American Eagle Outfitters forecast annual sales above estimates on Wednesday, betting on marketing-driven demand for its apparel and accessories from affluent shoppers, even as pressures linger from import duties in the United States.
The company has leaned on new product launches and high-profile marketing campaigns, including “Give Great Jeans” for the holidays, starring veteran actress Martha Stewart, and the “Great Jeans” ad featuring “Euphoria” actor Sydney Sweeney, to attract younger, higher-earning shoppers.
It also benefited from growth at its intimates and athleisure brand Aerie, and discounts were up for products such as jeans from its namesake brand in the holiday quarter.
“The strength among the highest income cohort is particularly notable given that AEO historically under-indexes to this group,” said Michael Gunther, senior vice president of research and market intelligence at Consumer Edge.
“It could also reflect a trade-down dynamic, where even higher-income consumers are becoming more value-conscious in a challenging economic environment,” he added.
The company targets annual comparable sales to rise in the mid-single-digit percentage range, compared to analysts’ estimates of a 2.92% rise, according to data compiled by LSEG.
Its holiday-quarter adjusted profit per share of 84 cents handily beat expectations of 72 cents.
TARIFFS EXPECTED TO BE A DRAG
However, the apparel maker expects a $60 million impact from tariffs in the first half of 2026. The forecast did not account for the recent Supreme Court decision to strike down some tariffs imposed by U.S. President Donald Trump, executives said.
American Eagle sources most of its products from vendors in Asia. Fourth-quarter gross margin fell 30 basis points, hurt by a $50 million impact from the import duties.
The company’s shares reversed course and were last down 2% after the bell. The stock gained 58% in 2025.
Rival Abercrombie & Fitch and shoemaker Steven Madden have also flagged pressure from tariffs in 2026 as companies navigate uncertainties around the duties.
The denim category was also expected to be pressured this year as trends move towards lower-rise jeans and customers shop more for skirts, khakis and chino pants, said Jennifer Foyle, executive creative director at American Eagle and Aerie.
Operating income nearly halved in 2025 to $226 million, partly due to an impairment charge of $102 million related to its exit from the e-commerce logistics business Quiet Platforms.
Quarterly net revenue of $1.76 billion edged past estimates of $1.74 billion.
