American Eagle Outfitters(US:AEO) The Motley Fool·2025-12-05 11:16Core Insights - American Eagle Outfitters has shown significant business momentum, with shares increasing over 45% in 2025, driven by strong third-quarter results and an optimistic outlook for the holiday season [1][3][5] Financial Performance - Third-quarter revenue rose 6% year over year to $1.36 billion, marking a quarterly record, with comparable sales increasing by 4% [3] - Aerie achieved an impressive 11% comparable sales gain, while the core American Eagle brand saw a 1% increase, indicating a positive turnaround from earlier negative trends [3][5] - Gross profit grew 5% year over year to $552 million, despite a 40 basis point decline in gross margin to 40.5% due to $20 million in tariffs [4] - Operating income reached $113 million, exceeding previous guidance, with earnings per share increasing by 29% year over year to $0.53 [4][5] Future Outlook - Management raised fourth-quarter operating income guidance to between $155 million and $160 million, anticipating comparable sales growth of 8% to 9% [5] - Full-year adjusted operating income guidance was also increased to a range of $303 million to $308 million, up from prior estimates [5] Brand Performance and Marketing - Aerie is approaching $2 billion in annual revenue and holds less than 5% market share in its core categories, indicating significant growth potential [7] - Recent marketing campaigns featuring celebrities have generated over 44 billion impressions, contributing to increased traffic [8] - Selling, general, and administrative expenses rose 10% year over year due to advertising costs, but management is satisfied with the campaign effectiveness [9] Valuation Metrics - The stock trades at 21 times earnings and 16 times forward earnings, which are below the S&P 500's price-to-earnings ratio of 25, suggesting a reasonable valuation [10] - The company offers an attractive dividend yield of 2.1% [10]