•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s cash equivalents are Level 1 financial assets and are measured at fair value on a recurring basis, for all periods presented. Refer to Note 3, Cash and Cash Equivalents to the Consolidated Financial Statements for additional information regarding cash equivalents.
Long-Term Debt
As of May 2, 2026, the fair value of the Company's $85.0 million in outstanding borrowings under its Credit Facility approximated the carrying value. As of May 3, 2025, the fair value of the Company's $110.0 million in outstanding borrowings under its Credit Facility approximated the carrying value
Refer to Note 8, Long-Term Debt, Net, to the Consolidated Financial Statements for additional information regarding long-term debt and other credit arrangements.
Non-Financial Assets
The Company’s non-financial assets, which include intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur and the Company is required to evaluate the non-financial asset for impairment, a resulting impairment would require that the non-financial asset be recorded at the estimated fair value. The fair value is determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located.
During the 13 weeks ended May 3, 2025, the Company recorded asset impairment charges of $10.4 million related to operating lease ROU assets and $4.9 million related to fixed assets. These assets were adjusted to their fair value and the loss on impairment was recorded within impairment and restructuring charges in the Consolidated Statements of Operations for the 13 weeks ended May 3, 2025. There were no long-lived asset impairment charges recorded during the 13 weeks ended May 2, 2026.
Refer to Note 13, Impairment and Restructuring Charges to the Consolidated Financial Statements for additional information regarding impairment and restructuring charges.
The fair value of the Company's ROU assets was based upon market rent assumptions.
The Company evaluates goodwill for possible impairment at least annually as of the last day of the fiscal year and upon occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of a reporting unit may be below its carrying value. The Company last performed an annual goodwill impairment test using Level 3 inputs as defined in ASC 820 as of January 31, 2026.
No indicators of goodwill impairment were present during the 13 weeks ended May 2, 2026 and May 3, 2025.
5. Earnings per Share
The following is a reconciliation between basic and diluted weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
(In thousands) |
|
May 2, 2026 |
|
|
May 3, 2025 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
Basic number of common shares outstanding: |
|
|
167,835 |
|
|
|
179,548 |
|
Dilutive effect of stock options and non-vested restricted stock (1) |
|
|
4,507 |
|
|
|
- |
|
Diluted number of common shares outstanding |
|
|
172,342 |
|
|
|
179,548 |
|
Anti-Dilutive Shares (1) |
|
|
1,371 |
|
|
|
2,939 |
|
(1) For the 13 weeks ended May 3, 2025, there were 1.8 million potentially dilutive equity awards that were excluded from diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive.
Dilutive and anti-dilutive shares related to share-based compensation. Refer to Note 9, Share-Based Payments, to the Consolidated Financial Statements for additional information regarding share-based compensation.
The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies ("ASC 450"), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes, as of the date of this Quarterly Report, that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position, results of operations or consolidated cash flows of the Company. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
U.S. Tariff Update
On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The Court of International Trade (“CIT”) subsequently issued an interim order requiring U.S. Customs and Border Protection ("CBP") to process unliquidated entries without the unlawful tariffs and to develop a plan that could result in refunds of duties previously collected. Pursuant to this order from CIT, CBP developed and implemented a process to facilitate refunds through its Consolidated Administration and Processing of Entries (“CAPE”) system, which went live on April 20, 2026. At the time the IEEPA tariffs were ruled unconstitutional, the Company had paid approximately $192 million of IEEPA tariffs. As of the date of this Quarterly Report, the Company has submitted all refund claims eligible for refund in the amount of $189.8 million.
While the Company has taken steps to preserve its rights, no assurance can be given that refunds will be realized. As of May 2, 2026, the Company has not recorded a receivable for these refunds as ultimate collection remained uncertain. Refer to Note 14, Subsequent Events, to the Consolidated Financial Statements for additional information.
12. Segment Reporting
In accordance with ASC 280, Segment Reporting ("ASC 280"), the Company has identified two operating segments (American Eagle brand and Aerie brand) that also represent our reportable segments and reflect the CODM’s internal view of analyzing results and allocating resources. Additionally, our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms until the completion of its operational wind-down, have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure, they are presented under the "Other" caption, as permitted by ASC 280.
Unallocated corporate expenses are comprised of general and administrative costs that management does not attribute to any of our operating segments. These costs primarily relate to corporate administration, information and technology resources, finance and human resources functional and organizational costs, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-level activities and projects.
