Sep 9, 2026 earnings call — Aerie momentum and tariff refund impact
Second quarter revenue of $1.4 billion with operating income of $211 million including a net tariff refund benefit of approximately $161 million.
Revenue $1.4B (est $1.4B) · EPS $0.79 (est $0.22)
Key quotes
"We delivered another exceptional quarter. Comparable sales increased 19%, and total revenue grew 25% to $536 million."
"Included in gross profit this year is a net benefit of $179 million related to tariff refunds, which drove 1,300 basis points of the gross margin expansion."
"Merchandise margin deleveraged 330 basis points with improvement in Aerie, offset by markdowns in AE, as we previously guided to for the second quarter."
Analyst Q&A 10
women's denim and Q3 trends
Q (Jay Sole · UBS): The analyst asked for detail on the women's denim business: how it developed in the quarter, sales expectations for Q3, drivers of improvement, and where Aerie stands in Q3 and how both brands are factored into guidance.
A: They said denim showed sequential improvement after a pivot to the fits that work, especially low rise, and that they still need to rebalance inventory from older fits. For Aerie, they said all categories are firing, new launches and intimates are gaining share, apparel is strong, and the sales continuation is reflected in the guidance.
"We needed to pivot, and we pivoted quite nicely into the fits that were working 100%." — Jennifer Foyle (PRESIDENT)
merchandise margin and markdowns
Q (Amanda Douglas · JPMorgan): The analyst asked why merchandise margin improved at Aerie but not at American Eagle, and specifically what markdowns each brand is seeing entering back-to-school.
A: They said AE saw pressure on seasonal ideas and they are rightsizing inventory, with some markdowns carrying into Q3. Aerie balanced promotions well by leveraging newness, growing brand awareness (still only at 59%), and the team has been able to reconstruct promotion activity between the brands.
"But pivoting back, like as we think about the promotional cadence, Aerie has done a really nice job balancing out their promotions, leveraging the newness." — Jennifer Foyle (PRESIDENT)
Q3 comps by brand and incentive accrual
Q (Kelly Crago · BMO): The analyst asked for a brand-level breakout of the Q3 comp guide and quarter-to-date trends for each banner, plus clarification on the tariff refund booking and higher incentive compensation accruals and how that affects the high single-digit SG&A guide and Q4.
A: They said the comp guidance by brand matches quarter-to-date: AE relatively flat (some sequential improvement) and Aerie in the high teens to 20%. They also said second-quarter tariff refunds were booked with related incentive comp; the back-half accrual is more historical/average, and there is no impact in the third and fourth quarter tied to refunds.
"Aerie in the high teens to 20%, again, similar to what we just reported in Q2." — Mike Mathias
drivers of AE negative comp
Q (Jonathan Keypour · Goldman Sachs): The analyst asked what caused the negative comp at American Eagle given strength in men and some bottoms, and whether the inventory rebalancing and promo overhang is from Q1 or also from Q2.
A: They said women's bottoms have improved and other bottoms like pants and cargoes have done very well, but denim still needs balance. For the inventory/promo overhang, they said it is primarily concentrated in seasonal businesses, with shorts being the #1 item and some fashion also needing clearance.
"It's primarily concentrated on some seasonal businesses, shorts being the #1." — Jennifer Foyle (PRESIDENT)
back-to-school timing and channels
Q (Dana Telsey · Telsey Advisory Group): The analyst asked if the later back-to-school timing affected sales, and how stores versus online are performing across traffic, conversion and remodels for each brand.
A: They said they have line of sight through Labor Day and peak back-to-school periods, and the guidance reflects quarter-to-date trends. Aerie is positive across the board with strength in stores and digital and across metrics; AE is flattish with digital stronger and stores on the lower side but improving during peak periods.
"That's still the case that we're seeing quarter-to-date, stores, digital traffic in both channels, AUR, UPT, AOV, customer counts, you name it, all going in the right direction with strength across channels, strength across categories, strength across metrics." — Mike Mathias
holiday assortment and intimates
Q (Jungwon Kim · TD Cowen): The analyst asked about Aerie's holiday product assortment and any changes at American Eagle for holiday, and asked for color on intimates performance and assortment.
A: They said brand health is very positive for both brands; AE is focused on converting customers and driving them to stores, and they expect long legs to build into Q3 and Q4. For Aerie intimates, they said performance is very strong with some market share gain and a clear focus on newness and bra innovation going forward.
"There was some market share gain, and we're really focused on newness in bras as we move forward." — Jennifer Foyle (PRESIDENT)
closing Aerie awareness gap and BOW
Q (Angus Kelleher-Ferguson · Barclays): The analyst asked how management will close Aerie's brand awareness gap (59%) and how much back-half ad spend targets awareness versus performance marketing. They also asked about buying and occupancy (BOW) leverage and distribution or occupancy costs and whether leverage returns in the back half.
A: They said they will not disclose ad spend contribution, but the goal is to reach or exceed the brand awareness seen elsewhere in the portfolio and teams are using in-store events, optimized digital spend, advocacy programs, and higher spend per customer. On BOW, they said results in Q3 and Q4 should be similar to Q2 with ongoing cross-functional work on rent, delivery and distribution costs.
"Our goal is to get it at least equal, if not exceed the brand awareness that we see in our portfolio." — Jennifer Foyle (PRESIDENT)
gross margin puts and takes
Q (Rakesh Patel · Raymond James): The analyst asked for more detail on gross margin drivers for Q3 and whether inventory cleanup will finish in Q3 or spill into Q4, and how Q4 plans differ.
A: They said Aerie's strong merch margin performance should continue while AE shows definite improvement but has placeholder markdowns to cover inventory balancing. They noted potential freight/fuel surcharge impacts are covered, Q3 tariff impact is negligible versus last year, and Q4 could see a little upside or downside depending on tariff developments, with modest improvement in the fourth-quarter guide.
"So I think in general, we're looking for Aerie's continued strong performance, on the merch margin line to continue." — Mike Mathias
refunds, guidance trim, and AE KPIs
Q (Alexandra Straton · Morgan Stanley): The analyst asked whether the slight trimming of full-year EBIT guidance is due to higher incentive accruals from refunds or changes in SG&A or gross margin, and then asked what KPIs will drive AE's return to positive.
A: They said the #1 driver of the trim is shifting AE from an expected low single-digit positive to flat for the back half, combined with some markdown placeholders; SG&A is roughly in line. For AE to return to positive, they focus on traffic, product strategies, conversion, and rebalanced marketing toward performance, with teams building on sequential improvement into holiday and next year.
"I'd say the #1 driver of that, if you remember the color -- or expectation was AE to be up like low positive -- or low single-digit positive. We're giving flat guidance for the balance of the year, so that's a piece of it." — Mike Mathias
Aerie bras, matchback sets, and sexy look
Q (Marni Shapiro · The Retail Tracker): The analyst asked if the sexier bra styles and sheer bras represent a shift for Aerie and if the customer is buying matchback sets that lift baskets, and whether that sexier look can be carried to AE without losing its DNA.
A: They said all bras are working, sets are selling and they are linking bras back to apparel; innovation and new laces are planned and matchback is an opportunity. On the sexier look, they said yes it can be done but it must be 'sexy' in their way, keeping it cool and understandable for their customer base.
"But I think there's ways to do it that can be cool and understandable for our customer base." — Jennifer Foyle (PRESIDENT)