— American Eagle Outfitters reported $1.28bn in net revenue for the quarter, a 1% year‑over‑year decline but 4.1% ahead of expectations; the company highlighted stronger Aerie sales and said rising tariffs will pressure margins in the back half of the fiscal year.
Key takeaways
- Net revenue: $1.28bn for Q2 (ended 2 Aug 2025), down 1% from prior year but beat consensus by ~4.1%.
- Brand split: Aerie comparable sales rose 3%; American Eagle comparable sales fell 3%.
- Profitability: Gross profit $499.96m; gross margin widened to 38.9% (+30 bps); operating income $103.09m.
- Earnings: Net income $77.63m; diluted EPS $0.45 on ~172m diluted shares (EPS +15% YoY).
- Inventory and tariffs: Ending inventory $718m (up 8%); company attributes higher inventory cost partly to tariffs.
- Capital moves: Completed $200m accelerated share repurchase (~18m shares); $231m repurchased YTD, lowering diluted shares ~10%.
- Outlook: Company expects low single‑digit comparable sales growth for FY25; gross margin to decline year‑over‑year; tariff headwinds of ~$20m expected in Q3 and $40–50m in Q4.
Verified facts
American Eagle reported $1.28 billion in net revenue for the second quarter that ended 2 August 2025, a slight decline of 1% from the prior year but above analyst estimates by roughly 4.07%. The company attributed the outperformance to stronger demand and fewer markdowns.
Brand performance was mixed: Aerie posted a 3% increase in comparable sales, while the American Eagle brand saw a 3% decline in comparable sales. Management cited better product assortments and recent marketing campaigns as contributors to Aerie’s improvement.
On margins, gross profit rose to $499.96m from $498.89m a year earlier, and gross margin expanded 30 basis points to 38.9%, helped by a 50‑basis‑point improvement in merchandise margins due to lower markdowns. SG&A expense was $342.21m, down 1% in absolute terms and roughly flat as a percentage of sales.
Operating profit increased 2% to $103.09m, with operating margin at 8.0% (up 20 bps). Net income was $77.63m versus $77.26m a year earlier. Diluted earnings per share rose to $0.45, a 15% increase, on an average diluted share count of about 172 million.
Inventory rose 8% to $718m, with unit counts up 3%. The company identified tariffs as a primary driver of higher inventory costs. Capital expenditures were $71m in the quarter and $133m year‑to‑date; FY25 capex guidance remains near $275m.
| Metric | Q2 FY25 | YoY |
|---|---|---|
| Net revenue | $1.28bn | -1% |
| Gross profit | $499.96m | +~0% |
| Operating income | $103.09m | +2% |
| Net income | $77.63m | +~0.5% |
| Diluted EPS | $0.45 | +15% |
| Ending inventory | $718m | +8% |
Context & impact
American Eagle’s results show the company is navigating a soft mall apparel market while Aerie’s direct-to-consumer momentum helps offset weakness in the core American Eagle assortments. Improvements in markdown discipline and inventory alignment supported margins this quarter.
The tariff outlook is now a central near‑term risk: management provided guidance that tariffs will reduce reported profit by roughly $20m in Q3 and an additional $40–50m in Q4. That timing is key because it concentrates the margin drag into the second half of FY25.
Shareholder returns remain a priority. The company completed a $200m accelerated buyback during the quarter (about 18m shares) and has repurchased $231m year‑to‑date, which management says reduced the company’s diluted share count by roughly 10% so far in the fiscal year.
- Short term: Tariff costs likely compress gross margin in H2 FY25.
- Medium term: Aerie’s top‑line strength and marketing investments may drive margin recovery if sell‑throughs remain strong.
- Capital allocation: Continued buybacks reduce share count and support EPS even with modest sales growth.
“We were pleased to see an improvement in the business during the second quarter driven by higher demand, lower promotions and well‑managed expenses,”
Jay Schottenstein, CEO and Executive Chairman
Unconfirmed
- Exact split of tariff impact by product category and region has not been publicly detailed by the company.
- How competitors will react to similar tariff costs—by raising prices or cutting promotions—remains uncertain.
Bottom line
American Eagle delivered a modest revenue decline but beat expectations thanks to better inventory control and Aerie growth; however, the company warns tariffs will materially pressure margins in Q3 and Q4, making execution and cost management the priorities to protect FY25 earnings.