Q2 2026 American Eagle Outfitters, Inc. Earnings Call Transcript
Key Points
- Aerie delivered exceptional performance with total revenue growth of 25% and comparable sales up 19%, driven by broad-based demand across channels and categories.
- American Eagle men's posted its fourth consecutive quarter of positive comps, signaling continued traction and relevance.
- Consolidated revenue increased 8% to $1.4 billion, with comparable sales growing 6%, hitting the high end of guidance.
- Gross margin expanded significantly by 980 basis points to 48.7%, including a net tariff refund benefit.
- Operating income rose to $211 million from $103 million last year, reflecting improved profitability.
- Aerie's customer base continues to expand, with the ADVOCATE program nearly doubling in size and brand awareness at 59% with room for growth.
- The company is making strategic investments in product and marketing ahead of AEO's 50th anniversary in 2027.
- American Eagle brand total revenue grew only 1% with comparable sales declining 1%, indicating ongoing challenges.
- Merchandise margin deleveraged 330 basis points due to markdowns in American Eagle, offsetting improvement in Aerie.
- Inventory cost increased 14% with units up 9%, partly due to incremental tariffs, requiring rebalancing.
- SG&A expenses increased 19% and 290 basis points, driven by planned investments in advertising and incentive expenses.
- Full-year operating income guidance was trimmed to $540-$550 million, reflecting reduced revenue expectations for American Eagle and markdown pressures.
- American Eagle's third-quarter comps are expected to be approximately flat, with continued markdowns needed to clear seasonal inventory.
- Tariff rate assumptions for the rest of the year reflect Section 301 tariffs, with potential for further increases impacting costs.
Good afternoon everyone. Welcome to the AEO Inc. second quarter 2026 earnings conference call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Alexis Tragos, Vice President of Corporate Communications. Please go ahead.
Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Jen Foyle, President, Executive Creative Director for American Eagle and Aerie; Ravi Thanawala, Chief Financial Officer; and Mike Mathias, Strategic Adviser.
Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise
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