Our CEO analyzes segment results and allocates resources between segments based on the adjusted operating income (loss), or the operating income (loss) in periods where there are no adjustments, of each segment. Adjusted operating income (loss) is a non-GAAP financial measure ("non-GAAP" or "adjusted") that is defined by the Company as operating income excluding impairment and restructuring charges. Adjusted operating income (loss) is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP consolidated financial statements and provides a higher degree of transparency.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A") is intended to help the reader understand the Company, our operations and our present business environment. This MD&A is provided as a supplement to — and should be read in conjunction with — our MD&A for Fiscal 2025, which can be found in Part II, Item 7 of our Fiscal 2025 Form 10-K.
In addition, the following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements and should be read in conjunction with these statements and notes thereto.
Introduction
This MD&A is organized as follows:
Recent accounting pronouncements the Company has adopted or is currently evaluating prior to adoption, including the dates of adoption or expected dates of adoption, as applicable, and anticipated effects on the Company’s audited Consolidated Financial Statements, are included in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein.
Executive Overview
We are a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under our American Eagle® and Aerie® brands.
We have two reportable segments, American Eagle and Aerie. Our Chief Operating Decision Maker (defined as our CEO) analyzes segment results and allocates resources based on adjusted operating income (loss), which is a non-GAAP financial measure. See Note 12, Segment Reporting, to the Consolidated Financial Statements included herein for additional information.
Key Performance Indicators
Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:
Comparable Sales — Comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period. In fiscal years following those with 53 weeks, the prior year period is shifted by one week to compare similar calendar weeks. A store is included in comparable sales in the 13th month of operation. However, stores that have a gross square footage change of 25% or greater due to a remodel are removed from the comparable sales base but are included in total sales. These stores are returned to the comparable sales base in the 13th month following the remodel. Sales from American Eagle, Aerie, Todd Snyder, and Unsubscribed stores, as well as sales from AEO Direct and other digital channels, are included in total comparable sales. Sales from licensed stores are not included in comparable sales. Individual American Eagle and Aerie brand comparable sales disclosures include sales from stores and AEO Direct.
Omni-Channel Sales Performance – Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within this MD&A when we believe that they enhance the understanding of the matter being discussed. Investors may find them useful as such. Each of these metrics is defined as follows (except comparable sales, which is defined separately above):
•Average unit retail price represents the selling price of our goods. It is the cumulative net sales divided by the net units sold for a period of time.
•Total transactions represents the count of customer transactions over a period of time (inclusive of Company-owned stores and AEO Direct, unless specified otherwise).
•Units per transaction represents the number of units sold divided by total transactions over a period of time (inclusive of Company-owned stores and AEO Direct, unless specified otherwise).
•Consolidated comparable traffic represents visits to our Company-owned stores, limited to those stores that qualify to be included in comparable sales as defined above, including AEO Direct, over a period of time.
Gross Profit — Gross profit measures whether we are optimizing the profitability of our sales. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs, buying, occupancy and warehousing costs and services and, until the completion of its operational wind-down, Quiet Platforms costs to service its customers. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples.
Buying, occupancy and warehousing costs and services consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operations.
The inability to obtain acceptable levels of sales, initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross consolidated profit and results of operations.
Operating Income — Our management views operating income as a key indicator of our performance. The key drivers of operating income are net revenue, gross profit, our ability to control selling. general, and administrative ("SG&A") expenses, and our level of capital expenditures.
Cash Flow and Liquidity — Our management evaluates cash flow from operations and investing and financing activities in determining the sufficiency of our cash position and capital allocation strategies. Cash flow has historically been sufficient to cover our uses of cash. Our management believes that cash flow and liquidity will be sufficient to fund anticipated capital expenditures and working capital requirements for the next twelve months and beyond.
Current Trends and Outlook
Macroeconomic Conditions, Inflation and Tariffs
During the 13 weeks ended May 2, 2026, our results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior.
