AMERICAN EAGLE OUTFITTERS INC (AEO)·Q3 2025 Earnings Summary

Executive Summary

• AEO has not yet reported Q3 FY2025; the company scheduled its Q3 press release and webcast for December 2, 2025 after market close . Management’s latest outlook (given with Q2) calls for Q3 comps up low single digits and operating income of $95–$100M with ~25% tax rate and ~172M diluted shares .
• Q2 marked a visible rebound: revenue $1.284B (down 1% YoY), gross margin 38.9% (+30 bps YoY), operating margin 8.0% (+20 bps YoY), and diluted EPS $0.45 (up 15% YoY). Aerie comps grew 3% while American Eagle comps fell 3% as lower promotions and tighter expense control supported profitability .
• Early Q3 demand drivers: high-profile campaigns (Sydney Sweeney and Travis Kelce) that drove record awareness; as of early September, quarter-to-date comps were up mid-single digits, with traffic strength and AUR turning slightly positive in Q3-to-date, per management commentary .
• Watch items into the print: tariff headwinds (Q3 impact ~$20M; Q4 ~$40–$50M) pressuring gross margin; planned higher Q3 advertising spend (SG&A up high-single digits) to support campaigns; BOW deleverage on higher digital mix; and the reintroduction of FY25 adjusted operating income guidance at $255–$265M after Q1 withdrawal .

What Went Well and What Went Wrong

• What Went Well

  • Demand recovery and margin stabilization in Q2: operating income rose 2% to $103M on 8.0% operating margin and EPS increased 15% YoY to $0.45 as lower promotions and managed SG&A offset modest sales decline .
  • Aerie reaccelerated: comps +3% with strength in intimates and Offline active; management emphasized a strategic focus to recapture intimates share and noted record second-quarter Aerie revenue .
  • Marketing momentum: “Sydney Sweeney sells great jeans. She is a winner.” Management cited “staggering 40,000,000,000 impressions” and record Labor Day, driving traffic and new customers across genders and age groups .

• What Went Wrong

  • Tariffs are a material headwind: management expects ~$20M impact to Q3 and $40–$50M in Q4; gross margin is guided down YoY for both quarters despite promotional discipline .
  • Category softness in shorts weighed on AE and Aerie in Q2; assortment transitions into back-to-school and fall improved trends, but shorts was highlighted as broadly soft across men’s, women’s, and Aerie .
  • Q2 AUR declined mid-single digits YoY; while digital AUR was flat and markdowns improved, the AUR drop partially offset transaction growth; inventory cost up 8% YoY with units up 3%, largely reflecting tariffs .

Financial Results

Note: Q3 FY2025 results will be released December 2, 2025. Tables below show the last two reported quarters and a placeholder for Q3.

• Summary financials

• Segment net revenue

• KPIs and operating drivers

Context vs prior year and quarter:

• Q2 revenue declined 1% YoY ($1.284B vs $1.291B), while gross margin expanded 30 bps to 38.9% and operating margin expanded 20 bps to 8.0% .
• Diluted EPS improved to $0.45 from $0.39 YoY; comps fell 1% with Aerie +3% and AE −3% .
• Q1 was weak on inventory writedowns and higher in-season markdowns, with gross margin down to 29.6% and GAAP operating loss $(85)M; FY25 outlook was withdrawn at that time .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Operating income improved 2% to $103 million… Diluted EPS increased 15% to last year… We are committed to growing our brands by putting our customers first and improving operational efficiencies.” – Jay Schottenstein, CEO .
• “Aerie… delivered comp growth of 3% and record second quarter revenue… Among the highlights, intimates has been a key area of focus… and we will recapture share.” – Jen Foyle, President & Executive Creative Director .
• “Our unmitigated [tariff] number was closer to $180 million versus the $70 million we’re guiding to… mitigation via country-of-origin rebalancing, cost negotiations, freight optimization and some pricing.” – Mike Mathias, CFO .
• “The third quarter is off to a better start with quarter-to-date consolidated comps up in the mid single digits… Q3 operating income expected to be $95–$100 million.” – Mike Mathias, CFO .

Q&A Highlights

• Campaign conversion and durability: Management emphasized unprecedented new customer acquisition and intent from Sydney Sweeney; Travis Kelce collab designed with multi-drop cadence into peak NFL season to sustain momentum .
• Tariff quantification and mitigation: ~$20M Q3 and $40–$50M Q4 impacts; pricing is a smaller lever versus sourcing mix, vendor negotiations, and freight; longer-term annualized tariff headwind projected at $125–$150M after mitigations .
• AUR and margin dynamics: Q2 AUR down mid-single digits; early Q3 AUR up low single digits; markdowns optimized particularly in digital; embedded promotions remain in outlook .
• SG&A control and leverage: Multi-year expense programs yielded Q2 SG&A down 1% and flat as a rate of sales; Q3 SG&A guided up HSD on advertising; aim to leverage SG&A over time on 3–5% revenue growth algorithm .
• Inventory posture: Q2 end units +3% and cost +8% (tariffs); actively chasing denim with long-life, less markdown-liable goods into holiday and early 2026 .

Estimates Context

• S&P Global consensus estimates for Q3 FY2025 EPS and revenue were unavailable due to data access limits at this time; we will update comparisons to consensus once accessible (S&P Global data unavailable).
• Company guidance for Q3 calls for operating income of $95–$100M, comps up low single digits, ~25% tax rate and ~172M diluted shares; GM down YoY given tariffs and BOW deleverage, partially offset by promotional discipline .

Key Takeaways for Investors

• Q3 print catalyst on Dec 2: Narrative hinges on whether mid-single-digit QTD comp and early AUR improvements held through the quarter amid elevated advertising spend and tariff headwinds .
• Marketing engine is working: Sydney Sweeney and Travis Kelce campaigns materially boosted traffic and customer acquisition; second TK drop should support men’s and keep momentum into holiday .
• Tariff drag is real but mitigatable: ~$20M Q3 impact; ~$40–$50M in Q4; structural mitigations (sourcing, vendors, freight) are the main defenses, limiting the need for broad pricing actions .
• Mix and channel implications: Digital strength and Aerie growth are positives but imply some BOW deleverage; watch gross margin execution vs embedded promotions and delivery costs .
• Expense control remains a support: Q2 SG&A fell 1% with leverage on a negative comp; Q3 SG&A up HSD for marketing, but Q4 set to flatten/down, pointing to prudent pacing .
• Balance sheet and share count: Post-ASR and buybacks, diluted shares dropped to ~172M in Q2 (from ~198M YoY); this can amplify EPS sensitivity to operating performance .
• Guidance reintroduced: FY25 adjusted operating income $255–$265M after being withdrawn in Q1; execution vs Q3/Q4 OI ranges and holiday demand will set the tone for FY26 .

Additional documents relevant to Q3 demand drivers:

• Sydney Sweeney fall denim campaign launched July 23, 2025 .
• Travis Kelce AE x Tru Kolors limited-edition collaboration launched in two drops (Aug 27 and Sept 24) .

Pending materials:

• Q3 FY2025 8-K 2.02 and earnings call transcript will be available on or after Dec 2, 2025; we will update this recap with actuals, segment trends, and consensus beat/miss analysis once those are released .