American Eagle Outfitters will release its latest quarterly earnings report on December 2, 2025 (post-market). Market attention is focused on the impact of tariffs during the holiday season, rebalancing cost controls, and the performance of the Aerie and American Eagle brands.

Market Forecast

The market consensus expects revenue for this quarter to be $1.323 billion, a year-over-year increase of 1.63%; adjusted earnings per share are expected to be $0.438, a year-over-year decrease of 5.62%; EBIT is anticipated to be $100 million, a year-over-year decline of 18.54%. In the previous quarter, the company's management mentioned that the tariff burden during the holiday season would expand, leading to increased caution regarding the gross margin and net margin trends for this quarter. Last quarter, the company's main business structure recorded $800 million in revenue from the American Eagle brand and $429 million from the Aerie brand. Currently, the highlight lies in the robust foot traffic and new product movements at Aerie stores and online, providing a noticeable underpinning for same-store sales growth. The existing business with the greatest growth prospects remains Aerie: last quarter's revenue was $429 million, slightly divergent year-over-year, with stable product strength in the lingerie and casual categories, viewed as a pivot for mid-term expansion.

Previous Quarter Review

Last quarter, American Eagle Outfitters reported revenue of $1.284 billion, a year-over-year decline of 0.57%; a gross margin of 38.95%; net income attributable to the parent company was $77.633 million, with a net margin of 6.05%, a quarter-over-quarter increase of 219.62%; adjusted earnings per share were $0.45, a year-over-year increase of 15.38%. The company noted that the second-quarter performance significantly exceeded market expectations, reiterating the annual guidance while lowering the annual revenue forecast. The core reason was the rising tariff costs exerting greater pressure on profits in the third and fourth quarters. By business segment, the American Eagle brand generated $800 million in revenue, the Aerie brand $429 million, and other and intersegment eliminations combined totaled approximately $62 million. Aerie maintained resilience in new product structure optimization and attracting new members.

Current Quarter Outlook

Holiday Season Gross Margin and Inventory Structure Key variables for this holiday season remain the accelerated transmission of tariff costs. The company previously disclosed that the tariff cost impact is expected to be around $20 million in the third quarter and expand to $40 million to $50 million in the fourth quarter. This implies downward pressure on unit gross margin, and the degree of promotional depth and stocking strategies will determine the stable range of the gross margin. If the company can mitigate the margin decline through fabric procurement optimization, accelerating nearshoring supply chains, and increasing the proportion of new product launches to reduce discount intensity, the impact on the gross margin could be cushioned. Regarding inventory, seasonal stocking focuses on holiday gifts and leisure series. If the sales pace matches the promotional pace closely, risk of unsold inventory is controllable; otherwise, extended inventory turnover will suppress EBIT. On the channel front, the increased share of digital channels helps reduce the dilution of fixed store costs, but last-mile logistics costs need to be balanced with higher order values and bundled sales packages.

Aerie’s Demand Resilience and Expansion Path

Aerie is still considered the main growth engine for the company in the mid-term. Last quarter's revenue was $429 million, though not significantly growing year-over-year, but showed good resilience in new product structures and member operations. Aerie's product strength in the comfortable casual and functional lingerie categories remains stable, combined with social media marketing and online traffic conversion, expected to support good average order value and repurchase rates during the holiday season. Future growth paths mainly include moderate store expansion, category extension (athleisure, home comfort), and enhancing self-operated online sales conversion efficiency. If delivery cycles on the supply chain end can be further shortened and reliance on discounts reduced, gross margin stability will improve. The risk lies in macro consumption volatility in non-essential categories and increased promotional competition from peers, but Aerie's differentiated design and pricing provide some buffer.

American Eagle Brand's Traffic Recovery and Promotion Management

The American Eagle brand reported $800 million in revenue last quarter, with improved traffic and sales supported by updates in core denim and casual tops. This quarter’s key lies in refined promotional management: substituting broader discounts with more focused SKU strategies and limited-time promotions helps maintain gross margin; meanwhile, enhancing in-store experience and combining with member discounts to boost offline conversion. If tariff pressure escalates, the company may absorb costs by increasing bargaining power for raw materials and adjusting supplier combinations for its own brands. Content marketing for the brand has shown significant traffic attraction effects during the holiday season; improving online-to-store conversion rates could positively impact revenue and net margins.

Defending Profitability and Cash Flow Stability

EBIT for the current quarter is expected to be $100 million, a year-over-year decrease of 18.54%, reflecting cost and discount pressures. The company's defensive approach on the expense side includes controlling store-related operating costs, optimizing staffing schedules, and improving digital advertising efficiency; at the same time, leveraging a higher online share to increase per-order profits. Regarding cash flow, the holiday season's inventory procurement increases cash usage, but if sales exceed expectations, turnover acceleration will improve operating cash flow. Focus points include whether higher promotional efforts will be made to offset tariff pressure; if discount depth exceeds planned strategies, the downward range of EPS may exceed the market-expected range of 5%-9%.

Analyst Opinions

With holiday season profit pressures and Aerie's resilience, sell-side opinions are cautious. TD Cowen reiterated its neutral stance on American Eagle Outfitters on August 5, 2025, raising the target price to $17, emphasizing that after the second quarter exceeded expectations, tariff-induced profit drag in the third and fourth quarters would expand, with guidance adjustments reflecting cautious management. The market bears a higher proportion of bearish voices, mainly focusing on tariff-induced gross margin decline and EBIT downside, indicating that this quarter's EPS and profitability still face pressure. According to the institution's statement, "Tariff costs are more erosive in the second half of the year, with revised guidance indicating a delayed profit improvement trajectory," aligning with current consensus expectations of EBIT and EPS declines. Combined with recent sell-side commentaries, the more cautious view is representative, with the core logic being: unresolved tariff pressures, rising holiday season promotional uncertainties, and profit improvements possibly postponed until the next calendar year.