In addition, trade policies and continued uncertainty related thereto, including with respect to tariffs and other restrictions, relating to countries from which we source our merchandise and raw materials, have created a dynamic and unpredictable trade landscape. This has and may continue to adversely impact our business and operations. On February 20, 2026, the U.S. Supreme Court held that the U.S. administration’s imposition of tariffs pursuant to the International Emergency Economic Powers Act (“IEEPA”) was unlawful, striking down the 10% global baseline tariff, as well as the higher tariffs imposed on certain U.S. trading partners. The U.S. Supreme Court’s ruling did not affect all of the recently imposed tariffs, including those imposed following trade remedy investigations by the Department of Commerce or the U.S. Trade Representative. Nor does the ruling prohibit the imposition of future tariffs through alternative trade authorities available to the U.S. administration. Shortly after the U.S. Supreme Court's ruling, effective February 24, 2026, the U.S. administration imposed a new 10% global tariff for a period of 150 days pursuant to a balance-of-payments provision in Section 122 of the Trade Act of 1974, which was invalidated by the Court of International Trade ("CIT") on May 7, 2026, though relief was limited to the named plaintiffs, and litigation is ongoing following the government's appeal. The U.S. administration further announced that it would begin additional trade remedy investigations into certain trading partners pursuant to Section 301 of the Trade Act of 1974 and with respect to certain product sectors pursuant to Section 232 of the Trade Expansion Act of 1962. The U.S. Supreme Court decision invalidating the IEEPA tariffs did not address a remedy or refunds, which instead have been addressed in cases in front
of the CIT. The CIT ordered U.S. Customs and Border Protection ("CBP") to issue refunds for all IEEPA tariffs, plus interest. Pursuant to this order from CIT, CBP developed and implemented a process to facilitate refunds through its Consolidated Administration and Processing of Entries (“CAPE”) system, the first phase of which went live on April 20, 2026. As of the date of this Quarterly Report, the Company has submitted all refund claims currently eligible for refund in the first phase of CAPE. While the Company has taken steps to preserve its rights, no assurance can be given that all requests for IEEPA tariff refunds will be realized.
Accordingly, uncertainty with respect to tariffs remains ongoing. The imposition of tariffs by the U.S. government, associated geopolitical tensions, including reciprocal tariffs by trading partners, and uncertainties regarding U.S. import tariffs have and may further affect our margins and operations or could lead to further weakened business conditions for our industry. We continue to evaluate the impact of tariffs and other trade policies on our business. Refer to Note 11, Commitments and Contingencies and Note 14. Subsequent Events to the Consolidated Financial Statements for further information on U.S. tariffs.
For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see "Risk Factors" in Part I, Item 1A of our Fiscal 2025 Form 10-K.
Omni-Channel Capabilities
The Company operates stores in the United States, Canada and Mexico, with merchandise available in more than 30 countries through a global network of license partners. Additionally, the Company operates a robust e-commerce business across its brands.
Over the past several years, we have invested in building our technologies and digital capabilities. We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience.
Results of Operations
Overview
We entered 2026 with strong momentum and delivered a solid start to the fiscal year, with double-digit revenue growth. The first quarter of Fiscal 2026 reflected the strength of our portfolio and highlighted the strength of the Aerie brand, which delivered exceptional growth and profitability across channels. We continue to prioritize operational excellence and financial discipline to create long-term value for AEO and its shareholders.
Compared to the first 13 weeks of Fiscal 2025:
•Total revenue increased 10% to $1.195 billion from $1.090 billion, with Aerie revenue increasing 34% year-over-year, and American Eagle revenue decreasing 2% year-over-year. Total comparable sales increased 8%. Aerie's comparable sales increased 25% year-over-year, and American Eagle's comparable sales decreased 2% year-over-year.
•Gross profit increased 41% to $456 million year-over-year, and increased by 860 basis points to 38.2% as a percentage of revenue.
•Operating income of $28 million increased 133% compared to an $85 million operating loss last year, and increased 141% compared to the adjusted operating loss of $68 million last year.
•Diluted earnings per share increased to $0.14 for the 13 weeks ended May 2, 2026, compared to diluted loss per share of ($0.36) and adjusted diluted loss per share of ($0.29) for the 13 weeks ended May 3, 2025.
