AMERICAN EAGLE OUTFITTERS INC

Overview

The second quarter of Fiscal 2026 reflected the overall strength of our portfolio, highlighted by the strength of the Aerie brand, which delivered exceptional growth and profitability across channels despite headwinds from ongoing macro-economic challenges and global inflationary pressures impacting consumer spending behavior. We continue to prioritize operational excellence and financial discipline to create long-term value for AEO and its shareholders.

Compared to the 13 weeks ended August 2, 2025:

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Total revenue increased 8% to $1.380 billion from $1.284 billion, with Aerie revenue increasing 25% year-over-year, and American Eagle revenue increasing 1% year-over-year. Total comparable sales increased 6% highlighted by a 19% Aerie comparable sales increase partially offset by a 1% decrease in American Eagle comparable sales year-over-year.

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Gross profit increased 34% to $672 million year-over-year, and increased by 980 basis points to 48.7% as a percentage of revenue. Included in gross profit are tariff refunds of $192 million received in the current quarter, partially offset by $13 million of incremental incentive expense attributable to the gain recognized as a result of tariff refunds.

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Operating income of $211 million increased 105% compared to $103 million for the same period last year. Included in operating income in the current quarter are tariff refunds of $196 million, partially offset by $35 million of incremental incentive expense attributable to the gain recognized as a result of tariff refunds. Net tariff refunds of $161 million contributed 1,170 basis points of operating margin expansion.

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Diluted earnings per share increased to $0.79 for the 13 weeks ended August 1, 2026, which includes a $0.52 per share benefit from net tariff refunds, compared to $0.45 for the 13 weeks ended August 2, 2025,

The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations:

The following table shows our consolidated store data for owned stores for the 13 and 26 weeks ended August 1, 2026 and August 2, 2025:

(1)

International licensed retail stores are not included in the consolidated store data or the total gross square feet calculation.

See below for a breakdown of owned stores as of August 1, 2026:

Comparison of the 13 weeks ended August 1, 2026 to the 13 weeks ended August 2, 2025

Total Net Revenue

Total net revenue increased 8% for the 13 weeks ended August 1, 2026 to $1.380 billion, compared to $1.284 billion last year, consisting of a 20% increase in digital revenue, and 1% increase in store revenue. The increase in total net revenue was driven by a mid-single digit increase in transaction value resulting from a mid-single digit increase in units per transaction and a low-single digit increase in average unit retail price ("AUR"). Total comparable sales increased by 6%, compared to a 1% decrease in the same period last year.

American Eagle. The increase in net revenue was driven by strength in the digital channel, offsetting a decline in store revenue. American Eagle comparable sales decreased 1% against the 13 weeks ended August 2, 2025.

Aerie. The increase in net revenue was driven by performance across channels, including increased transactions as well as a low double digit increase in AUR. Aerie comparable sales increased 19% against the prior year period.

Other. The decrease in net revenue for the current period was primarily attributable to planned decreased revenue from Quiet Platforms due to completion of its operational wind-down.

Gross Profit

Included in gross profit this period is a net benefit of $179 million related to tariff refunds, including interest, which drove 1,300 basis points of the gross margin expansion. Net tariff refunds consist of $192 million of IEEPA tariff refunds, partially offset by $13 million of incremental incentive expense attributable to the gain recognized as a result of tariff refunds.

Additionally, merchandise margin increased $78 million but deleveraged 330 basis points, with margin rate improvement in Aerie offset by promotional activity in American Eagle.

Buying, occupancy, and warehousing costs increased $22 million year-over-year, including $12 million related to compensation, and $7 million related to rent. Of the $12 million increase in compensation, $6 million is attributable to incremental incentives related to tariff refunds described above. The increase in rent is attributable to store lease renewals.

During each of the 13 weeks ended August 1, 2026 and August 2, 2025, $2.6 million of share-based payment expense was included in gross profit, representing the issuance of both time-based RSU awards and performance-based PSU awards.

Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network as well as design costs within cost of sales, while others may exclude a portion of these costs from cost of sales, including them in a line item such as SG&A expenses. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.

