American Eagle Q2 Earnings Preview: Consumer Headwinds and Merchandising Challenges Ahead

American Eagle Outfitters is scheduled to report Q2 fiscal 2025 results on Sept. 3. The Zacks Consensus Estimate for revenues is $1.2 billion, a 4.5% decline from the year-ago quarter. Earnings are expected to be 20 cents per share, a 48.7% decline from the previous year. The company has a Zacks Rank of 3 and an Earnings ESP of +7.69%. The results are likely to be negatively impacted by macroeconomic pressures, merchandising missteps, and margin pressure.

American Eagle Outfitters, Inc. (AEO) is scheduled to report its second-quarter fiscal 2025 results on September 3. The Zacks Consensus Estimate for revenues is $1.2 billion, representing a 4.5% decline from the year-ago quarter. Earnings are expected to be 20 cents per share, a 48.7% decline from the previous year. The company carries a Zacks Rank of 3 and an Earnings ESP of +7.69% [1].

The upcoming results are likely to be negatively impacted by persistent macroeconomic pressures that are weighing on consumer discretionary spending. Elevated household debt, inflationary headwinds, and ongoing employment uncertainty are dampening consumer confidence, particularly among younger, price-sensitive shoppers. This is expected to affect both traffic and conversion in stores and online [1].

Merchandising missteps also pose a significant challenge. Categories like lace tops and shorts at Aerie, and out-of-stocks in core denim and weakness in men’s pants and shorts at American Eagle, constrained growth. Although certain categories performed well, overall product performance was uneven, forcing the company to rely more heavily on markdowns that further hurt profitability [1].

Margin pressure is another significant challenge. Beyond inventory write-downs, higher product costs, increased freight expenses, elevated promotional activity, and tariffs are weighing on profitability. Management estimates about $40 million in tariff costs this year, a portion of which will impact the fiscal second quarter [1].

American Eagle has taken corrective actions to strengthen performance in the back half of the year. Inventory levels are better aligned with current demand, assortments are being refined to emphasize proven categories like denim, intimates, and activewear, and sourcing diversification should ease tariff exposure. Marketing investments are being ramped up ahead of back-to-school, and capital spending is being paced more carefully to preserve cash while still supporting growth [1].

From a valuation perspective, American Eagle’s shares present an attractive opportunity. The stock trades at a forward 12-month price-to-earnings ratio of 12.58X, below the Retail-Apparel & Shoes industry’s average of 18.67X [1].

References:
[1] https://www.nasdaq.com/articles/will-consumer-headwinds-weigh-american-eagles-q2-earnings
[2] https://finance.yahoo.com/news/heres-why-american-eagle-outfitters-215002816.html