The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
|
|
|
May 2, 2026 |
|
|
|
May 3, 2025 |
|
|
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
Total net revenue |
|
$ |
1,195,285 |
|
100.0 |
|
% |
|
$ |
1,089,599 |
|
100.0 |
|
% |
|
Cost of sales, including certain buying, occupancy and warehouse expenses |
|
|
739,113 |
|
|
61.8 |
|
|
|
|
767,178 |
|
|
70.4 |
|
|
|
Gross profit |
|
|
456,172 |
|
|
38.2 |
|
|
|
|
322,421 |
|
|
29.6 |
|
|
|
Selling, general and administrative expenses |
|
|
376,492 |
|
|
31.5 |
|
|
|
|
338,786 |
|
|
31.1 |
|
|
|
Impairment and restructuring charges (1) |
|
|
— |
|
|
— |
|
|
|
|
17,119 |
|
|
1.6 |
|
|
|
Depreciation and amortization expense |
|
|
51,454 |
|
|
4.3 |
|
|
|
|
51,697 |
|
|
4.7 |
|
|
|
Operating income (loss) |
|
|
28,226 |
|
|
2.4 |
|
|
|
|
(85,181 |
) |
|
(7.8 |
) |
|
|
Interest expense (income), net |
|
|
7,853 |
|
|
0.7 |
|
|
|
|
(219 |
) |
|
(0.0 |
) |
|
|
Other (income) expense, net |
|
|
(7,222 |
) |
|
(0.6 |
) |
|
|
|
168 |
|
|
0.0 |
|
|
|
Income (loss) before income taxes |
|
$ |
27,595 |
|
|
2.3 |
|
|
|
$ |
(85,130 |
) |
|
(7.8 |
) |
|
|
Provision (benefit) for income taxes |
|
|
4,658 |
|
|
0.4 |
|
|
|
|
(19,712 |
) |
|
(1.8 |
) |
|
|
Net income (loss) |
|
$ |
22,937 |
|
|
1.9 |
|
% |
|
$ |
(65,418 |
) |
|
(6.0 |
) |
% |
|
Net loss attributable to non-controlling interests |
|
|
588 |
|
|
0.1 |
|
|
|
|
519 |
|
|
0.0 |
|
|
|
Net income (loss) attributable to AEO |
|
$ |
23,525 |
|
|
2.0 |
|
|
|
$ |
(64,899 |
) |
|
(6.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Please see “Non-GAAP Information” below for non-GAAP financial measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows our consolidated store data for the 13 weeks ended May 2, 2026 and May 3, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
|
|
May 2, |
|
|
May 3, |
|
|
|
|
2026 |
|
|
2025 |
|
|
Number of stores: |
|
|
|
|
|
|
|
Beginning of period |
|
|
1,168 |
|
|
|
1,172 |
|
|
Opened |
|
|
6 |
|
|
|
6 |
|
|
Closed |
|
|
(4 |
) |
|
|
(2 |
) |
|
End of period |
|
|
1,170 |
|
|
|
1,176 |
|
|
|
|
|
|
|
|
|
|
Total gross square feet at end of period (in '000) |
|
|
7,220 |
|
|
|
7,232 |
|
|
International licensed retail stores at end of
period (1) |
|
|
357 |
|
|
|
363 |
|
|
(1)International licensed retail stores are not included in the consolidated store data or the total gross square feet calculation.
As of May 2, 2026, we operated 804 American Eagle retail stores, consisting of 184 Aerie side-by-side locations, 10 locations with AE brand, Aerie brand and OFFLINE™ connected as one store, and six OFFLINE™ side-by-side locations, 335 Aerie stand-alone stores (including 49 OFFLINE™ stand-alone stores and 52 OFFLINE™ side-by-side locations), and AEO Direct. Additionally, there were 23 Todd Snyder stand-alone locations and eight Unsubscribed locations.
Comparison of the 13 weeks ended May 2, 2026 to the 13 weeks ended May 3, 2025
Total Net Revenue
Total net revenue increased 10% for the 13 weeks ended May 2, 2026 to $1.195 billion, compared to $1.090 billion last year. Digital revenue increased 15%, and store revenue increased 8%. Total comparable sales increased by 8%, compared to a 3% decrease last year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
May 2, 2026 |
|
May 3, 2025 |
|
|
|
|
|
(In thousands) |
(Percentage) |
|
|
(In thousands) |
(Percentage) |
|
|
|
(In thousands) |
(Percentage) |
|
|
American Eagle |
|
$678,476 |
56.8 |
% |
|
$693,865 |
63.7 |
% |
|
|
$(15,389) |
(2) |
% |
|
Aerie |
|
480,826 |
40.2 |
|
|
359,788 |
33.0 |
|
|
|
121,038 |
34 |
|
|
Other |
|
35,983 |
3.0 |
|
|
43,970 |
4.0 |
|
|
|
(7,987) |
(18) |
|
|
Intersegment Eliminations |
|
- |
0.0 |
|
|
(8,024) |
(0.7) |
|
|
|
8,024 |
(100) |
|
|
Total net revenue |
|
$1,195,285 |
100.0 |
% |
|
$1,089,599 |
100.0 |
% |
|
|
$105,686 |
10 |
% |
|
American Eagle. The decrease in net revenue was driven by lower average unit retail price and store traffic. Digital performance was flat to last year. American Eagle comparable sales decreased 2%.
Aerie. The increase in net revenue was driven by increased transactions across channels, as well as increased transaction value resulting from higher average unit retail price. Aerie comparable sales increased 25%.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
|
|
(Percentage) |
|
Gross Profit |
|
$ |
456,172 |
|
|
|
$ |
322,421 |
|
|
|
|
$ |
133,751 |
|
|
|
41 |
|
% |
|
Gross Margin |
|
|
38.2 |
|
% |
|
|
29.6 |
|
% |
|
|
860 basis points |
|
|
|
|
The 41% increase in gross profit was primarily driven by an increase of $138 million in merchandise margin due to higher sales, as well as last year's $75 million inventory write-down of spring and summer merchandise.
