American Eagle Outfitters, Inc. Q3 FY2025 earnings call

• Jay highlighted the trend change across brands due to merchandising, marketing, and operational steps, with record revenue in Q3 and strong momentum into Q4. Aerie and Offline are generating exceptional growth.
• Jen discussed Aerie's record revenue with 11% comp growth across all categories, including strength in intimates, apparel, sleep, and Offline. American Eagle showed improvement with better in-stocks and new product flows.
• Mike mentioned consolidated revenue growth, controlled costs, managed promotions, and navigated tariffs. Inventory was up, and store upgrades were ongoing with plans to open Aerie and Offline stores and remodel AE stores.

Total revenue for the third quarter was $1.4 billion, a record. Aerie had record revenue with third-quarter comps up 11%, fueled by strength across all categories including intimates, apparel, sleep, and Offline. American Eagle had a 1% comp growth, with strength in jeans and improved men's business. Aerie contributed significantly with its 11% comp growth, accounting for a notable portion of the revenue growth, while American Eagle's 1% growth marked a sequential improvement.

• Raised fourth-quarter operating income guidance to $155 million to $160 million based on 8% to 9% comp sales growth.
• Expect comp sales growth of 8% to 9% in Q4, with Aerie expected to be in the high teens and AE in the low to mid-single digits.
• Continued to expect CapEx of approximately $275 million for the year, including a one-time spend for relocating the New York design center.

• Tariff impact, as seen with about $20 million net impact in Q3, and potential future tariff changes.
• Dynamic macro environment which could impact sales and profitability.

Q: Jay Sole asked about the acceleration in Q4 and denim silhouettes.

A: Mike Mathias said 8% to 9% comp includes nice improvements for both brands, with AE in low to mid-single digits and Aerie in high teens. Jennifer Foyle said denim has been strong, with silhouettes changing and team testing and scaling.

Q: Matthew Boss asked about Aerie's same-store sales drivers and customer acquisition.

A: Jennifer Foyle said Aerie pivoted strategy, core competencies accelerated, new categories like sleep are doing well, and customer acquisition is strong with new campaigns.

Q: Matthew Boss also asked about markdowns and inventory.

A: Mike Mathias said inventory is well-positioned, markdowns expected to be similar to Q3, and gross margin levers remain with offsets.

Q: Paul Lejuez asked about marketing campaigns and tariff impact.

A: Jennifer Foyle said marketing campaigns have halo effect, Jay Schottenstein mentioned loyalty members. Mike Mathias discussed tariff impact and pricing strategy.

Q: Jonah Kim asked about customer acquisition and retention.

A: Jennifer Foyle said customer file is stronger, retention strategies are in place, and marketing leverages brand platforms.

Q: Rick Patel asked about AUR and inventory.

A: Mike Mathias said AUR expected to be relatively flat in Q4, inventory in line with sales.

Q: Chris Nardone asked about store fleets and Aerie comps.

A: Mike Mathias said AE closing 35 stores, Aerie and Offline opening 40-50 stores. Jennifer Foyle said Aerie comps running above high teens, digital ahead of stores.

Q: Alexandra Straton asked about marketing expense and medium-term outlook.

A: Mike Mathias said marketing expense reset to mid-fours, expecting 5% rate next year. Jay Schottenstein and Jennifer Foyle discussed future marketing tricks.

Q: Janet Kloppenburg asked about product chasing and buying occupancy.

A: Jennifer Foyle said product chasing in women's denim, Mike Mathias said 20 basis points leverage in Q3 and SG&A leverage in Q4.

Q: Janine Stitcher asked about product chasing and pricing.

A: Jennifer Foyle said product chasing in women's denim, Mike Mathias said AUR flat, no passing tariffs to consumers.

Q: Corey Tarlowe asked about SG&A and Aerie momentum.

A: Mike Mathias said SG&A to have continued investment in advertising, Jennifer Foyle said Aerie has momentum with product and marketing.