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.
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.
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 our e-commerce platform, 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, prior to 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 Fiscal 2025 and the 13 and 26 weeks ended August 1, 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 in connection therewith, 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. 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. The Company submitted all refund claims eligible for refund in the first phase of CAPE during the 26 weeks ended August 1, 2026. As of August 1, 2026, the Company received $195.7 million of IEEPA tariff refunds, including interest, which were recognized primarily as a reduction of cost of sales in the Consolidated Statements of Operations.
Additionally, the Company paid $70.8 million related to the Participation Agreement during the 13 weeks ended August 1, 2026, representing substantially all of refund claims purchased by the buyer, plus interest,
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. On July 23, 2026, the U.S. administration announced plans to implement additional tariffs under Section 301 of the Trade Act of 1974, effective July 24, 2026. 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 2, Summary of Significant Accounting Policies, 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.
Results of Operations
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:
•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.
•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.
•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.
•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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
|
|
|
August 1, 2026 |
|
|
|
August 2, 2025 |
|
|
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
Total net revenue |
|
$ |
1,380,375 |
|
100.0 |
|
% |
|
$ |
1,283,675 |
|
100.0 |
|
% |
|
Cost of sales, including certain buying, occupancy and warehouse expenses |
|
|
708,311 |
|
|
51.3 |
|
|
|
|
783,713 |
|
|
61.1 |
|
|
|
Gross profit |
|
|
672,064 |
|
|
48.7 |
|
|
|
|
499,962 |
|
|
38.9 |
|
|
|
Selling, general and administrative expenses |
|
|
408,354 |
|
|
29.6 |
|
|
|
|
342,211 |
|
|
26.7 |
|
|
|
Depreciation and amortization expense |
|
|
52,305 |
|
|
3.8 |
|
|
|
|
54,666 |
|
|
4.2 |
|
|
|
Operating income |
|
|
211,405 |
|
|
15.3 |
|
|
|
|
103,085 |
|
|
8.0 |
|
|
|
Interest expense, net |
|
|
47,125 |
|
|
3.4 |
|
|
|
|
1,919 |
|
|
0.1 |
|
|
|
Other (income) loss, net |
|
|
(13,771 |
) |
|
(1.0 |
) |
|
|
|
648 |
|
|
0.1 |
|
|
|
Income before income taxes |
|
$ |
178,051 |
|
|
12.9 |
|
|
|
$ |
100,518 |
|
|
7.8 |
|
|
|
Provision for income taxes |
|
|
44,366 |
|
|
3.2 |
|
|
|
|
23,705 |
|
|
1.8 |
|
|
|
Net income |
|
$ |
133,685 |
|
|
9.7 |
|
% |
|
$ |
76,813 |
|
|
6.0 |
|
% |
|
Net loss attributable to non-controlling interests |
|
|
399 |
|
|
0.0 |
|
|
|
|
820 |
|
|
0.0 |
|
|
|
Net income attributable to AEO |
|
$ |
134,084 |
|
|
9.7 |
|
% |
|
$ |
77,633 |
|
|
6.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
|
|
|
|
August 1, 2026 |