Additionally, buying, occupancy, and warehousing costs increased $5 million year-over-year. However, as a percentage of net revenue, buying, occupancy, and warehousing costs improved 150 basis points primarily due to higher sales and reduced costs from the operational wind-down of Quiet Platforms.
During the 13 weeks ended May 2, 2026 and May 3, 2025, $7.1 million and $6.6 million, respectively, of share-based payment expense were included in gross profit, representing both time and performance-based 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 included herein for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
Selling, general and administrative expenses |
|
$ |
376,492 |
|
|
|
$ |
338,786 |
|
|
|
|
$ |
37,706 |
|
|
|
11 |
|
% |
|
Selling, general and administrative expenses as a percentage of net revenue |
|
|
31.5 |
|
% |
|
|
31.1 |
|
% |
|
|
-40 basis points |
|
|
|
|
The increase in SG&A expenses was driven by a $24 million increase in planned investments in advertising year-over-year, as well as a $10 million increase in compensation primarily related to increased store wage rates.
There was $15.0 million and $14.0 million of share-based payment expense included in SG&A expenses for the 13 weeks ended May 2, 2026 and May 3, 2025, respectively, comprised of both time and performance-based awards.
Impairment and Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
|
Impairment and restructuring charges |
|
$ |
- |
|
|
|
$ |
17,119 |
|
|
|
|
$ |
(17,119 |
) |
|
100 |
|
% |
|
Impairment and restructuring charges as a percentage of net revenue |
|
|
0.0 |
|
% |
|
|
1.6 |
|
% |
|
|
-160 basis points |
|
|
|
There were no impairment or restructuring charges recorded during the 13 weeks ended May 2, 2026. During the 13 weeks ended May 3, 2025, we recorded $17.1 million of impairment and restructuring. 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.
Depreciation and Amortization Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
American Eagle |
|
$ |
21,354 |
|
|
|
$ |
20,168 |
|
|
|
|
$ |
1,186 |
|
|
|
6 |
|
% |
|
Aerie |
|
|
16,023 |
|
|
|
|
14,170 |
|
|
|
|
|
1,853 |
|
|
|
13 |
|
|
|
Other |
|
|
14,077 |
|
|
|
|
17,359 |
|
|
|
|
|
(3,282 |
) |
|
|
(19 |
) |
|
|
Total depreciation and amortization expense |
|
$ |
51,454 |
|
|
|
$ |
51,697 |
|
|
|
|
$ |
(243 |
) |
|
|
(0 |
) |
% |
|
Total depreciation and amortization expense as a percentage of net revenue |
|
|
4.3 |
|
% |
|
|
4.7 |
|
% |
|
|
40 basis points |
|
|
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
(Percentage of revenue) |
|
|
(In thousands) |
(Percentage of revenue) |
|
|
|
(In thousands) |
(Percentage) |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Eagle |
|
$47,157 |
3.9 |
% |
|
$49,472 |
4.5 |
% |
|
|
$(2,315) |
(5) |
% |
|
Aerie |
|
96,284 |
8.1 |
|
|
1,048 |
0.1 |
|
|
|
95,236 |
n/m |
|
|
Other |
|
(6,355) |
(0.5) |
|
|
(13,169) |
(1.2) |
|
|
|
6,814 |
(52) |
|
|
General corporate expenses |
|
(108,860) |
|
|
|
(105,413) |
|
|
|
|
(3,447) |
|
|
|
Impairment and restructuring charges |
|
- |
|
|
|
(17,119) |
|
|
|
|
17,119 |
|
|
|
Total Operating Income (Loss) |
|
$28,226 |
2.4 |
|
|
$(85,181) |
(7.8) |
|
|
|
$113,407 |
(133) |
% |
|
The increase in operating income (loss) was primarily driven by higher gross profit and no impairment and restructuring charges in the current year, partially offset by increased SG&A expenses, all of which are explained in detail above.
American Eagle. The decrease in operating income was the result of a $10 million increase in SG&A expenses year-over-year. Merchandise margin was flat year over year, with lower sales offset by lower net markdowns this year including the $31 million inventory write-down of spring and summer merchandise incurred last year. Additionally, buying, occupancy, and warehousing expenses were $8 million lower this year
Aerie. The increase was primarily the result of a $111 million increase in gross profit driven by increased merchandise margin on the $121 million, or 34%, increase in total net revenue, partially offset by a $12 million increase in buying, occupancy, and warehousing expenses. Last year’s merchandise margin also included a $44 million inventory write-down of spring and summer merchandise.
