Executive Summary

Q2 FY25 stabilized materially vs Q1: revenue $1.284B (-1% YoY), gross margin 38.9% (+30 bps YoY), operating income $103M (+2% YoY), and diluted EPS $0.45 (+15% YoY), aided by lower promotions and expense control .
Aerie returned to growth (comp +3%) and posted record Q2 revenue, while AE comps fell 3%; traffic was positive across brands/channels and improved through the quarter into August .
Management reinstated full-year guidance: adjusted operating income $255–$265M (down vs initial March outlook), and issued Q3/Q4 OI targets ($95–$100M and $125–$130M), embedding incremental tariff headwinds ($20M in Q3; $40–$50M in Q4) .
Marketing collaborations (Sydney Sweeney; Travis Kelce) drove record awareness and new-customer acquisition; Q3-to-date comps turned mid-single-digit positive, a potential near-term stock catalyst if sustained through the quarter .

What Went Well and What Went Wrong

What Went Well

Margin and EPS resilience: Gross margin expanded to 38.9% (+30 bps YoY) on lower markdowns; operating income rose 2% to $103M; diluted EPS increased 15% to $0.45 despite -1% revenue .
Aerie rebound and record Q2: Aerie comps +3% with strength in intimates and OFFLINE; management called it a “dramatic turn” from Q1 .
Marketing-driven demand and traffic: Campaigns with Sydney Sweeney and Travis Kelce generated “staggering 40 billion impressions,” record new-customer acquisition, and strong sell-throughs; traffic momentum continued into August and Labor Day .

What Went Wrong

AE brand softness and seasonal misses: AE comps -3% with pressure in shorts/bottoms; management noted early spring assortment issues and the need to “repair” key seasonal categories .
Tariff cost inflation: Ending inventory dollars up 8% vs units +3% due largely to tariffs; back-half gross margin guided down YoY with $20M/Q3 and $40–$50M/Q4 tariff headwinds .
Q1 hangover and trend repair: Q1 saw a $75M inventory write-down and non-GAAP operating loss, necessitating tighter inventory and promotional actions heading into Q2 .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($B)	$1.291	$1.090	$1.284
Gross Margin (%)	38.6%	29.6%	38.9%
Operating Income ($M)	$101.1	$(85.2)	$103.1
Operating Margin (%)	7.8%	(7.8%)	8.0%
Diluted EPS ($)	0.39	(0.36)	0.45
Weighted Avg Diluted Shares (M)	197.8	179.5	171.7

YoY: Revenue -1%, GM +30 bps, OI +2%, EPS +15% . QoQ: Revenue +18%, GM +930 bps, swing from loss to $103M OI and to $0.45 EPS .

Segment Revenue (13 weeks)

Segment ($M)	Q2 2024	Q2 2025
American Eagle	827.6	800.4
Aerie	415.6	429.1
Other	57.5	61.5
Intersegment Elims	(9.7)	(7.3)
Total	1,291.1	1,283.7

KPIs and Balance Sheet

KPI	Q2 2024	Q1 2025	Q2 2025
Total Comparable Sales	—	(3%)	(1%)
Aerie Comp Sales	—	(4%)	+3%
AE Comp Sales	—	(2%)	(3%)
AUR (commentary)	—	Lower on higher promos	Down mid-single digits; Q3-to-date up low-single digits
Ending Inventory ($M)	663.7	645.1	718.3
Inventory Units YoY	—	(5%)	+3%
Capex ($M)	—	62	71; YTD 133
Cash & Equivalents ($M)	—	87.9	126.8
Shareholder Returns	—	ASR initiated; $31M OMR; $22M div	$200M ASR completed; YTD $231M buybacks; $21M div in Q2

Notes: Inventory $ cost increase vs units primarily reflects tariffs . Average diluted shares down to ~172M on ASR/buybacks .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable Sales	Q3 2025	—	Up low-single digits	New item
Gross Margin	Q3 2025	—	Down YoY	New item
SG&A	Q3 2025	—	Dollars up high-single digits	New item
D&A ($M)	Q3 2025	~54 (Q1 outlook)	~54	Maintained
Operating Income ($M)	Q3 2025	—	95–100	New item
Comparable Sales	Q4 2025	—	Up low-single digits	New item
Gross Margin	Q4 2025	—	Down YoY	New item
SG&A	Q4 2025	—	Dollars flat to down slightly YoY	New item
D&A ($M)	Q4 2025	—	~56	New item
Operating Income ($M)	Q4 2025	—	125–130	New item
Operating Income (Adj., $M)	FY 2025	March: 360–375 → Withdrawn in Q1	255–265 (adjusted; excludes $17M Q1 charges)	Lower vs March; reinstated vs Q1

Additional guidance parameters:

Tax rate ~25%; WASC ~172M Q3/Q4, ~174M FY .
Tariff impact: ~+$20M in Q3; +$40–$50M in Q4; FY gross margin “down YoY” .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current (Q2 2025)	Trend
Marketing/Brand	Planned new AE men’s campaign; invest in advertising, ROI-driven	Sydney Sweeney, Travis Kelce campaigns deliver 40B impressions, record new customers, strong sell-throughs; more drops coming	Strongly improving
Tariffs & Sourcing	FY25 tariff/currency headwinds flagged; China exposure to single digits in back half; flexibility emphasized	Back-half tariff hit ~$70M (mitigated from ~$180M unmitigated); Q3 $20M/Q4 $40–$50M; 2026 impact projected $125–$150M with further mitigations	Headwind managed but elevated
Product & Category	Denim leadership; Aerie soft apparel/active strong; Q1 seasonal misses, inventory write-down	Aerie comps +3% (intimates, OFFLINE); AE improved through quarter but shorts/bottoms pressured; Q3 back-to-school strong start	Improving mix; AE still mixed
Digital vs Stores	Digital outperformed stores; investment in platform; remodels ongoing	Digital a key driver; BOW deleverage risk with higher digital mix; SG&A to support campaigns in Q3	Mixed: growth vs cost
Fleet/Capex	Plan ~90–100 AE remodels; ~35 Aerie/OFFLINE openings; capex ~$300M initially	FY25 capex ~$275M; ~30 Aerie/OFFLINE openings; 35–40 AE closures to optimize fleet	Optimizing; lower capex

Management Commentary

“We achieved our second highest enterprise revenues ever recorded for the second quarter… driven by higher demand, lower promotions and well-managed expenses” — Jay Schottenstein, CEO .
“Sydney Sweeney sells great jeans… unprecedented new customer acquisition… 40 billion impressions… a brand campaign endures” — Craig Brommers, AE CMO .
“Operating income improved 2% to $103 million significantly exceeding our expectations… we are pleased to see [trends] continue into August” — Mike Mathias, CFO .
“Aerie saw a dramatic turn… comp growth of 3% and record second quarter revenue” — Jay Schottenstein .

Q&A Highlights

Demand drivers and AUR: Q2 AUR down mid-single digits; Q3-to-date AUR up low-single digits; traffic positive and improving into August/Labor Day .
Tariffs: Q3 impact ~$20M; Q4 ~$40–$50M; mitigations include country mix, vendor cost, freight optimization; unmitigated back-half ~$180M reduced to ~$70M; 2026 impact ~$125–$150M with further actions .
SG&A discipline: Q2 SG&A down 1% and flat as a rate of sales; leverage initiatives continue; Q3 SG&A up high-single digits on advertising to support campaigns; Q4 SG&A down slightly ex-advertising .
Inventory posture: Q2 ending inventory +8% dollars, +3% units (tariff-driven); Q3 plan similar dynamic; chasing denim with long life; minor pull-forward ahead of tariff timing .
Store fleet: Plan to close 35–40 AE stores in 2025 while opening ~30 Aerie/OFFLINE; remodel program continues .

Estimates Context

S&P Global consensus estimates for Q2 FY25 revenue and EPS were unavailable due to provider limits at the time of analysis. As a result, we cannot quantify beats/misses vs consensus for Q2. Management stated Q2 results “exceeded our expectations,” referring to internal guidance set in May .
We will update vs-consensus comparisons when S&P Global data becomes available. Values would be retrieved from S&P Global.

Key Takeaways for Investors

Near-term momentum: Traffic, comps, and AUR inflected positively into August/early Q3; if sustained, Q3 OI $95–$100M appears attainable despite tariff pressure, a potential positive catalyst .
Marketing is working: Celebrity-led campaigns are driving record awareness and new-customer adds, supporting denim leadership and cross-category sell-through into the holiday set-up .
Margin resilience with cost discipline: Q2 margin expansion on lower markdowns and SG&A control provides a playbook to partially offset tariffs and mix-related BOW deleverage as digital grows .
Aerie back on track: Record Q2 revenue and +3% comps underscore brand durability; OFFLINE and intimates are growth pillars into 2H .
Tariffs remain the swing factor: Back-half gross margin guided down YoY; execution on sourcing, freight, and selective pricing will dictate the degree of compression (watch Q3/Q4 GM) .
Capital returns continue: $231M YTD buybacks (ASR completed) and dividend reinforce capital allocation confidence; lower share count supports EPS leverage as operations normalize .
Medium-term: Fleet optimization (closures/remodels), digital investments, and Aerie/OFFLINE expansion, paired with marketing-led customer acquisition, can re-accelerate growth once tariff headwinds moderate .

Appendix: Additional Q2 FY25 Details

Consolidated results (detail): Revenue $1,283.7M; cost of sales $783.7M; gross profit $500.0M; SG&A $342.2M; D&A $54.7M; operating income $103.1M; net income $77.6M; diluted EPS $0.45; diluted shares 171.7M .
Segment comps: Total -1%; Aerie +3%; AE -3% .
Shareholder returns: Completed $200M ASR (~18M shares); YTD repurchases $231M (~20M shares, ~10% of diluted) and Q2 dividend $21M .
Capex: Q2 $71M; YTD $133M; FY25 expected ~$275M .
Outlook detail: Q3 comps up low-single digits; Q4 comps up low-single digits; FY25 adjusted OI $255–$265M; tax rate ~25%; WASC ~172M Q3/Q4, ~174M FY .

Sources: AEO Q2 FY25 8-K/press release and exhibits ; Q2 FY25 earnings call transcript ; Q1 FY25 press release ; Q1 FY25 call ; Q4 FY24 8-K and call ; marketing press releases (Sydney Sweeney; Travis Kelce) .

AMERICAN EAGLE OUTFITTERS INC (AEO)·Q2 2025 Earnings Summary