|
|
|
August 2, 2025 |
|
|
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
Total net revenue |
|
$ |
2,575,660 |
|
100.0 |
|
% |
|
$ |
2,373,275 |
|
100.0 |
|
% |
|
Cost of sales, including certain buying, occupancy and warehouse expenses |
|
|
1,447,425 |
|
|
56.2 |
|
|
|
|
1,550,892 |
|
|
65.3 |
|
|
|
Gross profit |
|
|
1,128,235 |
|
|
43.8 |
|
|
|
|
822,383 |
|
|
34.7 |
|
|
|
Selling, general and administrative expenses |
|
|
784,846 |
|
|
30.5 |
|
|
|
|
680,998 |
|
|
28.7 |
|
|
|
Impairment & restructuring charges |
|
|
- |
|
|
0.0 |
|
|
|
|
17,119 |
|
|
0.7 |
|
|
|
Depreciation and amortization expense |
|
|
103,760 |
|
|
4.0 |
|
|
|
|
106,363 |
|
|
4.5 |
|
|
|
Operating income |
|
|
239,629 |
|
|
9.3 |
|
|
|
|
17,903 |
|
|
0.8 |
|
|
|
Interest expense, net |
|
|
54,978 |
|
|
2.1 |
|
|
|
|
1,700 |
|
|
0.1 |
|
|
|
Other (income) loss, net |
|
|
(20,993 |
) |
|
(0.8 |
) |
|
|
|
816 |
|
|
0.0 |
|
|
|
Income before income taxes |
|
$ |
205,644 |
|
|
8.0 |
|
|
|
$ |
15,387 |
|
|
0.7 |
|
|
|
Provision for income taxes |
|
|
49,024 |
|
|
1.9 |
|
|
|
|
3,992 |
|
|
0.2 |
|
|
|
Net income |
|
$ |
156,620 |
|
|
6.1 |
|
% |
|
$ |
11,395 |
|
|
0.5 |
|
% |
|
Net loss attributable to non-controlling interests |
|
|
987 |
|
|
0.0 |
|
|
|
|
1,339 |
|
|
0.0 |
|
|
|
Net income attributable to AEO |
|
$ |
157,607 |
|
|
6.1 |
|
% |
|
$ |
12,734 |
|
|
0.5 |
|
% |
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
|
|
August 1, |
|
|
August 2, |
|
|
August 1, |
|
|
August 2, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Number of stores: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
1,170 |
|
|
|
1,176 |
|
|
|
1,168 |
|
|
|
1,172 |
|
Opened |
|
|
2 |
|
|
|
12 |
|
|
|
8 |
|
|
|
18 |
|
Closed |
|
|
(5 |
) |
|
|
(3 |
) |
|
|
(9 |
) |
|
|
(5 |
) |
End of period |
|
|
1,167 |
|
|
|
1,185 |
|
|
|
1,167 |
|
|
|
1,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross square feet at end of period (in '000) |
|
|
7,260 |
|
|
|
7,266 |
|
|
|
7,260 |
|
|
|
7,266 |
|
International licensed retail stores at end of
period (1) |
|
|
376 |
|
|
|
365 |
|
|
|
376 |
|
|
|
365 |
|
(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:
|
|
|
August 1, 2026 |
American Eagle: |
|
American Eagle stand-alone |
599 |
Aerie side-by-side |
183 |
AE brand, Aerie brand and OFFLINE™ |
14 |
OFFLINE™ side-by-side |
6 |
Total American Eagle |
802 |
|
|
Aerie: |
|
Aerie stand-alone |
225 |
OFFLINE™ stand-alone |
49 |
OFFLINE™ side-by-side |
61 |
Total Aerie |
335 |
|
|
Todd Snyder |
23 |
Unsubscribed |
7 |
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
|
August 2, 2025 |
|
|
|
|
(In thousands) |
(Percentage) |
|
|
(In thousands) |
(Percentage) |
|
|
|
(In thousands) |
(Percentage) |
|
|
American Eagle |
|
$805,883 |
58.4 |
% |
|
$800,406 |
62.4 |
% |
|
|
$5,477 |
1 |
% |
|
Aerie |
|
535,822 |
38.8 |
|
|
429,084 |
33.4 |
|
|
|
106,738 |
25 |
|
|
Other |
|
38,670 |
2.8 |
|
|
61,523 |
4.8 |
|
|
|
(22,853) |
(37) |
|
|
Intersegment Eliminations |
|
- |
0.0 |
|
|
(7,338) |
(0.6) |
|
|
|
7,338 |
(100) |
|
|
Total net revenue |
|
$1,380,375 |
100.0 |
% |
|
$1,283,675 |
100.0 |
% |
|
|
$96,700 |
8 |
% |
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