Interest Expense (Income), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
Interest expense (income), net |
$ |
7,853 |
|
|
|
$ |
(219 |
) |
|
|
|
$ |
(8,072 |
) |
|
Interest expense (income) as a percentage of net revenue |
|
0.7 |
|
% |
|
|
0.0 |
|
% |
|
|
-70 basis points |
The increase in interest expense (income), net is primarily driven by $7 million of accretion expense related to the Participation Agreement for tariff refund claims. Refer to Note 14, Subsequent Events, to the Consolidated Financial Statements for additional information.
Other (Income) Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
Other (income) expense, net |
$(7,222) |
|
|
$168 |
|
|
|
$7,390 |
|
Other (income) expense, net as a percentage of net revenue |
(0.6) |
% |
|
0.0 |
% |
|
|
60 basis points |
The increase in other (income) expense, net primarily consists of a $6 million gain on equity method investments.
Provision (Benefit) for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
May 2, 2026 |
May 3, 2025 |
|
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Provision (benefit) for income taxes |
|
$ |
4,658 |
|
|
|
$ |
(19,712 |
) |
|
|
|
$ |
24,370 |
|
|
|
124 |
|
% |
|
Provision (benefit) for incomes taxes as a percentage of net revenue |
|
|
0.4 |
|
% |
|
|
(1.8 |
) |
% |
|
|
220 basis points |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
16.9 |
|
% |
|
|
23.2 |
|
% |
|
|
|
|
|
|
|
|
|
The provision (benefit) 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 May 2, 2026 was 16.9% compared to 23.2% for the 13 weeks ended May 3, 2025. The change in the effective tax rate, as compared to the prior period, is primarily due to share-based payments and tax audit adjustments.
Net Income (loss) attributable to AEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
May 2, 2026 |
May 3, 2025 |
|
|
Net income (loss) attributable to AEO |
|
$ |
23,525 |
|
|
|
$ |
(64,899 |
) |
|
|
|
$ |
88,424 |
|
|
|
(136 |
) |
% |
|
Net income (loss) attributable to AEO as a percentage of net revenue |
|
|
2.0 |
|
% |
|
|
(6.0 |
) |
% |
|
|
800 basis points |
|
|
|
|
Net income per diluted share attributable to AEO of $0.14 increased for the 13 weeks ended May 2, 2026, compared to net loss per diluted share attributable to AEO of ($0.36) for the 13 weeks ended May 3, 2025. The increase in net income was attributable to the factors noted above.
Non-GAAP Information
The results of operations section above includes operating income and net income per diluted share presented on an adjusted or non-GAAP basis, which are non-GAAP financial measures. These financial measures are not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance when reviewed in conjunction with our
GAAP Consolidated Financial Statements and provides a higher degree of transparency. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. The table below reconciles the GAAP financial measure to the non-GAAP financial measures discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation |
|
(Dollars in thousands, except per share amounts) |
|
|
|
13 Weeks Ended |
|
|
|
May 3, 2025 |
|
|
|
Operating Loss |
|
|
(Benefit) for Income Taxes |
|
|
Effective Tax Rate |
|
|
Net (loss) attributable to AEO |
|
|
Earnings per Diluted Share |
|
GAAP Basis |
|
$ |
(85,181 |
) |
|
$ |
(19,712 |
) |
|
|
23.2 |
% |
|
$ |
(64,899 |
) |
|
$ |
(0.36 |
) |
% of Revenue |
|
|
(7.8 |
) |
% |
|
|
|
|
|
|
|
(6.0 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Impairment and restructuring charges (1) |
|
|
17,119 |
|
|
|
|
|
|
|
|
|
13,131 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect of the above (2) |
|
|
|
|
$ |
3,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Basis |
|
$ |
(68,062 |
) |
|
$ |
(15,724 |
) |
|
|
23.1 |
% |
|
$ |
(51,768 |
) |
|
$ |
(0.29 |
) |
% of Revenue |
|
|
(6.2 |
) |
% |
|
|
|
|
|
|
|
(4.8 |
) |
% |
|
|
(1) Refer to Note 13, Impairment and Restructuring Charges, to the Consolidated Financial Statements included herein for additional information.
(2) The tax effect of excluded items is the difference between the tax benefit calculated on a GAAP basis and on a non-GAAP basis.
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 May 2, 2026, our international licensing partners operated in 357 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.
