AMERICAN EAGLE OUTFITTERS INC

Overview

We entered 2026 with strong momentum and delivered a solid start to the fiscal year, with double-digit revenue growth. The first quarter of Fiscal 2026 reflected the strength of our portfolio and highlighted the strength of the Aerie brand, which delivered exceptional growth and profitability across channels. We continue to prioritize operational excellence and financial discipline to create long-term value for AEO and its shareholders.

Compared to the first 13 weeks of Fiscal 2025:

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Total revenue increased 10% to $1.195 billion from $1.090 billion, with Aerie revenue increasing 34% year-over-year, and American Eagle revenue decreasing 2% year-over-year. Total comparable sales increased 8%. Aerie's comparable sales increased 25% year-over-year, and American Eagle's comparable sales decreased 2% year-over-year.

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Gross profit increased 41% to $456 million year-over-year, and increased by 860 basis points to 38.2% as a percentage of revenue.

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Operating income of $28 million increased 133% compared to an $85 million operating loss last year, and increased 141% compared to the adjusted operating loss of $68 million last year.

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Diluted earnings per share increased to $0.14 for the 13 weeks ended May 2, 2026, compared to diluted loss per share of ($0.36) and adjusted diluted loss per share of ($0.29) for the 13 weeks ended May 3, 2025.

The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations:

The following table shows our consolidated store data for the 13 weeks ended May 2, 2026 and May 3, 2025:

(1)

International licensed retail stores are not included in the consolidated store data or the total gross square feet calculation.

As of May 2, 2026, we operated 804 American Eagle retail stores, consisting of 184 Aerie side-by-side locations, 10 locations with AE brand, Aerie brand and OFFLINE™ connected as one store, and six OFFLINE™ side-by-side locations, 335 Aerie stand-alone stores (including 49 OFFLINE™ stand-alone stores and 52 OFFLINE™ side-by-side locations), and AEO Direct. Additionally, there were 23 Todd Snyder stand-alone locations and eight Unsubscribed locations.

Comparison of the 13 weeks ended May 2, 2026 to the 13 weeks ended May 3, 2025

Total Net Revenue

Total net revenue increased 10% for the 13 weeks ended May 2, 2026 to $1.195 billion, compared to $1.090 billion last year. Digital revenue increased 15%, and store revenue increased 8%. Total comparable sales increased by 8%, compared to a 3% decrease last year.

American Eagle. The decrease in net revenue was driven by lower average unit retail price and store traffic. Digital performance was flat to last year. American Eagle comparable sales decreased 2%.

Aerie. The increase in net revenue was driven by increased transactions across channels, as well as increased transaction value resulting from higher average unit retail price. Aerie comparable sales increased 25%.

Gross Profit

The 41% increase in gross profit was primarily driven by an increase of $138 million in merchandise margin due to higher sales, as well as last year's $75 million inventory write-down of spring and summer merchandise.

Additionally, buying, occupancy, and warehousing costs increased $5 million year-over-year. However, as a percentage of net revenue, buying, occupancy, and warehousing costs improved 150 basis points primarily due to higher sales and reduced costs from the operational wind-down of Quiet Platforms.

During the 13 weeks ended May 2, 2026 and May 3, 2025, $7.1 million and $6.6 million, respectively, of share-based payment expense were included in gross profit, representing both time and performance-based awards.

Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network as well as design costs in cost of sales and others may exclude a portion of these costs from cost of sales, including them in a line item such as SG&A expenses. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.

Selling, General and Administrative Expenses

The increase in SG&A expenses was driven by a $24 million increase in planned investments in advertising year-over-year, as well as a $10 million increase in compensation primarily related to increased store wage rates.

There was $15.0 million and $14.0 million of share-based payment expense included in SG&A expenses for the 13 weeks ended May 2, 2026 and May 3, 2025, respectively, comprised of both time and performance-based awards.

Impairment and Restructuring

There were no impairment or restructuring charges recorded during the 13 weeks ended May 2, 2026. During the 13 weeks ended May 3, 2025, we recorded $17.1 million of impairment and restructuring. We recorded $10.4 million of impairment related to ROU assets, $4.9 million related to fixed assets, and $1.8 million of employee severance.

Depreciation and Amortization Expense

Operating Income (Loss)

The increase in operating income (loss) was primarily driven by higher gross profit and no impairment and restructuring charges in the current year, partially offset by increased SG&A expenses, all of which are explained in detail above.

American Eagle. The decrease in operating income was the result of a $10 million increase in SG&A expenses year-over-year. Merchandise margin was flat year over year, with lower sales offset by lower net markdowns this year including the $31 million inventory write-down of spring and summer merchandise incurred last year. Additionally, buying, occupancy, and warehousing expenses were $8 million lower this year

Aerie. The increase was primarily the result of a $111 million increase in gross profit driven by increased merchandise margin on the $121 million, or 34%, increase in total net revenue, partially offset by a $12 million increase in buying, occupancy, and warehousing expenses. Last year’s merchandise margin also included a $44 million inventory write-down of spring and summer merchandise.

Interest Expense (Income), net

The increase in interest expense (income), net is primarily driven by $7 million of accretion expense related to the Participation Agreement for tariff refund claims. Refer to Note 14, Subsequent Events, to the Consolidated Financial Statements for additional information.

Other (Income) Expense, net

The increase in other (income) expense, net primarily consists of a $6 million gain on equity method investments.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended May 2, 2026 was 16.9% compared to 23.2% for the 13 weeks ended May 3, 2025. The change in the effective tax rate, as compared to the prior period, is primarily due to share-based payments and tax audit adjustments.

Net Income (loss) attributable to AEO

Net income per diluted share attributable to AEO of $0.14 increased for the 13 weeks ended May 2, 2026, compared to net loss per diluted share attributable to AEO of ($0.36) for the 13 weeks ended May 3, 2025. The increase in net income was attributable to the factors noted above.