|
|
(Percentage) |
|
Gross Profit |
|
$ |
672,064 |
|
|
|
$ |
499,962 |
|
|
|
|
$ |
172,102 |
|
|
|
34 |
|
% |
|
Gross Margin |
|
|
48.7 |
|
% |
|
|
38.9 |
|
% |
|
|
980 basis points |
|
|
|
|
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.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
American Eagle |
|
$ |
194,628 |
|
|
|
$ |
170,640 |
|
|
|
|
$ |
23,988 |
|
|
|
14 |
|
% |
|
Aerie |
|
|
106,829 |
|
|
|
|
89,191 |
|
|
|
|
|
17,638 |
|
|
|
20 |
|
|
|
Other |
|
|
106,897 |
|
|
|
|
82,380 |
|
|
|
|
|
24,517 |
|
|
|
30 |
|
|
|
Selling, general and administrative expenses |
|
$ |
408,354 |
|
|
|
$ |
342,211 |
|
|
|
|
$ |
66,143 |
|
|
|
19 |
|
% |
|
Selling, general and administrative expenses as a percentage of net revenue |
|
|
29.6 |
|
% |
|
|
26.7 |
|
% |
|
|
290 basis points |
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
American Eagle |
|
$ |
21,379 |
|
|
|
$ |
20,718 |
|
|
|
|
$ |
661 |
|
|
|
3 |
|
% |
|
Aerie |
|
|
16,072 |
|
|
|
|
14,740 |
|
|
|
|
|
1,332 |
|
|
|
9 |
|
|
|
Other |
|
|
14,854 |
|
|
|
|
19,208 |
|
|
|
|
|
(4,354 |
) |
|
|
(23 |
) |
|
|
Total depreciation and amortization expense |
|
$ |
52,305 |
|
|
|
$ |
54,666 |
|
|
|
|
$ |
(2,361 |
) |
|
|
(4 |
) |
% |
|
Total depreciation and amortization expense as a percentage of net revenue |
|
|
3.8 |
|
% |
|
|
4.2 |
|
% |
|
|
-40 basis points |
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
(Percentage of revenue) |
|
|
(In thousands) |
(Percentage of revenue) |
|
|
|
(In thousands) |
(Percentage) |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Eagle |
|
$188,478 |
13.7 |
% |
|
$138,188 |
10.8 |
% |
|
|
$50,290 |
36 |
% |
|
Aerie |
|
170,160 |
12.3 |
|
|
74,628 |
5.8 |
|
|
|
95,532 |
128 |
|
|
Other |
|
(2,407) |
(0.2) |
|
|
(10,094) |
(0.8) |
|
|
|
7,687 |
(76) |
|
|
General corporate expenses |
|
(144,826) |
|
|
|
(99,637) |
|
|
|
|
(45,189) |
|
|
|
Total Operating Income |
|
$211,405 |
|
|
|
$103,085 |
|
|
|
|
$108,320 |
105 |
% |
|
Total Operating Income as a percentage of net revenue |
|
15.3 |
% |
|
|
8.0 |
% |
|
|
|
730 basis points |
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Interest expense, net |
$ |
47,125 |
|
|
|
$ |
1,919 |
|
|
|
|
$ |
45,206 |
|
|
|
2356 |
|
% |
|
Interest expense as a percentage of net revenue |
|
3.4 |
|
% |
|
|
0.1 |
|
% |
|
|
330 basis points |
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Other (income) loss, net |
$(13,771) |
|
|
$648 |
|
|
|
$14,419 |
|
2225 |
% |
|
Other (income) loss, net as a percentage of net revenue |
(1.0) |
% |
|
0.1 |
% |
|
|
110 basis points |
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Provision for income taxes |
|
$ |
44,366 |
|
|
|
$ |
23,705 |
|
|
|
|
$ |
20,661 |
|
|
|
87 |
|
% |
|
Provision for incomes taxes as a percentage of net revenue |
|
|
3.2 |
|
% |
|
|
1.8 |
|
% |
|
|
140 basis points |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
24.9 |
|
% |
|
|
23.6 |
|
% |
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
|
Net income attributable to AEO |
|
$ |
134,084 |
|
|
|
$ |
77,633 |
|
|
|
|
$ |
56,451 |
|
|
|
73 |
|
% |
|
Net income as a percentage of net revenue |
|
|
6.1 |
|
% |
|
|
6.0 |
|
% |
|
|
10 basis points |
|
|
|
|
