Shares of American Eagle Outfitters, Inc. (AEO) experienced a notable decline of 17.4% yesterday after the announcement of major new tariffs designed to overhaul global trade and support U.S. manufacturing.The sharp decline was due to the U.S. government's decision to implement a flat 10% tariff on imports from nearly all countries, along with additional reciprocal tariffs on around 60 nations that the United States claims to impose higher duties on American goods. Among these is Vietnam, which now faces a ...

Following my coverage of American Eagle Outfitters (NYSE: AEO ) in December, in which I recommended a buy rating due to my expectation that I still believed AEO could deliver $738 million in EBITDA in FY25, this post is toI take a fundamentals-based approach to value investing.I disagree with the common misconception held by many investors that low multiple stocks must be cheap. I look for companies that offer the best long-term durability at the most affordable prices. Consequently, I have a propensity to ...

Core Viewpoint - American Eagle Outfitters, Inc. (AEO) experienced a 5.9% increase in stock price following the release of its fourth-quarter 2025 results, attributed to beating revenue and earnings expectations, indicating effective strategies in a competitive retail environment [1][3]. Financial Performance - AEO's net revenues declined by 4% year-over-year, aligning with Zacks Consensus Estimate, primarily due to an $85 million impact from a change in the retail calendar [5]. - Comparable sales increased by 3%, although this was slower than the 8% increase in the same quarter last year [5]. - Brand-wise, American Eagle's revenues fell by 9.1% year-over-year, while Aerie brand revenues increased by 0.4% with comps climbing 6% [6]. Margin and Expense Analysis - Gross profit declined by 2.5% year-over-year, but gross margin remained stable at 37.3% on an adjusted basis due to higher freight and product costs offset by reduced markdowns [7]. - SG&A expenses decreased by 6% year-over-year, representing 25% of sales, driven by lower compensation costs, partially offset by increased advertising [7]. Future Outlook - AEO management provided a cautious outlook for fiscal 2025, forecasting a low-single-digit revenue decline and a year-over-year gross margin reduction [11]. - Operating income is projected to be between $360 million and $375 million, considering impacts from the stronger U.S. dollar and U.S. tariffs on China [11]. - Anticipated mid-single-digit revenue decrease in the first half of fiscal 2025, with declining profits [11].

Financial Performance - Total net revenue increased by $67 million to $5.329 billion in Fiscal 2024 compared to $5.262 billion in Fiscal 2023[207] - Total comparable sales rose by 4%, with American Eagle increasing by 3% and Aerie by 5%[208] - Gross profit increased by 3% to $2.089 billion, with a gross margin of 39.2%, up 70 basis points from the previous year[211] - Operating income surged by 92% to $427.3 million, representing 8.0% of total revenue, an increase of 380 basis points[207] - Net income rose by 94% to $329.4 million, with diluted earnings per share increasing to $1.68 from $0.86[207] - Operating income for American Eagle was $606.5 million, a 1% increase from the previous year, while Aerie's operating income rose by 14% to $315.8 million[219] - Non-GAAP net income for Fiscal 2024 was $342.4 million, or $1.74 per diluted share, after adjusting for impairment and restructuring charges[230] - Total operating income increased by 92% to $427.3 million, driven by higher gross profit and lower impairment charges[219] Digital and Operational Improvements - Digital revenue grew by 5%, driven by increased transaction volume, while store revenue remained flat compared to Fiscal 2023[208] - The profit improvement program initiated in Fiscal 2023 contributed to margin expansion and improved operating profit rate for Fiscal 2024[204] - The company has invested in enhancing digital capabilities, focusing on mobile technology, digital marketing, and customer experience improvements[202] Expenses and Charges - Selling, general and administrative expenses decreased by $1 million year-over-year, improving by 30 basis points as a percentage of revenue[214] - Total impairment, restructuring, and other charges for Fiscal 2024 amounted to $141.7 million, representing 2.7% of net revenue[216] - The company recorded $10.7 million in employee severance related to corporate restructuring and $6.8 million in impairment costs from the sale of Hong Kong retail operations[215] - The company incurred $10.9 million in charges related to exiting the Japan market, including the closure of four stores and impairments in Hong Kong operations[233] - The company recorded $119.6 million in charges related to the Quiet Platforms restructuring, including impairments of $40.5 million in intangible assets and $39.6 million in goodwill[236] Cash Flow and Shareholder Returns - Cash flow and liquidity are expected to be sufficient to fund anticipated capital expenditures and working capital requirements for the next 12 months[199] - Total cash provided by operating activities decreased by $103.9 million from $580.7 million in Fiscal 2023 to $476.8 million in Fiscal 2024[238] - Capital expenditures for Fiscal 2024 totaled $222.5 million, with a projected increase to approximately $300 million for Fiscal 2025 to support expansion and technology upgrades[245] - The company repurchased 9.5 million shares during Fiscal 2024 under a new share repurchase program authorized for 30 million shares[250] - Cash returned to shareholders through dividends and share repurchases was $287.4 million in Fiscal 2024, compared to $104.1 million in Fiscal 2023[243] Tax and Depreciation - The effective tax rate for Fiscal 2024 was 25.5%, down from 29.1% in Fiscal 2023, primarily due to changes in non-deductible executive compensation[225] - Depreciation and amortization expense decreased by 6% to $212.3 million, primarily driven by prior year impairments of definite-lived tangible and intangible assets[218] - The effective tax rate for non-GAAP income was 23.6%, with a tax impact of $22.8 million related to restructuring charges[234] Liquidity and Financial Position - The current ratio as of February 1, 2025, was 1.53, indicating a strong liquidity position[238] - The company expects to fund future cash requirements through current cash holdings and available liquidity[237] Foreign Exchange and Other Comprehensive Loss - A hypothetical 10% adverse change in foreign exchange rates could result in a $25 million to $30 million fluctuation in foreign currency translation[274] - An unrealized loss of $40 million is included in accumulated other comprehensive loss, primarily due to fluctuations in the U.S. dollar against the Mexican peso and Canadian dollar[274] Goodwill and Share-Based Payments - The company evaluates goodwill for impairment at least annually, with potential charges recorded if carrying value exceeds fair value[264] - Share-based payments are valued using the Black-Scholes model and Monte-Carlo simulation, with assumptions impacting fair value estimates[265]

