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AE

AMERICAN EAGLE OUTFITTERS INC (AEO)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue was $1.60B with gross margin 37.3% and operating income $142M; diluted EPS was $0.54. Aerie comps rose 6% and American Eagle (AE) comps rose 1% .
  • Operating income came in “slightly ahead” of the company’s updated January outlook ($135M), landing at $142M; the quarter was adversely impacted by one fewer selling week ($85M revenue) and retail calendar shift (~$20M OI) .
  • FY2024 delivered record revenue of $5.33B and adjusted operating income of $445M (+19% YoY), with a gross margin of 39.2%; Aerie hit a record $1.74B revenue for the year .
  • 2025 outlook calls for Q1 mid-single-digit revenue decline and OI $20–$25M; FY2025 revenue down low-single digits and OI $360–$375M, reflecting currency and tariff headwinds; capex ~$300M including a one-time $40M Manhattan office move .
  • Post-earnings capital actions: board authorized an additional 50M shares for repurchase (total remaining authorization 68.5M) and launched a $200M ASR (≈9.5% of fully diluted shares), alongside a $0.125 quarterly dividend .

What Went Well and What Went Wrong

What Went Well

  • Aerie delivered record quarterly and annual revenue; Q4 comps +6% with strong soft apparel and activewear (OFFLINE), and AE retained #1 denim ranking; management emphasized OFFLINE leggings share at #2 in the core demo .
  • Expense discipline and operating efficiencies drove margin improvement: SG&A dollars fell 6% in Q4 and leveraged 40 bps; adjusted OI margin expanded 50 bps despite currency and calendar headwinds .
  • Shareholder returns and balance sheet strength: $60M buybacks in Q4 (9.5M shares, $191M for FY), dividend of $0.125, cash/investments ~$359M and liquidity >$920M; subsequent $200M ASR announced .

Management quotes:

  • “2024 demonstrated significant progress on our Powering Profitable Growth Plan… strong operating profit growth with positive momentum across our brands and channels” — Jay Schottenstein .
  • “We made strategic investments… and we continue to build speed and agility in our supply chain” — Jay Schottenstein .
  • “OFFLINE… is the fastest-growing thing in the company… a lot of runway ahead of us” — Mike Mathias .

What Went Wrong

  • Near-term demand softness and weather-related headwinds: Q1-to-date sales slower than expected; colder weather and category outages (denim in AE, fleece in Aerie) pressured top line .
  • Currency and tariff pressures: Q4 OI had ~$10M adverse FX impact; 2025 outlook embeds ~$20M FX and $5–$10M tariff headwinds, with front-half gross margin down on deleverage and markdowns .
  • Retail calendar effects: one less selling week and calendar shift reduced Q4 revenue by ~$85M and OI by ~$20M; Q3 revenue and margin also impacted by calendar shift .

Financial Results

MetricQ2 FY2024 (13w ended Aug 3, 2024)Q3 FY2024 (13w ended Nov 2, 2024)Q4 FY2024 (13w ended Feb 1, 2025)
Revenue ($USD)$1,291,058 $1,289,094 $1,604,633
Gross Margin %38.6% 40.9% 37.3%
Operating Income ($USD)$101,109 $106,089 $142,470
Operating Margin % (GAAP)7.8% 8.2% 8.9%
Diluted EPS ($)$0.39 $0.41 $0.54

Notes: Q4 revenue down 4% YoY including ~$85M adverse impact from one less selling week/retail calendar shift; Q4 OI included ~$20M adverse impact from calendar shift .

Segment revenue breakdown ($USD):

SegmentQ2 FY2024Q3 FY2024Q4 FY2024
American Eagle$827,638 $831,914 $1,000,935
Aerie$415,646 $410,442 $539,673
Other$57,457 $56,562 $74,906
Intersegment Elimination$(9,683) $(9,824) $(10,881)
Total Net Revenue$1,291,058 $1,289,094 $1,604,633

KPIs and comps:

KPI / CompsQ2 FY2024Q3 FY2024Q4 FY2024
Total Comparable Sales Growth %n/a (not disclosed)+3% +3%
Aerie Comparable Sales Growth %+4% +5% +6%
AE Comparable Sales Growth %+5% +3% +1%
Ending Inventory ($)$663,659 $804,256 $636,655
Loyalty Program Penetration——75%

