American Eagle Outfitters shares fell 15.4% in the afternoon session even after the young adult apparel retailer reported strong second-quarter results and raised its full-year outlook. Second-quarter revenue was $1.38 billion, up 8% year over year, with comparable sales up 6%, while diluted EPS of $0.79 exceeded Wall Street's $0.22 estimate and operating margin expanded to 15.3% from 8.0%. Aerie and OFFLINE drove the strength, with combined revenue up 25% and comparable sales up 19%, though American Eagle comparable sales fell 1%, and much of the profit improvement came from a $161 million net operating-income benefit from tariff refunds. Management guided for third-quarter gross margin to be roughly flat year over year and raised full-year operating income guidance to $540 million to $550 million, including the refund benefit. Investors instead focused on the namesake brand's weakness and the margin outlook, with Reuters reporting shares fell roughly 10% after the release and about 11% the following session, while the August Producer Price Index rose 5.4% year over year and crude oil climbed back above $100 a barrel, lifting freight costs and leaving shoppers with less to spend on apparel.
American Eagle Outfitters IncDespite strong Q2 results and raised guidance, investors focused on the namesake brand's 1% comparable sales decline and flat Q3 margin outlook, sending shares down 15.4%.