American Eagle Outfitters, Inc.’s (AEO) Powering Profitable Growth Plan has been progressing well. The company’s shareholder-friendly moves to boost value have been encouraging.In the latest action, the company has made an accelerated share repurchase agreement (ASR) with Bank of America to buy back $200 million of its common stock. This equates to roughly 18.1 million shares at the closing price on March 14, 2025, hence representing roughly 9.5% of its wholly diluted outstanding stock. AEO intends to compl ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Here are three stocks added to the Zacks Rank #5 (Strong Sell) List today:Albany International (AIN) is a global advanced textiles and materials processing company. The Zacks Consensus Estimate for its current year earnings has been revised 13.2% downward over the last 60 days.American Eagle Outfitters (AEO) is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15–25 years. The Zacks Consensus Estimate for its current year earnings has been revised 12.2% downward over th ...

Core Viewpoint - Telsey Advisory Group analyst Dana Telsey has reiterated a Market Perform rating on American Eagle Outfitters Inc (AEO) and reduced the price target from $18 to $12, reflecting concerns over the company's future performance amid a challenging macro environment [1]. Financial Performance - AEO's quarterly sales decreased by 4.4% to $1.605 billion, which was slightly better than the anticipated 4.6% decline [1]. - The gross margin remained flat at 37.3%, exceeding expectations, while SG&A expenses improved due to lower compensation costs [2]. - Operating income reached $142.3 million, surpassing both consensus and guidance, marking the highest operating income in over a decade [2]. Future Outlook - The FY25 outlook for AEO is weaker than expected, with a projected low single-digit revenue decline, contrasting with the previous consensus of a 3% increase [3]. - The company has cited slower demand and cold weather impacting first-quarter FY25 sales, although it anticipates improvement by spring [3]. - Sales have softened due to a weaker consumer environment and unfavorable weather, with limited visibility for improvement [4]. Guidance and Challenges - AEO's guidance indicates an expected decline in gross margin and a contraction in SG&A, with operating income projected between $360 million and $375 million, significantly lower than the consensus estimate of $454 million [4]. - Despite management's efforts to boost sales and reduce costs, both FY25 and first-quarter guidance are well below prior expectations [4]. - The uncertain macroeconomic backdrop poses a significant challenge, although AEO has shown strong performance during peak periods [5].

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Core Insights - American Eagle Outfitters (AEO) reported fourth-quarter 2024 earnings with an EPS of $0.54, surpassing the forecast of $0.50, while revenue declined 4.4% year-over-year to $1.6 billion [2][4] - The company achieved a remarkable 1,700% increase in operating income, reaching $142 million, reflecting strong financial discipline and operational efficiency [3][4][7] - Management's forward guidance indicates a cautious outlook, anticipating a mid-single-digit decline in revenue for Q1 2025 and a modest contraction for the fiscal year [10][11] Financial Performance - Q4 2024 metrics include: - EPS (diluted): $0.54, up from $0.03 in Q4 2023 [4] - Revenue: $1.6 billion, down from $1.68 billion in Q4 2023 [4] - Operating income: $142 million, significantly up from $9 million in Q4 2023 [4] - Gross margin: 37.3%, slightly improved from 36.6% in Q4 2023 [4] Brand Performance - Aerie brand showed strong performance with a 6% growth in comparable sales, contributing to record revenue [7] - The American Eagle brand experienced flat performance with only a 1% increase in comparable sales, and revenue decreased from $1.066 billion to $1.001 billion [8] Strategic Initiatives - AEO is focusing on expanding the Aerie brand, aiming for $2 billion in revenue, and enhancing its omnichannel strategy to improve customer engagement [5][6] - The company is committed to sustainability and effective inventory management to bolster brand loyalty and competitiveness [6] Shareholder Returns - AEO returned over $190 million to shareholders in 2024 through share repurchases and authorized an additional 50 million shares for buybacks [9] - Capital expenditures for the year totaled $223 million, indicating a focus on future growth through infrastructure and capacity enhancements [9] Market Outlook - Management anticipates a leaner revenue decline in Q1 2025 and a low-single-digit contraction for the fiscal year, while projecting operating income between $360 million and $375 million [10] - The strategic focus remains on branding, digital transformation, and international market expansion to sustain growth potential [11][12]