The increase in SG&A expenses for the 13 weeks ended August 1, 2026 was primarily driven by a $36 million increase in compensation, which includes $22 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received, as well as increased store wages associated with new store openings. Additionally, the increase in SG&A expenses included a $25 million increase in planned investments in advertising year-over-year. Tariff refunds of $4 million were recorded as a reduction to SG&A expenses this period.

There was $4.2 million and $3.9 million of share-based payment expense included in SG&A expenses for the 13 weeks ended August 1, 2026 and August 2, 2025, respectively, comprised of both time-based RSU awards and performance-based PSU awards.

Depreciation and Amortization Expense

Operating Income

Operating income for the 13 weeks ended August 1, 2026 includes $161 million of net tariff refunds ($196 million of tariff refunds, including interest, partially offset by $35 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received). The $108 million increase was primarily driven by higher gross profit, inclusive of tariff refunds, partially offset by increased SG&A expenses, all of which are explained in detail above. The 730 basis point increase in operating income included a 1,170 basis point net benefit from tariff refunds.

American Eagle. The increase in operating income attributable to our American Eagle segment was primarily the result a $75 million increase in gross profit period-over-period, which included $121 million of IEEPA tariff refunds, including interest, and lower buying, occupancy, and warehousing expenses, partially offset by lower merchandise margin, driven by the decline in sales and increased markdowns. This increase was partially offset by a $24 million increase in SG&A expenses period-over-period, mostly related to investments in advertising and compensation.

Aerie. The increase in operating income attributable to our Aerie segment was primarily the result of a $115 million increase in gross profit driven by incremental merchandise margins on the $107 million, or 25%, increase in total net revenue, and $67 million of IEEPA tariff refunds, including interest. The increase was partially offset by an $18 million increase in SG&A expenses period-over-period, primarily related to store compensation and advertising.

General corporate expenses. The increase was primarily the result of $35 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received.

Interest Expense, net

The increase in interest expense, net was primarily driven by $45 million of accretion expense related to the Participation Agreement for tariff refund claims for the 13 weeks ended August 2, 2026. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for additional information.

Other (Income) Loss, net

The increase in other (income), net primarily consists of a $12 million gain on equity method investments recorded during the period.

Provision for Income Taxes

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended August 1, 2026 was 24.9% compared to 23.6% for the 13 weeks ended August 2, 2025. The change in the effective tax rate, as compared to the prior period, is primarily due to tax and statutory audit adjustments.

Net Income attributable to AEO

Net income per diluted share attributable to AEO of $0.79 increased for the 13 weeks ended August 1, 2026, compared to $0.45 for the 13 weeks ended August 2, 2025. The increase in net income was attributable to the factors noted above.

Comparison of the 26 weeks ended August 1, 2026 to the 26 weeks ended August 2, 2025

Total Net Revenue

Total net revenue increased 9% to $2.576 billion for the 26 weeks ended August 1, 2026, compared to $2.373 billion in the same period last year. Digital revenue increased 17%, while store revenue increased 4%. The increase in total net revenue was driven by a mid single digit increase in traffic, as well as a mid single digit increase in transaction value. Total comparable sales increased by 6% for the period, compared to a decrease of 2% for the same period last year.

American Eagle. The decrease in net revenue for the current period was driven by a mid single digit decline in store traffic and slight decline in average unit retail price, partially offset by strength in the digital channel. American Eagle comparable sales decreased 1% in the current period.

Aerie. The increase in net revenue for the current period was driven by increased transactions across channels, as well as a mid teen increase in average unit retail price. Aerie comparable sales increased 22% in the current period.

Other. The decrease in net revenue for the current period was primarily attributable to planned decreased revenue from Quiet Platforms due to completion of its operational wind-down.

Gross Profit

Included in gross profit for the 26 weeks ended August 1, 2026 is a net benefit of $179 million related to tariff refunds, which drove 700 basis points of the gross margin expansion. Net tariff refunds consist of $192 million of IEEPA tariff refunds, partially offset by $13 million of incremental incentive expense attributable to the gain recognized as a result of tariff refunds.

