Core Insights - American Eagle Outfitters reported a fiscal Q2 2025 revenue of $1.28 billion, a 1% decrease year-over-year, marking the second-highest Q2 revenue in the company's history [4][24] - The company expects a tariff impact of approximately $70 million for the second half of fiscal 2025, down from an unmitigated estimate of $180 million [4][7] - The company plans to close 35 to 40 American Eagle locations by year-end, while simultaneously expanding Aerie and offline store locations [4][29] Financial Performance - Gross margin improved to 38.9%, up from 38.6% last year, despite a 20 basis points deleverage in buying, occupancy, and warehousing costs [3][25] - Operating income for Q2 2025 was $103 million, a 2% increase from the previous year, resulting in an operating margin of 8% [3][26] - Diluted EPS rose 15% compared to last year, reflecting strong financial discipline and effective cost management [3][10] Sales and Marketing - The company experienced robust new customer growth driven by celebrity marketing campaigns, resulting in over 700,000 new customers and 40 billion campaign impressions [4][22] - Comparable sales declined 1% in Q2 2025, but Aerie's comparable sales grew by 3%, indicating a positive trend in specific segments [6][17] - The marketing campaigns featuring Sydney Sweeney and Travis Kelce have generated significant engagement and traffic, contributing to record-breaking sales during Labor Day [4][22] Inventory and Supply Chain - Ending inventory cost increased by 8%, primarily due to tariff effects, with units up 3% in Q2 2025 [6][26] - The company actively managed inventory to align with category trends and anticipated demand, minimizing pull-forward related to tariffs [4][7] - Strategic supply chain adjustments, including country-of-origin shifts and vendor negotiations, have helped mitigate tariff impacts [4][7] Future Outlook - For Q3 2025, the company expects a low single-digit increase in comparable sales and operating income in the range of $95 million to $100 million, including approximately $20 million in tariffs [4][30] - Fiscal Q4 2025 guidance includes a low single-digit increase in comparable sales and operating profit projected at $125 million to $130 million, with an expected tariff impact of $40 million to $50 million [4][31] - The company is focused on optimizing its store fleet and enhancing its digital channel to drive future growth [4][28]