American Eagle Outfitters (AEO) stock soared 25% in Wednesday’s extended trading session after the apparel retailer reported better-than-expected results for the second quarter of Fiscal 2025 (ended August 2, 2025). The company reinstated its full-year guidance, attributing the improvement in customer engagement and comparable sales to better product offerings and the success of its fall denim marketing campaign that featured actress Sydney Sweeney.
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AEO also cited its recent collaboration with Travis Kelce, an American professional football player who recently got engaged to award-winning pop singer Taylor Swift.
The retailer has been under pressure due to merchandising missteps, tariff woes, and the impact of macro uncertainty on consumers’ discretionary spending.
AEO Impresses with Upbeat Q2 Earnings
American Eagle Outfitters reported a 0.6% year-over-year decline in its Q2 2025 net revenue to $1.28 billion, but managed to surpass the Street’s estimate of $1.24 billion. In particular, the Aerie brand saw a 3% growth in its Q2 FY25 comparable sales.
Meanwhile, adjusted earnings per share (EPS) grew 15.4% year-over-year to $0.45, crushing the consensus expectation of $0.20. AEO saw its gross margin expand by 30 basis points to 38.9%, while operating margin improved by 20 basis points to 8%.
Overall, American Eagle’s Q2 beat was driven by increased demand, lower promotions, better inventory alignment, and expense management.
American Eagle Reinstates Full-Year Outlook
American Eagle issued better-than-expected guidance for the third quarter of Fiscal 2025 and reinstated its full-year guidance after withdrawing it earlier this year. The company expects its Fiscal 2025 comparable sales to be approximately flat. However, tariffs are expected to impact AEO’s full-year profitability.
Meanwhile, the company said that it will continue the Sydney Sweeney Great Jeans campaign throughout the remainder of the year. The Sweeney ad campaign, launched in July, featured the actress talking about her “good jeans,” which some viewers debated was a play on the word “genes.”
The wording sparked a controversy about whether the actress was making a political point. While critics accused the ad of promoting eugenics (a theory that selective breeding could improve the human race), others, including President Donald Trump, defended it.
Is AEO a Good Stock to Buy?
Wall Street has a Hold consensus rating on American Eagle stock based on three Holds, one Buy, and two Sell recommendations. The average AEO stock price target of $12.20 indicates a possible downside risk of 10.4%.
However, these ratings/price targets are expected to be revised based on analysts’ reactions to the Q2 beat and guidance.