Diluted net income per common share attributable to AEO |
|
$ |
0.79 |
|
|
|
$ |
0.45 |
|
|
|
|
$ |
0.34 |
|
|
|
75 |
|
% |
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
|
August 2, 2025 |
|
|
|
|
(In thousands) |
|
(Percentage) |
|
|
|
(In thousands) |
|
(Percentage) |
|
|
|
|
(In thousands) |
|
(Percentage) |
|
|
|
American Eagle |
|
$ |
1,484,359 |
|
|
57.6 |
|
% |
|
$ |
1,494,271 |
|
|
63.0 |
|
% |
|
|
$ |
(9,912 |
) |
|
(1 |
) |
% |
|
Aerie |
|
|
1,016,648 |
|
|
39.5 |
|
|
|
|
788,872 |
|
|
33.2 |
|
|
|
|
|
227,776 |
|
|
29 |
|
|
|
Other |
|
|
74,653 |
|
|
2.9 |
|
|
|
|
105,494 |
|
|
4.4 |
|
|
|
|
|
(30,841 |
) |
|
(29 |
) |
|
|
Intersegment Eliminations |
|
|
- |
|
|
0.0 |
|
|
|
|
(15,362 |
) |
|
(0.6 |
) |
|
|
|
|
15,362 |
|
|
(100 |
) |
|
|
Total net revenue |
|
$ |
2,575,660 |
|
|
100.0 |
|
% |
|
$ |
2,373,275 |
|
|
100.0 |
|
% |
|
|
$ |
202,385 |
|
|
9 |
|
% |
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
|
|
(Percentage) |
|
Gross Profit |
|
$ |
1,128,235 |
|
|
|
$ |
822,383 |
|
|
|
|
$ |
305,852 |
|
|
|
37 |
|
% |
|
Gross Margin |
|
|
43.8 |
|
% |
|
|
34.7 |
|
% |
|
|
910 basis points |
|
|
|
|
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.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
American Eagle |
|
$ |
373,300 |
|
|
|
$ |
338,695 |
|
|
|
|
$ |
34,605 |
|
|
|
10 |
|
% |
|
Aerie |
|
|
203,798 |
|
|
|
|
172,108 |
|
|
|
|
|
31,690 |
|
|
|
18 |
|
|
|
Other |
|
|
207,748 |
|
|
|
|
170,195 |
|
|
|
|
|
37,553 |
|
|
|
22 |
|
|
|
Selling, general and administrative expenses |
|
$ |
784,846 |
|
|
|
$ |
680,998 |
|
|
|
|
$ |
103,848 |
|
|
|
15 |
|
% |
|
Selling, general and administrative expenses as a percentage of net revenue |
|
|
30.5 |
|
% |
|
|
28.7 |
|
% |
|
|
-180 basis points |
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 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 |
|
% |
|
|
0.7 |
|
% |
|
|
-70 basis points |
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
American Eagle |
|
$ |
42,733 |
|
|
|
$ |
40,886 |
|
|
|
|
$ |
1,847 |
|
|
|
5 |
|
% |
|
Aerie |
|
|
32,095 |
|
|
|
|
28,910 |
|
|
|
|
|
3,185 |
|
|
|
11 |
|
|
|
Other |
|
|
28,932 |
|
|
|
|
36,567 |
|
|
|
|
|
(7,635 |
) |
|
|
(21 |
) |
|
|
Total depreciation and amortization expense |
|
$ |
103,760 |
|
|
|
$ |
106,363 |
|
|
|
|
$ |
(2,603 |
) |
|
|
(2 |
) |
% |
|
Total depreciation and amortization expense as a percentage of net revenue |
|
|
4.0 |
|
% |
|
|
4.5 |
|
% |
|
|
-50 basis points |
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
|
(In thousands) |
|
(Percentage) |
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Eagle |
|
$ |
235,635 |
|
|
17.1 |
|
% |
|
$ |
187,935 |
|
|
14.6 |
|
% |
|
|
$ |
47,700 |
|
|
25 |
|
% |
|
Aerie |
|
$ |
266,444 |
|
|
19.3 |
|
|
|
|
75,403 |
|
|
5.9 |
|
|
|
|
|
191,041 |
|
|
253 |
|
|
|
Other |
|
$ |
(8,762 |
) |
|
(0.6 |
) |
|
|
|
(23,264 |
) |
|
(1.8 |
) |
|
|
|
|
14,502 |
|
|
(62 |
) |
|
|
General corporate expenses |
|
$ |
(253,688 |
) |
|
|
|
|
|
(205,052 |
) |
|
|
|
|
|
|
(48,636 |
) |
|
|
|
|
Impairment and restructuring charges |
|
$ |
- |
|
|
|
|
|
|
(17,119 |
) |
|
|
|
|
|
|
17,119 |
|
|
|
|
|
Total Operating Income |
|
$ |
239,629 |
|
|
|
|
|
$ |
17,903 |