As of May 2, 2026, we had 95 and 99 Company-owned stores in Canada and Mexico, respectively.
Liquidity and Capital Resources
Our uses of cash have historically been for working capital, the construction of new stores and remodeling of existing stores, information technology and e-commerce upgrades and investments, distribution center improvements and expansion, and the return of value to stockholders through the repurchase of common stock and the payment of dividends. Additionally, our uses of cash have included the development of the Aerie brand, investments in technology and omni-channel capabilities, and our international expansion efforts.
Historically, our uses of cash have been funded with cash flow from operations and existing cash on hand. We also maintain an asset-based revolving credit facility that allows us to borrow up to $700 million, which will expire in June 2027. As of May 2, 2026, the Company had $85.0 million in borrowings under the Credit Facility. Refer to Note 8, Long-Term Debt, Net, to the Consolidated Financial Statements included herein for additional information regarding our long-term debt.
As of May 2, 2026, we had approximately $103.3 million in cash and cash equivalents. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.
The following sets forth certain measures of our liquidity:
|
|
|
|
|
|
|
May 2,
2026 |
|
Working Capital (in thousands) |
|
|
436,967 |
|
Current Ratio |
|
|
1.55 |
|
The following table sets forth net cash flows in operating, investing, and financing activities for the 13 weeks ended May 2, 2026 and May 3, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
Increase/(Decrease) |
|
May 2, 2026 |
|
May 3, 2025 |
|
|
(In thousands) |
|
Total cash (used for): |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(65,222 |
) |
|
$ |
(54,672 |
) |
|
|
$ |
(10,550 |
) |
|
Investing activities |
|
|
(61,877 |
) |
|
|
(11,833 |
) |
|
|
|
(50,044 |
) |
|
Financing activities |
|
|
(8,641 |
) |
|
|
(154,134 |
) |
|
|
|
145,493 |
|
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
103 |
|
|
|
(470 |
) |
|
|
|
573 |
|
|
(Decrease) in cash and cash equivalents |
|
$ |
(135,637 |
) |
|
$ |
(221,109 |
) |
|
|
$ |
85,472 |
|
|
Cash Flows (Used For) Operating Activities
Our major source of cash from operations for both periods was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs.
Cash Flows (Used For) Investing Activities
Investing activities for the 13 weeks ended May 2, 2026 primarily consisted of capital expenditures of $61.4 million.
Investing activities for the 13 weeks ended May 3, 2025 primarily consisted of capital expenditures of $61.6 million, partially offset by the sale of available-for-sale investments of $50.0 million.
Cash Flows (Used For) Financing Activities
Cash used for financing activities for the 13 weeks ended May 2, 2026 consisted primarily of $53.5 million, including commissions and excise taxes, used for the repurchase of common stock under our publicly-announced share repurchase program, and $20.9 million for cash dividends paid at a quarterly rate of $0.125 per share, partially offset by $85 million of net proceeds from borrowing on our Credit Facility..
Cash used for financing activities for the 13 weeks ended May 3, 2025 consisted primarily of $201.5 million, including excise taxes, used to repurchase the Company's common stock under the ASR Agreement (as defined below), $31.3 million, including commissions and excise taxes, used for the repurchase of common stock under our publicly-announced share repurchase program, and $21.7 million for cash dividends paid at a quarterly rate of $0.125 per share, partially offset by $110 million of net proceeds from borrowing on our Credit Facility..
Revolving Credit Facility
In June 2022, we entered into an amended and restated Credit Agreement, which provides senior secured asset-based revolving credit for loans and letters of credit up to $700 million, subject to customary borrowing base limitations. The Credit Facility expires on June 24, 2027.
All obligations under the Credit Facility are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by certain assets of the Company and certain subsidiaries.
As of May 2, 2026, the Company was in compliance with the terms of the Credit Agreement and had borrowings of $85.0 million and $12.0 million outstanding in stand-by letters of credit. As of May 3, 2025, the Company was in compliance with the terms of the Credit Agreement and had borrowings of $110.0 million and $12.0 million outstanding in stand-by letters of credit.
