American Eagle Lifts Fiscal 2026 Operating Income Outlook
The specialty retailer now sees operating income of $540 million to $550 million after a $161 million net tariff-refund benefit lifted second-quarter operating profit to $211 million.
American Eagle Outfitters, Inc. (AEO) raised its fiscal 2026 operating income outlook to a range of $540 million to $550 million, inclusive of a net tariff-refund benefit, after second-quarter operating profit of $211 million and a 15.3% operating margin.
The specialty retailer had previously guided to $390 million to $410 million for the year. The company said all guidance is based on estimates and includes the impact of International Emergency Economic Powers Act (IEEPA) tariff refunds.
Total net revenue for the 13 weeks ended August 1, 2026, was a record $1.38 billion, up 8% from a year earlier, with total comparable sales up 6%. Diluted earnings were $0.79 a share, compared with $0.45 a year earlier, on average diluted shares of 170 million.
Aerie comparable sales grew 19%, after 25% growth in the first quarter. American Eagle comparable sales decreased 1%, after a 2% decline in the prior quarter. Aerie net revenue was $535.8 million. American Eagle net revenue was $805.9 million. Other net revenue was $38.7 million.
Executive Chairman and Chief Executive Officer Jay Schottenstein said the quarter reflected the value of the AEO Inc. portfolio, led by broad-based momentum at Aerie and OFFLINE, alongside progress at American Eagle. He said American Eagle saw sequential improvement from the first quarter, including a fourth consecutive quarter of growth in men’s, and that the company remains focused on opportunities to drive greater consistency in the women’s business.
Gross profit was $672 million and gross margin expanded to 48.7%. Included in gross profit was a net benefit of $179 million related to tariff refunds, which drove 1,300 basis points of the expansion. Merchandise margins deleveraged 330 basis points, with margin-rate improvement in Aerie offset by American Eagle.
Selling, general and administrative expenses were $408 million, or 29.6% of revenue. Included in SG&A was $18 million, or 130 basis points, of tariff-refund-related incentive compensation, partially offset by tariff refunds received. The remaining increase was primarily driven by planned investments in advertising.
Operating profit included a net benefit of $161 million related to tariff refunds, which drove 1,170 basis points of the operating-margin expansion. Other income of $14 million included a $12 million gain on equity-method investments. Interest expense of $47 million increased due to an agreement related to the sale of certain tariff-refund claims.
During the second quarter, the company received IEEPA tariff refunds of $196 million, including interest. It accrued incremental incentive compensation of $35 million, which impacted both gross profit and SG&A. The net operating-income benefit of tariff refunds was $161 million. The company has received substantially all of the tariff refunds for which it submitted refund claims. It also recorded interest expense of $45 million related to an agreement with a third-party buyer for the sale of certain tariff-refund claims entered into during the prior fiscal year.
Consolidated inventory at cost was up 14%, with units up 9%. The increase in cost includes the impact of incremental tariffs this year, and unit inventory plans will continue to be rebalanced between brands and categories for the remainder of the year.
Consolidated stores ended the quarter at 1,167. The company returned $21 million to shareholders via a quarterly cash dividend of $0.125 a share. Capital expenditures totaled $66 million in the second quarter. The company expects 2026 capital expenditures to be in the range of $250 million to $260 million.
For the third quarter of 2026, the company’s outlook called for mid-to-high single-digit comparable sales, gross margin flat year over year, SG&A up high-single digits, operating income of $110 million to $115 million, and a low-170-million weighted average share count. Fiscal 2026 comparable sales are expected to increase mid single digits, gross margin is expected to be up year over year, and SG&A is expected to be up low-double digits. Depreciation and amortization for the year is expected at approximately $215 million.
Schottenstein said that looking ahead to the second half, the company is committed to building on continued momentum in Aerie and OFFLINE, accelerating improvement at American Eagle, and unlocking greater consistency and profitability across the business.