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American Eagle has gained publicity recently for some celebrity collaborations.
It's feeling pressure in sales, but it's doing a good job of managing expenses.
American Eagle stock trades at a reasonable price.
American Eagle Outfitters (NYSE: AEO) is one of the most popular clothing brands around these days. With many of its products aimed at the teen and young adult market, its broader mission is to lean into youthful trends that might also be popular with the population at large.
It has reported a mixed performance over the years, and its stock has more or less reflected that. Let's take a look at what's happening now and how the stock has rewarded shareholders.
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Image source: American Eagle Outfitters.
2025 has been a relatively tough time for many consumer discretionary companies. Simply put, there's not a whole lot of discretionary income for much of the U.S. population as inflation is once again rising. Shoppers of late seem to be focusing on essentials and cheaper items. American Eagle considers its products to be low-priced, and they are when compared with luxury brands. But an extra pair of jeans is still extra.
In the 2025 fiscal second quarter (ended Aug. 2), sales and comparable sales (comps) both decreased 1% from last year. Even Aerie, the company's women's intimate apparel and loungewear brand, which has been a strong growth driver, is feeling the pressure, and Aerie comps were down 3%.
The company has been careful about costs in this climate, and gross margin expanded 0.3 percentage points to 38.9%, while operating margin expanded 0.2 percentage points to 8%.
American Eagle gained publicity over the past few months for what ended up being a controversial marketing campaign featuring actress Sydney Sweeney, as well as for a collaboration with football star and Taylor Swift's fiancé, Travis Kelce. These marketing moves did end up having a positive impact on sales.
American Eagle is one of the most popular clothing brands in the U.S., but its stock hasn't been quite as popular, especially compared to the S&P 500.
| Stock/Index | 1-year returns | 3-year returns | 5-year returns |
|---|---|---|---|
| American Eagle Outfitters | 13% | 32% | 24% |
| S&P 500 | 13.8% | 74% | 99% |
Data source: Ycharts. Note: Data is as of Nov. 25.
These are total returns, which include dividends (American Eagle's dividend yields 2.7% at the current price).
American Eagle stock trades at 18 times trailing-12-month earnings, which is about its average over the past few years and looks reasonable. American Eagle isn't a growth stock, and investors should understand that going in. But if you're looking for a value stock with an above-average dividend yield, American Eagle could be a valuable stock to hold over a long period of time.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.
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