|
|
|
|
|
|
$ |
221,726 |
|
|
1238 |
|
% |
|
Total Operating Income as a percentage of income |
|
|
9.3 |
|
% |
|
|
|
|
0.8 |
|
% |
|
|
|
|
850 basis points |
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Interest expense, net |
$ |
54,978 |
|
|
|
$ |
1,700 |
|
|
|
|
$ |
53,278 |
|
|
|
3134 |
|
% |
|
Interest expense as a percentage of net revenue |
|
2.1 |
|
% |
|
|
0.1 |
|
% |
|
|
200 basis points |
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Other (income) loss, net |
$ |
(20,993 |
) |
|
|
$ |
816 |
|
|
|
|
$ |
21,809 |
|
|
|
2673 |
|
% |
|
Other (income) loss, net as a percentage of net revenue |
|
(0.8 |
) |
% |
|
|
0.0 |
|
% |
|
|
80 basis points |
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
Provision for income taxes |
|
$ |
49,024 |
|
|
|
$ |
3,992 |
|
|
|
|
$ |
45,032 |
|
|
|
1128 |
|
% |
|
Provision for incomes taxes as a percentage of net revenue |
|
|
1.9 |
|
% |
|
|
0.2 |
|
% |
|
|
170 basis points |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
23.8 |
|
% |
|
|
25.9 |
|
% |
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
Increase/(Decrease) |
|
August 1, 2026 |
August 2, 2025 |
|
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
|
Net income attributable to AEO |
|
$ |
157,607 |
|
|
|
$ |
12,734 |
|
|
|
|
$ |
144,873 |
|
|
|
1138 |
|
% |
|
Net income as a percentage of net revenue |
|
|
6.1 |
|
% |
|
|
0.5 |
|
% |
|
|
560 basis points |
|
|
|
|
Diluted net income per common share attributable to AEO |
|
$ |
0.92 |
|
|
|
$ |
0.07 |
|
|
|
|
$ |
0.85 |
|
|
|
1214 |
|
% |
|
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.
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 currently expires in June 2031. As of August 1, 2026, the Company had $55.0 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 August 1, 2026, we had approximately $148.0 million in cash and cash equivalents. We expect to be able to fund our cash requirements in both the short-term and the long-term through current cash holdings and available liquidity.
The following sets forth certain measures of our liquidity:
|
|
|
|
|
|
|
August 1,
2026 |
|
Working Capital (in thousands) |
|
|
497,295 |
|
Current Ratio |
|
|
1.59 |
|
The following table sets forth net cash flows in operating, investing, and financing activities for the 26 weeks ended August 1, 2026 and August 2, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
Increase/(Decrease) |
|
August 1, 2026 |
|
August 2, 2025 |
|
(In thousands) |
|
Total cash (used for) provided by: |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
116,325 |
|
|
$ |
(26,859 |
) |
|
|
$ |
143,184 |
|
|
Investing activities |
|
|
(128,294 |
) |
|
|
(74,113 |
) |
|
|
|
(54,181 |
) |
|
Financing activities |
|
|
(79,340 |
) |
|
|
(82,701 |
) |
|
|
|
3,361 |
|
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
340 |
|
|
|
1,491 |
|
|
|
|
(1,151 |
) |
|
(Decrease) in cash and cash equivalents |
|
$ |
(90,969 |
) |
|
$ |
(182,182 |
) |
|
|
$ |
91,213 |
|
|
Cash Flows Provided by (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. Additionally, this year’s cash from operations includes $195.7 million of tariff refunds, including interest, received during the period.
