American Eagle Outfitters 2026 Q1 Earnings Misses Targets with 195.8% Net Income Decline

American Eagle Outfitters (AEO) reported its fiscal 2026 Q1 earnings on June 5th, 2025. The company missed expectations, experiencing a significant downturn compared to the previous year. AEO's adjusted guidance signals caution as they navigate macroeconomic uncertainties. Despite disappointing results, the company is focused on aligning inventory with sales trends and improving merchandising strategies.

Revenue
American Eagle Outfitters' revenue for fiscal 2026 Q1 declined by 4.7% to $1.09 billion from $1.14 billion in the same period of the previous year. The American Eagle segment led with revenue of $693.87 million, while Aerie contributed $359.79 million. Other segments added $43.97 million in revenue, with intersegment eliminations accounting for a deduction of $8.02 million, resulting in total net revenue of $1.09 billion.

Earnings/Net Income
For 2026 Q1, American Eagle Outfitters recorded a loss of $0.36 per share, a stark contrast to the profit of $0.34 per share seen in 2025 Q1, marking a 205.9% negative change. The company reported a net loss of $64.90 million, representing a 195.8% deterioration from the net income of $67.75 million achieved in the prior year. This indicates a challenging quarter with significant setbacks.

Price Action
The stock price of American Eagle Outfitters decreased by 1.55% during the latest trading day, fell by 9.30% over the past week, and has dropped 8.73% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing AEO shares post-revenue miss and holding for 30 days yielded a mere 6.88% return, underperforming the benchmark return of 78.25%. The strategy demonstrated poor risk-adjusted returns, with a Sharpe ratio of 0.03, and encountered a maximum drawdown of -76.55%, underscoring the high-risk nature. It posted a compounded annual growth rate (CAGR) of 1.35% with volatility at 51.64%, reflecting substantial challenges. The strategy proved less attractive compared to passive investment approaches given its risk and performance metrics.

CEO Commentary
Jay Schottenstein, Executive Chairman and CEO, expressed disappointment, noting their merchandising strategies did not deliver the anticipated results, leading to increased promotions and surplus inventory. A necessary inventory write-down was undertaken due to merchandising miscalculations. Schottenstein emphasized improvements entering the second quarter, with inventory better aligned to sales trends and an urgent focus on enhancing product performance and purchasing principles.

Guidance
For the second quarter of fiscal 2025, American Eagle Outfitters expects a revenue decline of approximately 5% and a 3% decrease in comparable sales. The company forecasts operating income between $40 million and $45 million. Overall fiscal year 2025 guidance has been withdrawn due to macroeconomic uncertainties, reflecting a cautious approach moving forward.

Additional News
American Eagle Outfitters initiated an aggressive share repurchase program, completing a $200 million accelerated buyback, removing approximately 9.5% of its shares from the market. In addition, the company has repurchased $31 million worth of shares in open market transactions. AEO also announced the closure of two fulfillment centers as part of its supply chain optimization efforts, incurring restructuring charges. The company is focusing on strengthening its brands and aligning inventory management with sales trends to enhance performance.