AEO Q2 Deep Dive: Celebrity Campaigns and Category Rebound Drive Positive Momentum

September 04, 2025 at 09:20 AM EDT

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Young adult apparel retailer American Eagle Outfitters (NYSE: AEO) reported Q2 CY2025 results exceeding the market’s revenue expectations, but sales were flat year on year at $1.28 billion. Its GAAP profit of $0.45 per share was significantly above analysts’ consensus estimates.

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American Eagle (AEO) Q2 CY2025 Highlights:

Revenue: $1.28 billion vs analyst estimates of $1.23 billion (flat year on year, 4% beat)
EPS (GAAP): $0.45 vs analyst estimates of $0.21 (significant beat)
Adjusted EBITDA: $157.8 million vs analyst estimates of $99.38 million (12.3% margin, 58.7% beat)
Operating Margin: 8%, in line with the same quarter last year
Locations: 1,185 at quarter end, up from 1,178 in the same quarter last year
Same-Store Sales were flat year on year (4% in the same quarter last year)
Market Capitalization: $2.36 billion

StockStory’s Take

American Eagle’s second quarter saw a positive market reaction, as management pointed to the impact of high-profile marketing campaigns and targeted product initiatives. CEO Jay Schottenstein credited “the early results of the actions we are taking to reignite performance,” with the Sydney Sweeney and Travis Kelce collaborations fueling new customer acquisition and strengthening brand engagement. Improvements in Aerie’s performance, particularly in intimates and activewear, and disciplined cost controls also contributed to margins holding steady. Management highlighted that lower promotional activity and a focus on key categories helped to stabilize the business, even as same-store sales remained flat year-over-year.

Looking forward, American Eagle’s outlook is anchored by continued investment in product innovation and digital enhancements, alongside an ongoing focus on mitigating rising tariff costs. CFO Mike Mathias emphasized that “pricing will be a component” of managing tariff pressures, but that supply chain optimization and cost negotiations remain central strategies. President Jen Foyle stated, “We are heads down focused on the future and improving all aspects of the business to deliver sustained growth,” pointing to upcoming product drops, further celebrity-driven campaigns, and a renewed push in core categories like denim and intimates as key to sustaining recent momentum.

Key Insights from Management’s Remarks

Management attributed the recent improvement to a combination of successful celebrity partnerships, product resets in core categories, and disciplined expense management—all contributing to stronger customer engagement and better financial results.

Celebrity-led brand resets: The Sydney Sweeney and Travis Kelce marketing campaigns generated significant customer acquisition and engagement, with over 40 billion impressions and notable denim sellouts, according to CMO Craig Brahmers. These collaborations extended beyond single product launches, creating broader brand buzz and bringing in new shoppers from diverse demographics.
Aerie’s category rebound: Aerie saw a turnaround from the first quarter, led by growth in intimates, activewear, and soft apparel. Management highlighted the Parisian romance capsule as an example of successful product innovation, helping to recapture share in the intimates category and drive record revenue for Aerie in the quarter.
Men’s business improvement: The men’s segment experienced renewed momentum due to focused merchandising and the Travis Kelce collection, with CEO Schottenstein noting “key classifications including graphics, knit tops, and jeans all positive in August.” A new merchandising leader has contributed to a more balanced assortment and improved performance in men’s tops and denim.
Inventory and promotional discipline: The company managed inventory tightly following a first quarter write-down, resulting in better sell-throughs and reduced markdowns. CFO Mike Mathias credited these actions for helping to maintain gross margins, even as average unit retail (AUR) declined mid-single digits.
Cost management and digital investment: Ongoing efforts in expense control, including store salary restructuring and flat SG&A as a percentage of sales, provided margin stability. Investments in digital channels and modernized store formats were cited as priorities to support long-term growth and improve the customer shopping experience.

Drivers of Future Performance

American Eagle’s guidance is shaped by balancing growth initiatives and digital investments with the headwinds of elevated tariffs and the need for ongoing cost controls.

Tariff mitigation strategies: Management expects tariff headwinds to persist into the back half of the year and into 2026. Mathias outlined a multifaceted mitigation plan, including country-of-origin rebalancing, supply chain optimization, and selective price increases. While pricing is only one lever, ongoing negotiations and operational adjustments are expected to offset most of the tariff impact over time.
Sustaining marketing momentum: The company plans to build on the success of its celebrity campaigns with additional product drops and collaborations, particularly as the NFL season boosts visibility for the Travis Kelce collection. CMO Craig Brahmers emphasized the importance of converting new customers into repeat buyers and extending the impact of these campaigns through holiday and beyond.
Digital and store optimization: Investments in digital platforms and modernizing store layouts remain priorities. Management expects these efforts, alongside targeted store closures and Aerie/offline openings, to drive improved customer experience and operational efficiency, while maintaining a disciplined SG&A structure.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the conversion of new customers from celebrity-driven campaigns into repeat shoppers, (2) the effectiveness of supply chain and pricing strategies in offsetting tariff headwinds, and (3) progress in Aerie’s rebound in core categories like intimates and activewear. The execution of digital investments and store optimization plans will also be critical markers for future performance.

American Eagle currently trades at $17.40, up from $13.64 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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