Vs. Wall Street estimates (S&P Global): Consensus estimates were unavailable due to data access limits; numeric comparisons to consensus could not be shown. Actuals provided above; company guidance/updates used for context .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Income ($)Q4 FY2024$125–$130M (Dec guidance) ~$135M (Jan 13 update) Raised
Operating Income ($)Q4 FY2024 Actual~$135M (updated guide) $142M Above company guidance
Revenue trendQ4 FY2024Down ~5% (calendar impact) Down 4% (actual), incl. ~$85M calendar impact Slightly better vs guide
RevenueQ1 FY2025—Mid-single-digit decline Initial
Operating Income ($)Q1 FY2025—$20–$25M Initial
Gross MarginQ1/FY2025—Down YoY (front half), back half ~in line Initial
SG&AQ1/FY2025—Q1 flat dollars; FY down low-single digits Initial
Tax RateFY2025—~25% Initial
D&AFY2025—~$230M Initial
Weighted Avg Share CountFY2025—Low 190M (pre additional repurchases) Initial
CapexFY2025—~$300M (incl. $40M one-time office move) Initial
DividendQ4 FY2024—$0.125 per share declared (paid Apr 25, 2025) Maintained
Share Repurchase AuthorizationPost-Q418.5M remaining at YE (implied)+50M additional; 68.5M total remaining authorization Increased
Accelerated Share Repurchase (ASR)Post-Q4—$200M ASR launched (≈9.5% of FD shares) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 FY2024)Current Period (Q4 FY2024)Trend
Supply chain, tariffs, currencyRetail calendar shifts benefited Q2 (+$55M) and hurt Q3 (~$45M); expense leverage; mitigation actions; Hong Kong retail moved to license 2025 outlook embeds ~$20M FX and $5–$10M tariff headwinds; diversification across 15 countries; China % to single digits by back half if needed Elevated near-term headwinds; mitigation ongoing
Digital vs. storesQ2: digital +12%; Q3: comps across brands/channels Q1-to-date: digital stronger than stores; traffic down in malls; marketing spend up in 1H Shift to digital; targeted marketing investments
Product performanceQ2/Q3: AE & Aerie comps positive; Aerie all-time highs AE denim strong; Aerie soft apparel/activewear robust; OFFLINE leggings #2 share; swim planned down but beating plan; men’s tops improving Strength in Aerie/active; AE women strong; men improving
Inventory and OTBInventory healthy; Q3 inventory +5% to position holiday Lean inventories; chasing high-demand denim/fleece; open-to-buy preserved for back half Flexible inventory posture
Store fleet & remodelsCapex to support growth; new store designs rolled out 2025 plan: 90–100 remodels; ~35 Aerie/OFFLINE openings; AE net closures 15–20; net square footage +1–2% Continued fleet optimization
Marketing and technologyOngoing investments, efficiencies First-half marketing spend up, leveraging new analytics tools; AE men’s campaign planned for 2H ROI-focused marketing
Regulatory/macro toneCognizant of choppiness; calendar impacts Consumer uncertainty; FX/tariffs; expectation for back-half normalization Cautious near-term; constructive back half

Management Commentary

  • “2025 has started off softer than anticipated… we currently expect full year revenue and operating income to be down relative to last year” — Jay Schottenstein .
  • “We are taking proactive actions to pull back on expense plans… thorough assessment of all costs and capital spend” — Mike Mathias .
  • “We grew [OFFLINE] market share this year… #2 market share in our core demographic [leggings]” — Jennifer Foyle .
  • “Loyalty penetration… 75%. Those customers are the most profitable; highest lifetime value” — Mike Mathias .
  • “We source across 15 countries… flexibility is key… plans to go from high teens [China penetration] to single digits” — Mike Mathias .

Q&A Highlights

  • SG&A control and leverage: Management reiterated structural expense control via transformation office and cross-functional discipline; target SG&A rate 25–26% intact contingent on revenue growth .
  • Gross margin outlook: Front half down (deleverage, FX-driven IMU, tariffs, some freight) with Q1 GM down ~240 bps YoY and Q2 ~150 bps; back half relatively in line with last year on mitigations and normalization .
  • Tariffs and sourcing: China penetration now high teens; plan to single digits by back half if needed; similar approach in Vietnam; mitigation via vendor partnerships without consumer pass-through assumed .
  • Demand and category dynamics: Weather-driven softness in seasonal categories; strength in dresses, soft apparel, activewear; denim diversity (skinny re-emerging) and men’s bottoms/shorts showing momentum; basket size slightly up .
  • Digital and store traffic: Digital healthier than stores; continued remodel program and fleet optimization; first-half marketing spend timed for back-to-school and holiday ROI .

Estimates Context

  • S&P Global consensus estimates for revenue and EPS were unavailable due to data access limits; numeric comparisons to consensus cannot be provided. As context, company-raised Q4 operating income outlook (~$135M) was exceeded by actual $142M, despite calendar and FX headwinds .

Key Takeaways for Investors

  • Resilient brand performance (Aerie/OFFLINE strength, AE denim leadership) paired with structural cost discipline supports mid/high single-digit operating margins even amid FX/tariff pressure; back-half normalization is the key inflection to watch .
  • Near-term caution: Q1 mid-single-digit revenue decline and lower gross margin on deleverage/markdowns; expect improvement through merchandising resets, inventory chase, and currency/tariff mitigation by back half .
  • Capital allocation is an upside catalyst: enlarged repurchase authorization (68.5M shares), immediate $200M ASR, continued dividend — potentially supportive for EPS and share count dynamics in 2025 .
  • Digital momentum and targeted marketing investment in 1H position the company to capture share in peak seasons; watch AE men’s campaign and OFFLINE awareness efforts for incremental growth .
  • Tariff/currency risk managed through diversified sourcing (15 countries), reduced China/Vietnam exposure, and vendor cost sharing; sensitivity persists, but mitigation plans are in place .
  • Store fleet optimization (90–100 remodels; ~35 Aerie/OFFLINE openings; selective AE closures) and DC automation should aid customer experience and cost efficiency, supporting margin durability .
  • For trading: monitor monthly demand tone and weather normalization, Q1 GM pressure magnitude vs. guide, and any updates to tariff policy; repurchase execution and marketing ROI into back-to-school/holiday could drive sentiment shifts .