Key Takeaways:
- Total same-store sales rose 6%, missing 6.7% consensus on Aerie deceleration
- Revenue hit $1.38 billion, beating the $1.37 billion estimate
- Q3 operating income guided to $110-115 million range
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American Eagle misses 6.7% comps estimate as Aerie growth slows
American Eagle Outfitters reported Q2 profit of $134.1 million as same-store sales rose 6 percent, missing the 6.7 percent Wall Street projected on slowing Aerie growth.
"We know where the problem is. We are going to pivot," Chief Executive Officer Jay Schottenstein said in May, addressing the American Eagle women's business that continued to weigh on results.
Revenue reached $1.38 billion, topping the $1.37 billion consensus, while adjusted earnings of 79 cents a share more than tripled the 22-cent estimate. Gross margin expanded 980 basis points to 48.7 percent. Aerie comparable sales grew 19 percent, slowing from 25 percent in the prior quarter, while the American Eagle brand posted a 1 percent decline.
The company guided third-quarter operating income to $110-115 million with mid-to-high single-digit comparable sales growth, and full-year operating income of $540-550 million. Shares initially jumped 9 percent after the release before giving back gains to trade down about 2 percent.
Aerie, which surpassed $2 billion in trailing 12-month revenue in the first quarter, remains the company's primary growth engine. But the deceleration from 25 percent comparable sales growth in Q1 to 19 percent in Q2 raises questions about whether the "100% Aerie REAL" campaign lift is fading. The core American Eagle brand, meanwhile, continued to struggle, with comparable sales down 1 percent as women's denim underperformed.
Tariffs added a $20 million incremental headwind to gross margin in the quarter, with management guiding for 10 percent tariff rates on Q2 receipts and 15 percent for the back half. The company has applied for $190 million in IEEPA refunds, with a $140 million expected net cash benefit.
The stock has fallen about 34 percent year to date, trading near 11 times earnings against an analyst price target of $19.55. The modest comps miss, driven by Aerie's slowdown, could keep pressure on the shares unless management demonstrates the American Eagle brand turnaround is gaining traction. Investors will watch the earnings call for updates on the women's denim fix and any tariff refund progress.
This article is for informational purposes only and does not constitute investment advice.
