American Eagle Outfitters Exceeds Q3 Expectations, Raises Outlook

AEO +15.07%

With sales momentum continuing, American Eagle Outfitters appears headed for a happy holiday season.

On Tuesday, AEO reported total revenue grew 6 percent in the third quarter to a record $1.36 billion, driven by a total comparable sales increase of 4 percent.

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Comparable sales at the Aerie brand rose 11 percent. At the American Eagle brand, comparable sales rose 1 percent. AEO also operates the Offline by Aerie, Todd Snyder and Unsubscribed brands.

Net income rose 6.7 percent to $91.34 million, up from $80 million recorded in the year-ago period.

Gross profit of $552 million rose 5 percent from $527 million last year. The gross margin of 40.5 percent declined 40 basis points from last year. The net tariff impact was $20 million or 150 basis points to gross margin. Higher markdowns were largely offset by positive sales and lower costs, including favorability in freight.

With its sustained momentum, AEO raised its fourth-quarter operating income guidance to $155 million to $160 million on comp sales growth of 8 percent to 9 percent. Previous fourth-quarter guidance of operating income of $125 million to $130 million was based on comparable sales in the low single digits.

The results and the raised guidance motivated Wall Street to push AEO stock up almost 12 percent or over $2 to $23.31 in trading after the market closed Tuesday, reversing a small decline in the stock price earlier in the day.

“I’m extremely pleased with the significant trend change across our business reflecting decisive steps taken from merchandising to marketing to operations — all having a positive impact. Record third-quarter revenue was highlighted by Aerie’s double-digit comparable sales increase and positive growth at American Eagle, contributing to results that exceeded expectations,” commented Jay Schottenstein, executive chairman of the board and chief executive officer.

“Strong momentum has continued into the fourth quarter, including an excellent start to the holiday season,” Schottenstein added. “We delivered a record-breaking Thanksgiving weekend, led by an acceleration in demand across brands and channels and underscored by outstanding growth at Aerie and Offline. We are focused on finishing the season strong and sustaining our success into 2026 and beyond.”

AEO sparked controversy last summer with its ad campaign featuring Sydney Sweeney but the campaign proved to be a major hit with consumers, investors and on social media. Last month the brand named Martha Stewart as its newest face.

In other third-quarter results, total ending inventory increased 11 percent to $891 million with units up 8 percent, reflecting increasing demand, new store openings and improved in-stocks. The inventory cost increase includes the impact of tariffs.Year-to-date, the company has completed $231 million in share repurchases, all of which occurred in the first half of the fiscal year. This quarter, the company returned $21 million to shareholders via its quarterly cash dividend of 12.5 cents per share, bringing year-to-date cash dividends to $64 million.

Capital expenditures totaled $70 million in the third quarter, bringing year-to-date spend to $202 million. The company continues to expect 2025 capital expenditures to be approximately $275 million.

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