American Eagle (AEO) Down 12.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for American Eagle Outfitters (AEO). Shares have lost about 12.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American Eagle due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for American Eagle Outfitters, Inc. before we dive into how investors and analysts have reacted as of late.

American Eagle Q4 Earnings Beat Estimates, Comps Rise 8% Y/Y

American Eagle reported solid fourth-quarter fiscal 2025 results wherein both the top and bottom lines increased year over year and surpassed the Zacks Consensus Estimate.

AEO posted earnings of 84 cents per share in the fiscal fourth quarter, surpassing the Zacks Consensus Estimate of 71 cents. Also, the bottom line increased 55.6% from the year-earlier quarter.

The company benefited from improved sales trends across its brands, particularly strong momentum at Aerie and OFFLINE, along with steady progress at the American Eagle brand. Higher customer demand, successful product launches and effective marketing initiatives supported the performance, while operational efficiencies and disciplined cost management helped strengthen profitability. Overall, AEO closed the year on a strong note with improving margins and positive sales momentum heading into the new fiscal year.

An Insight Into AEO’s Q4 Revenues

Total net revenues of $1.76 billion jumped 10% year over year and surpassed the Zacks Consensus Estimate of $1.73 billion. This was backed by consolidated comparable sales (comps) and positive results across brands. Comps edged up 8% in the quarter. Our model predicted positive comps of 9.2% for the fiscal fourth quarter.

Brand-wise, revenues inched up 1.8% year over year to $1.01 billion at the American Eagle brand. Also, comps for the brand inched up 2%.

Revenues jumped 26.7% year over year to $683.8 million for the Aerie brand. Comps for the Aerie brand rose 23%. We expected sales growth of 5.5% year over year at the American Eagle brand and a 5.2% rise at Aerie in the reported quarter. Traffic has improved consistently throughout the quarter, particularly within its digital selling channels, including both the AE and Aerie.

An Insight Into AEO’s Margins & Expenses

Gross profit inched up 9% year over year to $651 million. The gross margin of 37% dipped 30 basis points (bps) from the year-ago quarter. The net tariff impact was $50 million or 280 bps to gross margin. Increased markdowns were mainly offset by higher sales, lower costs, favorable currency and operational efficiencies. In addition, buying, occupancy and warehousing (BOW) expenses leveraged 50 bps year over year on positive sales.

Selling, general and administrative (SG&A) expenses increased 4% year over year to $418 million. As a percentage of sales, SG&A expenses leveraged 120 bps year over year. The increase was led by planned investments in advertising, somewhat offset by leverage in the rest of the expense base.

American Eagle reported an adjusted operating income of $180 million, up 27% year over year on an adjusted basis, backed by greater-than-expected demand. The operating margin of 10.2% expanded 130 bps from 8.9% reported in the prior year figure.

AEO’s Financial Health Snapshot

American Eagle ended the fiscal fourth quarter with cash and cash equivalents of $238.9 million. Total shareholders’ equity was $1.69 billion as of Jan. 31, 2026. Inventory increased 10% year over year to $702 million at the end of the reported quarter, reflecting higher demand, store openings and improved in-stocks. The inventory cost rise also consists of tariff impacts. Capital expenditures were $79 million in the fiscal fourth quarter, with a full-year spend of $261 million.

AEO bought back nearly one million shares for about $25 million, raising total share repurchases for the year to roughly 21 million shares valued at $256 million. Additionally, the company distributed $21 million to shareholders through its quarterly cash dividend of $0.125 per share, bringing total dividend payments for the year to $85 million.

What to Expect From AEO Ahead?

The company expects 2026 to build on the progress achieved in the second half of 2025, supported by improving sales momentum and strong brand performance. For the first quarter of fiscal 2026, American Eagle expects comparable sales to increase in the high-single digits. It projects gross margin to rise year over year for the fiscal first quarter. SG&A dollars are likely to increase 10%, while operating income is projected to be in the range of $20-$25 million. The strong demand for Aerie and OFFLINE is expected to continue, while the American Eagle brand is projected to deliver steady improvement as new product initiatives and marketing efforts gain traction.

For fiscal 2026, the company expects comparable sales to increase in the mid-single digits and the gross margin to increase year over year. SG&A in dollars is likely to rise in the mid-single digits. Operating income is projected to be in the band of $390-$410 million. AEO expects capital expenditure of $250-$260 million for fiscal 2026. The company expects a weighted Average Share Count of 177 million in fiscal 2026.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted 175% due to these changes.

VGM Scores

Currently, American Eagle has a subpar Growth Score of D, a score with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

American Eagle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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