AEO Stock’s 6-Month Performance
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In the same period, American Eagle has trailed the performance of Tapestry, Inc. (TPR - Free Report) , Fossil Group, Inc. (FOSL - Free Report) and Urban Outfitters, Inc. (URBN - Free Report) . Shares of TPR and FOSL have gained 11.6% and 11%, respectively, in the past six months, while shares of URBN have lost 6.6%.
AEO’s Share Price Performance VS Peers
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AEO Stock Falls on Rising Costs & Macroeconomic UncertaintyAmerican Eagle faces several near-term headwinds stemming from a challenging macroeconomic environment, rising operating costs and tariff-related uncertainty. The company continued to experience cost pressures in the first quarter of fiscal 2026, with SG&A expenses increasing 11% due to planned advertising investments. Interest expense also increased following a transaction involving the sale of a portion of its tariff claims.
Looking ahead, management expects growth of the SG&A expenses to accelerate to the mid-teens in the fiscal second quarter, primarily due to continued advertising investments, which are likely to keep operating expenses elevated in the near term.
Product-related challenges also weighed on performance in the quarter. Management highlighted that women’s bottoms, particularly denim, underperformed expectations and were the primary contributor to the decline in American Eagle sales. Performance was affected by the need to refine the product assortment toward more relevant styles and fits, while a colder-than-normal spring reduced demand across several seasonal categories. Although these factors pressured results, management remains focused on improving execution and enhancing product productivity in areas within its control.
The company is also facing meaningful cost pressures from import tariffs. For the fiscal second quarter, American Eagle expects an incremental tariff headwind of approximately $20 million compared with the prior year. The planned tariff rate on imports is expected to remain at 10% in the fiscal second quarter before increasing to 15% for the remainder of the year, creating an additional drag on profitability.
More broadly, management noted that the retail environment remains highly dynamic and continues to be shaped by macroeconomic uncertainty. Softer consumer demand in women's bottoms, tariff-related cost inflation and unfavorable seasonal conditions contributed to a more challenging operating environment in the first quarter and are expected to remain near-term headwinds.
American Eagle Invests in Marketing, Digital and Brand PartnershipsDespite near-term challenges, American Eagle continues to benefit from several long-term growth drivers that support customer engagement, traffic and brand visibility. The company remains committed to investing in its brands and operational capabilities where it expects the highest returns. As part of this strategy, AEO opened its West Coast distribution center in Phoenix in early May to further optimize its supply chain and improve inventory placement. Management believes the new facility will enhance product availability while giving customers greater flexibility in how and when they receive their purchases.
The company has also successfully shifted away from broad-based promotional activity toward a more disciplined commercial strategy focused on profitable growth. Management emphasized that this approach prioritizes higher-margin sales and more targeted promotions rather than widespread discounting. By improving promotional discipline, AEO aims to enhance the quality of revenue while building a more sustainable, margin-focused operating model.
Customer engagement remains strong, supported by American Eagle’s marketing initiatives and strategic brand partnerships. The company’s customer file expanded to more than 19 million, representing 3% year-over-year growth, reflecting continued brand relevance and customer loyalty. Digital innovation and social commerce also remain key priorities.
AEO recently launched a dedicated TikTok Shop and the AE Creator Community to engage its core demographic through more authentic and timely content. In addition, the company is reallocating marketing investments toward digital media, performance marketing and influencer partnerships to drive higher-converting traffic and shift its focus from broad brand awareness to customer conversion.
How Have Estimates Shaped Up for AEO?The Zacks Consensus Estimate for AEO’s current quarter and the current year earnings per share has remained unchanged at 21 cents and $1.77, respectively, in the past seven days.
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American Eagle is currently trading at a forward 12-month P/E multiple of 9.43X, lower than the industry average of 14.68X and well below the S&P 500 multiple of 21.13X. The stock is also trading below its 12-month median P/E of 12.29X, reflecting potential undervaluation.
American Eagle’s Valuation Picture
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How to Play AEO Stock?American Eagle is navigating macroeconomic challenges, tariff-related uncertainty and rising cost pressures, which may temper near-term performance. However, the company continues to benefit from digital innovation and strategic collaborations, which provide additional avenues for long-term growth. Given the balance between near-term headwinds and long-term growth opportunities, investors may prefer to remain on the sidelines until there is greater visibility into the pace of growth.
At present, AEO carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.