Aerie's 11% Surge Leads Record Q3 Revenue for AEO as Guidance Climbs Again
Double-Digit Growth at Aerie Powers Record Quarter and Outlook Upgrades
American Eagle Outfitters (AEO) delivered its highest-ever third quarter revenue, reporting $1.36 billion—a 6% year-over-year gain—on the back of strong comparable sales at both Aerie (+11%) and American Eagle (+1%). With demand momentum continuing into the fourth quarter, management raised guidance for operating income and revenue, underscoring confidence in both core brands as the crucial holiday period ramps up.
Momentum from Q3: Broad-Based Sales Gains and Key Financial Highlights
| Financial Metric | Q3 2025 | Q3 2024 | YoY Change |
|---|---|---|---|
| Total Net Revenue | $1.36B | $1.29B | +6% |
| Gross Profit | $551.88M (40.5% margin) | $526.62M (40.9% margin) | +5% |
| Operating Income | $112.57M (8.3% margin) | $106.09M (8.2% margin) | +6% |
| Diluted EPS | $0.53 | $0.41 | +29% |
| Aerie Comp Sales | +11% | N/A | - |
| American Eagle Comp Sales | +1% | N/A | - |
Although gross margin ticked down 40 basis points to 40.5%, this was mainly attributed to higher tariffs (150bps net impact), which were partially offset by freight savings and lower costs elsewhere. AEO continues to reinvest in marketing and advertising, evidenced by a 10% jump in SG&A spend.
Aerie Growth Stands Out Among Brand Segments
| Brand | Q3 Revenue (in millions) | YoY Change | 39 Weeks Revenue |
|---|---|---|---|
| American Eagle | $853.73 | +2.6% | $2,348.00 |
| Aerie | $461.99 | +12.5% | $1,250.86 |
Aerie continues to be the standout performer in the portfolio, posting its fifth straight quarter of double-digit comp gains and now representing a growing share of total revenue. The brand's momentum, including offline channel growth and robust holiday demand so far, positions it as a key profit driver going forward.
Inventory and Capital: Positioned for Continued Demand
Total inventory rose 11% year-over-year to $891 million, with units up 8%. This increase reflects management’s expectations for stronger demand, the opening of new stores, and improved in-stock levels ahead of the busy holiday season. The cost impact from tariffs is still evident, but proactive steps to lower freight costs and refine supply chain execution have softened the margin headwinds.
| Metric | Q3 2025 | YTD 2025 |
|---|---|---|
| Ending Inventory | $891M | +11% YoY |
| Store Count | 1,190 | +5 Net YTD |
| Share Repurchases | N/A in Q3 | $231M YTD |
| Dividends | $21M in Q3 | $64M YTD |
| CapEx | $70M in Q3 | $202M YTD |
Guidance Boosts and What to Watch Heading Into Year-End
| Metric | Previous Q4 2025 Guidance | Updated Q4 2025 Guidance |
|---|---|---|
| Comparable Sales | Low single digits | +8% to +9% |
| Operating Income | $125–$130M | $155–$160M |
| Adjusted Full-Year Operating Income | $255–$265M | $303–$308M |
The raised outlook reflects broad-based strength, a successful start to the holiday season (including record Thanksgiving sales), and a more constructive environment for inventory management. While gross margin faces pressure from tariffs and markdowns, management’s execution on merchandising, operations, and digital strategy is paying off.
Bottom Line: Can AEO Keep the Streak Alive?
With Aerie continuing to outperform, a strong capital base, and improving demand into Q4, AEO looks poised to extend its positive trend into 2026. Investors will be watching for sustained growth at both brands, margin resilience amid ongoing tariff and promotional pressures, and whether consumer demand holds up as the macro environment shifts.
While challenges remain, including inflation and competition, AEO’s playbook for holiday and beyond seems on track for now. The company’s conference call this afternoon and detailed supplemental disclosures on their website may offer further color on inventory, omnichannel strategy, and potential international opportunities.
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