreement under which the company sold a portion of its tariff claims, while other income increased due to an unrealized gain on investments. Depreciation was flat at $51 million. The company reported a first-quarter tax rate of approximately 17% and earnings per share of $0.14.

Ending inventory at cost was up 27%, while units were up 5%. Mathias said the difference reflected incremental tariffs this year and the comparison to last year’s inventory write-down. Normalizing for those factors, he said inventory cost dollars would have been up in the high single-digit range.

Tariffs remained a key topic on the call. Mathias said the company expects a $20 million incremental tariff headwind in the second quarter versus last year. The company is planning for a 10% tariff rate on imports in the second quarter and 15% for the balance of the year.

Mathias said American Eagle Outfitters has applied for roughly $190 million in tariff refunds and anticipates a $140 million net cash benefit, though that benefit is not included in guidance. He said the company has received more than $100 million back so far and has about $75 million in the bank net of amounts owed to a third party after selling a portion of the claims.

Guidance Calls for Continued Aerie Strength

For the second quarter, the company expects comparable sales growth in the mid- to high-single-digit range. Mathias said Aerie and OFFLINE are expected to continue growing in the high teens to low 20% range, while American Eagle is expected to be flat to down low single digits.

The company expects second-quarter operating income of $45 million to $50 million, including the $20 million tariff headwind. SG&A is expected to rise in the mid-teens, primarily due to continued advertising investment.

For the full year, American Eagle Outfitters expects operating profit of $390 million to $410 million, based on consolidated comparable sales growth in the mid-single-digit range. Mathias said the company expects capital expenditures of $250 million to $260 million.

In the back half of the year, Mathias said the company expects American Eagle comparable sales in the low single-digit range, while Aerie is expected to moderate to high single-digit to low double-digit growth. He said that mix would support mid-single-digit comparable sales growth for the total portfolio.

Capital Returns and Store Plans

The company returned $74 million to shareholders in the quarter, including $21 million through its quarterly dividend and $53 million through repurchases of 3 million shares. Capital expenditures totaled $61 million. American Eagle Outfitters ended the quarter with $103 million in cash and approximately $620 million of total liquidity, including its revolver.

Schottenstein also highlighted the opening of the company’s West Coast distribution center in Phoenix, which went live in early May. He said the facility supports efforts to optimize the distribution network, improve inventory placement and give customers more options for receiving products.

On stores, Mathias said the company still expects roughly 25 net closures for the American Eagle brand this year, along with about 40 Aerie and OFFLINE openings. He said the company is planning around 80 American Eagle remodel projects, with the program nearing completion after potentially one more year.

Schottenstein said the company remains optimistic despite a fluid retail environment. “We think American Eagle’s positioned very well,” he said, adding that the brand offers “great value” and “great quality” to consumers.

About American Eagle Outfitters NYSE: AEO

American Eagle Outfitters, Inc NYSE: AEO is a leading American specialty retailer offering apparel, accessories and personal care products for men and women. The company's flagship brand, American Eagle, focuses on casualwear including denim, tops, outerwear and accessories targeted primarily at teens and young adults. In addition to its core apparel lines, the company operates the Aerie brand of intimates, loungewear and swimwear, which has gained recognition for its body-positive marketing and inclusive sizing.

American Eagle Outfitters conducts business through a combination of over 900 brick-and-mortar stores in North America and Greater China, complemented by a growing e-commerce platform that serves customers around the globe.

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