Additionally, merchandise margin increased $147 million due to higher sales and lower promotional activity period-over-period.

Buying, occupancy, and warehousing costs increased $27 million year-over-year. This increase includes $14 million related to compensation, $6 million of which is attributable to incremental incentives related to tariff refunds described above, and $10 million related to increased rent obligations.

During the 26 weeks ended August 1, 2026 and August 2, 2025, $9.7 million and $9.5 million, respectively of share-based payment expense were included in gross profit, representing both time-based RSU awards and performance-based PSU awards.

Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network as well as design costs in cost of sales and others may exclude a portion of these costs from cost of sales, including them in a line item such as SG&A expenses. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.

The increase in SG&A expenses for the 26 weeks ended was driven by a $49 million increase in planned advertising investments and a $48 million increase in compensation costs, including $22 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received, as well as increased store wage rates associated with new store openings. Tariff refunds of $4 million were recorded as a reduction to SG&A expenses this period.

There was $19.2 million and $17.5 million of share-based payment expense included in SG&A expenses for the 26 week periods ended August 1, 2026 and August 2, 2025, respectively, comprised of both time and performance-based awards.

Impairment & Restructuring Charges

During the 26 weeks ended August 2, 2025, we recorded $17.1 million of impairment and restructuring charges. We recorded $10.4 million of impairment related to ROU assets, $4.9 million related to fixed assets, and $1.8 million of employee severance. There were no comparable charges for the 26 weeks ended August 1, 2026.

Depreciation and Amortization Expense

Operating Income

Operating income for the 26 weeks ended August 1, 2026 includes $161 million of net tariff refunds ($196 million of tariff refunds, including interest, partially offset by $35 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received). The $222 million increase was primarily driven by higher gross profit, inclusive of tariff refunds, partially offset by increased SG&A expenses, all of which are explained in detail above. The 850 basis point increase in operating income included a 630 basis point net benefit from tariff refunds.

American Eagle. The increase in operating income was primarily the result of a $84 million increase in gross profit year over year, which included $121 million of IEEPA tariff refunds, including interest, and lower buying, occupancy, and warehousing expenses, which was partially offset by lower merchandise margin, driven by the decline in sales and increased markdowns. This increase was partially offset by a $35 million increase in SG&A expenses period-over-period, primarily related to increased advertising investments.

Aerie. The increase in operating income was primarily the result of a $226 million increase in gross profit driven by incremental merchandise margin on the $228 million, or 29%, increase in total net revenue, and $67 million of IEEPA tariff refunds, including interest. SG&A expenses increased $32 million period-over-period, primarily related to store compensation from increased wage rates and new store openings, as well as a planned advertising investment.

General corporate expenses. The increase in operating income was primarily the result of $35 million of incremental incentive expense attributable to the gain recognized as a result of the tariff refunds received in the current period.

Interest Expense, net

The increase in interest expense, net for the current period was primarily driven by $52 million of accretion expense related to the Participation Agreement for tariff refund claims. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for additional information.

Other (Income) Loss, net

The increase in other (income), net for the current period primarily consisted of an $18 million gain on equity method investments recorded this year.

Provision for Income Taxes

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 26 weeks ended August 1, 2026 was 23.8% compared to 25.9% for the 26 weeks ended August 2, 2025. The change in the effective tax rate, as compared to the prior period, is primarily due to share-based payments and tax and statutory audit adjustments.

Net Income attributable to AEO

Net income per diluted share attributable to AEO increased to $0.92 per diluted share for the 26 weeks ended August 1, 2026, compared to $0.07 per diluted share for the 26 weeks ended August 2, 2025. The increase in net income was attributable to the factors noted above.

International Operations

We have agreements with multiple third-party operators to expand our brands internationally. Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given geographic area and to source products from us. International licensees' rights include the right to own and operate retail stores and may include rights to sell in wholesale markets, shop-in-shop concessions and operate online marketplace businesses. As of August 1, 2026, our international licensing partners operated in 376 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.

As of August 1, 2026, we had 94 and 99 Company-owned stores in Canada and Mexico, respectively.