Cash Flows (Used For) Investing Activities
Investing activities for the 26 weeks ended August 1, 2026 primarily consisted of capital expenditures of $127.6 million.
Investing activities for the 26 weeks ended August 2, 2025 primarily consisted of capital expenditures of $132.6 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 26 weeks ended August 1, 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 $41.9 million for cash dividends paid at a quarterly rate of $0.125 per share, partially offset by $55 million of net proceeds from borrowing on our Credit Facility
Cash used for financing activities for the 26 weeks ended August 2, 2025 consisted primarily of $201.8 million, including excise taxes, used to repurchase the Company's common stock under the ASR Agreement (as defined below), $42.8 million for cash dividends paid at a quarterly rate of $0.125 per share, and $31.3 million, including commissions and
excise taxes, used for the repurchase of common stock under our publicly announced program, partially offset by net Credit Facility borrowings of $203.0 million.
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.
On June 4, 2026, the Credit Agreement was amended to extend the maturity date of the Credit Facility to June 4, 2031 and simplify the interest rate calculation by removing the SOFR Adjustment and Term CORRA Adjustment (as such terms are defined in the Credit Agreement) and increasing the applicable margin.
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 August 1, 2026, the Company was in compliance with the terms of the Credit Agreement and had borrowings of $55 million and $10 million outstanding in stand-by letters of credit. As of August 2, 2025, the Company was in compliance with the terms of the Credit Agreement and had borrowings of $203.0 million and $12.0 million outstanding in stand-by letters of credit.
Capital Expenditures for Property and Equipment
For the 26 weeks ended August 1, 2026, capital expenditures totaled $127.6 million. See below for a breakdown of expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
Increase/(Decrease) |
|
August 1, 2026 |
|
August 2, 2025 |
|
(In thousands) |
(In thousands) |
(Percentage) |
Store, fixture, and visual investments |
|
$ |
87,356 |
|
|
$ |
66,649 |
|
|
|
$ |
20,707 |
|
|
|
31 |
|
% |
|
Information technology initiatives |
|
|
28,665 |
|
|
|
22,765 |
|
|
|
|
5,900 |
|
|
|
26 |
|
|
|
Supply chain infrastructure |
|
|
3,353 |
|
|
|
20,947 |
|
|
|
|
(17,594 |
) |
|
|
(84 |
) |
|
|
Other home office projects |
|
|
8,263 |
|
|
|
22,204 |
|
|
|
|
(13,941 |
) |
|
|
(63 |
) |
|
|
Capital Expenditures |
|
$ |
127,637 |
|
|
$ |
132,565 |
|
|
|
$ |
(4,928 |
) |
|
|
(4 |
) |
% |
|
For Fiscal 2026, we expect total 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 26 weeks ended August 1, 2026 and August 2, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended |
|
|
|
August 1, 2026 |
August 2, 2025 |
|
|
|
New Stores |
|
Remodels |
|
New Stores |
|
Remodels |
|
|
American Eagle (1) |
|
3 |
|
23 |
|
|
3 |
|
24 |
|
|
Aerie (2) |
|
5 |
|
2 |
|
|
9 |
|
1 |
|
|
Todd Snyder |
|
- |
|
- |
|
|
4 |
|
- |
|
|
Unsubscribed |
|
- |
|
- |
|
|
2 |
|
- |
|
|
Total stores |
|
8 |
|
25 |
|
|
18 |
|
25 |
|
|
(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 26 weeks ended August 1, 2026, there were 3.0 million shares repurchased under this authorization. As of August 1, 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 per share.
During the 26 weeks ended August 1, 2026 and August 2, 2025, we repurchased approximately 1.0 million and 0.7 million shares, respectively, from certain employees at market prices totaling $20.3 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 August 1, 2026, the Board declared a quarterly cash dividend of $0.125 per share on June 9, 2026, which was paid on July 24, 2026 to stockholders of record as of July 10, 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. 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 there have been no material changes to our market risk profile from those disclosed in the Fiscal 2025 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure 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 the Company, including our principal executive officer and our principal financial officer (or persons performing similar functions), 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, 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, August 1, 2026, our disclosure controls and procedures were effective.
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.