Capital Expenditures for Property and Equipment
For the 13 weeks ended May 2, 2026, capital expenditures totaled $61.4 million. See below for a breakdown of expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
Increase/(Decrease) |
|
May 2, 2026 |
|
May 3, 2025 |
|
|
(In thousands) |
(In thousands) |
(Percentage) |
Store, fixture, and visual investments |
|
$ |
39,359 |
|
|
$ |
28,466 |
|
|
|
$ |
10,893 |
|
|
|
38 |
|
% |
|
Information technology initiatives |
|
|
13,722 |
|
|
|
11,998 |
|
|
|
|
1,724 |
|
|
|
14 |
|
|
|
Supply chain infrastructure |
|
|
1,966 |
|
|
|
11,427 |
|
|
|
|
(9,461 |
) |
|
|
(83 |
) |
|
|
Other home office projects |
|
|
6,369 |
|
|
|
9,715 |
|
|
|
|
(3,346 |
) |
|
|
(34 |
) |
|
|
Capital Expenditures |
|
$ |
61,416 |
|
|
$ |
61,606 |
|
|
|
$ |
(190 |
) |
|
|
(0 |
) |
% |
|
For Fiscal 2026, we expect capital expenditures to be between $250 million and $260 million related to the continued support of our expansion efforts, stores, information technology upgrades to support growth and investments in e-commerce, as well as to support and enhance our supply chain. We expect to be able to fund our capital expenditures through current available liquidity and cash generated from operations.
See below for a breakdown for stores remodeled and new stores opened in the 13 weeks ended May 2, 2026 and May 3, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
|
May 2, 2026 |
May 3, 2025 |
|
|
|
New Stores |
|
Remodels |
|
New Stores |
|
Remodels |
|
|
American Eagle (1) |
|
3 |
|
26 |
|
|
1 |
|
11 |
|
|
Aerie (2) |
|
3 |
|
1 |
|
|
3 |
|
2 |
|
|
Todd Snyder |
|
0 |
|
- |
|
|
1 |
|
- |
|
|
Unsubscribed |
|
0 |
|
- |
|
|
1 |
|
- |
|
|
Total stores |
|
6 |
|
27 |
|
|
6 |
|
13 |
|
|
(1) American Eagle includes AE stand-alone stores, Aerie side-by-side stores connected to an AE brand location, AE, Aerie, and OFFLINE locations connected as one store, and OFFLINE side-by-side stores connected to an AE brand location.
(2) Aerie includes Aerie stand-alone, OFFLINE stand-alone, and OFFLINE side-by-side stores connected to an Aerie brand location.
Share Repurchases
On March 11, 2025, the Company’s Board of Directors (the "Board") authorized 50 million additional shares for repurchase as part of its existing share repurchase program, which was previously announced in February 2024. During the 13 weeks ended May 2, 2026, there were 3.0 million shares repurchased under this authorization. As of May 2, 2026, the Company had a total of 46 million shares remaining authorized for repurchase through February 3, 2029.
On March 14, 2025, the Company entered into an accelerated share repurchase agreement (the "ASR Agreement") with Bank of America, N.A. ("Bank of America") to repurchase an aggregate of $200 million of the Company’s common stock.
Pursuant to the terms of the ASR Agreement, on March 17, 2025, the Company made an aggregate payment of $200 million to Bank of America and received an aggregate initial delivery of approximately 14.5 million shares of its common stock. At final settlement on June 16, 2025, the Company received an additional 3.9 million shares. The cumulative repurchases under the ASR Agreement totaled 18.4 million shares, in the aggregate, at an average price of $10.86.
During the 13 weeks ended May 2, 2026 and May 3, 2025, we repurchased approximately 1.0 million and 0.7 million shares, respectively, from certain employees at market prices totaling $20.0 million and $7.9 million, respectively. These shares were repurchased for the payment of taxes, in connection with the vesting of share-based payments, as permitted under our equity incentive plans.
The aforementioned repurchased shares were recorded as treasury stock.
Dividends
During the 13 weeks ended May 2, 2026, the Board declared a quarterly cash dividend of $0.125 per share on March 4, 2026, which was paid on April 24, 2026.
The Company maintains the right to defer the record and payment dates of any declared dividends, depending upon, among other factors, business performance and the macroeconomic environment. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes in United States taxation, and other relevant factors.
Critical Accounting Estimates
Our critical accounting policies and estimates are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2026 contained in our Fiscal 2025 Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Consolidated Financial Statements in this Quarterly Report. The application of our critical accounting policies and estimates may require our management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Our management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates. There have been no significant changes in critical accounting estimates since the end of Fiscal 2025.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are primarily exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. An unrealized gain of $15 million is included in accumulated other comprehensive income during the 13 weeks ended May 2, 2026. Our market risk profile as of January 31, 2026 is disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Fiscal 2025 Form 10-K, and was unchanged as of May 2, 2026.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the management of American Eagle Outfitters, Inc. (the "Management"), including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In connection with the preparation of this Quarterly Report, as of May 2, 2026, the Company performed an evaluation under the supervision and with the participation of our Management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing, and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our Management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.