Tariff Pressures Loom Over American Eagle's Outlook Despite Recent Gains

Core Viewpoint - American Eagle Outfitters, Inc. has demonstrated resilience by exceeding financial expectations despite ongoing market challenges, with shares trading lower following the announcement of better-than-expected second-quarter results [1]. Financial Performance - American Eagle reported second-quarter revenue of $1.28 billion, surpassing analyst estimates of $1.24 billion, and earnings per share of 45 cents, exceeding expectations of 20 cents [2]. - The company is now expected to achieve flat full-year revenue of approximately $5.334 billion, reflecting a 0.1% year-over-year increase, compared to a prior forecast of a 2.6% decline to $5.189 billion [6][7]. Sales and Growth Outlook - Comparable sales growth is anticipated to be in the low single-digit range for both the third and fourth quarters [3]. - Despite a fourth consecutive quarter of sales decline, the rate of decline has eased by over 400 basis points, aided by growth in the Aerie brand [4]. Analyst Insights - Telsey Advisory Group's analyst Dana Telsey raised the price target from $12 to $18 while maintaining a Market Perform rating, noting improvements in management and back-half outlook [3][5]. - Bank of America Securities' analyst Christopher Nardone reiterated an Underperform rating, increasing the price target from $10 to $11, and estimating a tariff impact of about $70 million for FY25 [8]. Tariff Impact - The projected tariff impact for the fourth quarter is estimated to be between $40 million and $50 million, significantly lower than the "unmitigated impact" of $180 million due to effective supply chain management and pricing adjustments [5][6]. - For FY26, the net effect of tariffs is expected to be more pronounced in the first half, potentially limiting margin improvement [9]. Stock Performance - American Eagle shares were up 34.08% at $18.26 at the time of publication, trading within a 52-week range of $9.27 to $22.63 [10].