Shares of American Eagle Outfitters Inc (NYSE:AEO) surged 24.5% in after-hours trading Wednesday after the apparel retailer posted better-than-expected second-quarter earnings, aided by strong brand campaigns featuring actress Sydney Sweeney and NFL star Travis Kelce. Rising customer engagement and improved execution drove meaningful outperformance, fueling optimism heading into the fall season.
In the quarter ended August 2, American Eagle reported adjusted earnings per share of $0.45, surpassing Wall Street expectations by $0.25. Revenue came in at $1.28 billion, ahead of estimates of $1.23 billion, though slightly down 1% from the prior year.
Comparable sales dipped 1%, with American Eagle-branded stores falling 3% and its Aerie brand rising 3%. Gross margin expanded 30 basis points year-over-year to 38.9%, thanks primarily to a 50-basis-point lift in merchandise margins due to reduced markdowns.
“We were pleased to see an improvement in the business during the second quarter driven by higher demand, lower promotions and well-managed expenses, all of which exceeded our expectations,” said Jay Schottenstein, AEO’s Executive Chairman and CEO. “The fall season is off to a positive start. Fueled by stronger product offerings and the success of recent marketing campaigns with Sydney Sweeney and Travis Kelce, we have seen an uptick in customer awareness, engagement and comparable sales,” he added.
The company’s operating profit rose 2% year-over-year to $103 million, resulting in an operating margin of 8.0%, up 20 basis points. SG&A costs were held in check, declining slightly to $342 million on the back of recent restructuring, even as the company ramped up advertising.
American Eagle completed a $200 million accelerated share repurchase in the quarter, retiring 18 million shares. Year-to-date repurchases now total $231 million, cutting the outstanding diluted share count by approximately 10%.
Inventories rose 8% to $718 million, largely due to tariff-driven cost increases, though unit levels were up only 3%. Capital expenditures for the year are now expected to reach $275 million, with $133 million spent through the second quarter.
Looking to fiscal 2025, the company forecasts flat comparable sales and compressed gross margins across the back half of the year. However, stronger brand momentum and disciplined execution have given investors cause for confidence, as evidenced by the sharp rally following results.
Source :
https://www.investing.com/news/earnings/american-eagle-pops-on-earnings-beat-benefits-from-sweeney-and-kelce-pushes-4222863
