- Record Q3 Revenue: AEO reported $1.4 billion in revenue, a 6% year-over-year increase, driven by 4% comp sales growth and Aerie’s 11% comp surge.
- Earnings Outperformance: Operating income reached $113 million (exceeding guidance), with diluted EPS at $0.53, up 10% from adjusted EPS in 2024.
- Aerie Dominance: Aerie’s 11% comp growth (vs. AE’s 1%) fueled by strength in denim, intimates, and Offline, with 1 million+ new loyalty members added recently.
- Q4 Guidance Raised: Operating income projected at $155–160 million with 8–9% comp growth, despite $50 million in incremental tariff costs (300 bps margin impact).
Segment Performance
Aerie's comp growth was 11%, driven by strength across all categories, including intimates, apparel, sleep, and Offline. American Eagle's comp growth was 1%, driven by trend-right new fall collections, bold marketing, and exciting product collaborations. The company's jeans business, particularly in Aerie, is performing well, with a notable success in denim. As CEO Jay Schottenstein stated, the company is seeing an encouraging response to new product collections, with Aerie and Offline generating exceptional growth.
Guidance and Outlook
The company raised its Q4 operating income guidance to $155-160 million, based on comp sales growth of 8-9%. The guidance includes approximately $50 million of incremental tariff costs. Inventory is expected to grow in line with sales, with an 8-9% comp growth expected in Q4. For 2025, around 40-50 new stores are planned, mainly in Aerie and Offline.
Valuation
With a P/E Ratio of 19.43 and an EV/EBITDA of 11.07, the stock appears to be reasonably valued. The company's ROE of 13.0% and ROIC of 5.72% indicate a strong ability to generate returns on equity and invested capital. The Dividend Yield of 2.09% provides a relatively stable source of return for investors.
Growth Prospects
Aerie's growth is driven by various channels and categories, with a notable performance in denim. The brand's awareness is only at 55-60%, providing a runway for growth into 2026. The company plans to continue investing in marketing, including recent campaigns with celebrities, and expects to end the year with a marketing expense as a percentage of sales in the mid-4% range. Analysts estimate next year's revenue growth at 2.7%, indicating a moderate growth trajectory.