American Eagle Outfitters-American Eagle Stock Rises 5.9% Post Q4 Results: Time to Buy or Wait?

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].