American Eagle Outfitters Inc. (NYSE:AEO) reported first quarter results that topped Wall Street expectations on both revenue and earnings, but issued forward outlook that incorporates significant tariff-related assumptions and weighed on investor sentiment, sending shares down about 13%.
The company said it expects a 10% tariff rate for second-quarter receipts and 15% for the back half of fiscal 2026.
For the second quarter, the company expects comparable sales to rise in the mid- to high-single-digit range, while gross margin is expected to decline year over year. SG&A expenses are projected to increase in the mid-teens percentage range. Operating income is forecast between $45 million and $50 million.
For the full fiscal year 2026, American Eagle expects mid-single-digit comparable sales growth and gross margin expansion year over year. SG&A is projected to rise in the high-single-digit range, with operating income expected between $390 million and $410 million.
For Q1, American Eagle reported earnings per share of $0.14, ahead of the $0.12 consensus estimate.
Revenue came in at $1.20 billion versus expectations of $1.18 billion, representing a 10% year-over-year increase.
Total comparable sales rose 8%, driven by strong performance at Aerie, which posted a 25% comparable sales increase. This was partially offset by a 2% decline in American Eagle comparable sales.
“Looking ahead, our priorities are clear. Despite continued consumer and macroeconomic uncertainty, we remain confident in our ability to navigate near-term headwinds,” American Eagle CEO Jay Schottenstein said.
“While results at American Eagle were mixed, our teams are moving decisively to reignite the women’s business and strengthen product execution and brand positioning.”