Here's Why American Eagle Stock Looks Like a Buy Option Right Now

American Eagle Outfitters, Inc. AEO, a multi-brand specialty retailer with a presence in the U.S. and international markets, is gaining traction from steady progress under its Powering Profitable Growth Plan. Targeted investments in digital capabilities, automation and supply chain diversification, along with Aerie’s sustained momentum, category expansion and fresh assortments, are supporting growth. At the same time, disciplined cost management is helping enhance profitability and strengthen the company’s operating model.

Let’s examine why AEO stock appears to be a buy at the moment.

Strong Performance, Brand Collaborations & Cost Efficiency

American Eagle is showing clear signs of a turnaround, supported by strengthening demand trends, brand momentum and improving execution across its portfolio. Management highlighted a meaningful inflection in performance in the third quarter of fiscal 2025, driven by decisive actions in merchandising, marketing and operations. American Eagle reported a solid performance in third-quarter fiscal 2025, with total revenue rising 6% year over year.

The standout remains Aerie and Offline, which delivered double-digit comparable sales growth, supported by broad-based demand across categories such as intimates, apparel, sleep and activewear. Management emphasized that growth accelerated throughout the quarter and continued into the fiscal fourth quarter, underscoring strong brand relevance and a sizable long-term runway, given Aerie’s relatively low market penetration. Importantly, customer acquisition and traffic improved across channels, particularly digital, reflecting the effectiveness of increased marketing investments.

The core American Eagle brand is also stabilizing. Comparable sales returned to positive territory, with growth of 1%, led by strength in denim and improving trends in men’s categories. Better in-stocks, trend-right assortments and high-impact collaborations helped drive sequential improvement, suggesting the brand reset is gaining traction.

From a financial standpoint, AEO delivered an operating income of $113 million, exceeding management’s guidance of $95–$100 million, benefiting from disciplined cost control and improving expense leverage, even as it absorbed $20 million of tariff-related pressures. Management raised its fiscal fourth-quarter outlook, citing strong holiday momentum and healthy inventory positioning. Recent marketing collaborations with Sydney Sweeney, Travis Kelce, and Martha Stewart are expected to prove highly effective, generating more than 44 billion impressions, driving higher customer counts across brands, and contributing to a 4% increase in customer loyalty.

Cost management also supported results, as the company leveraged buying, occupancy, and warehousing expenses by 20 basis points and benefited from lower non-tariff and freight costs. These efficiencies helped offset tariff pressures and enabled operating income to surpass expectations.

The Zacks Rundown for AEO

AEO’s shares gained 181% in the past six months compared with the industry’s rise of 15%. AEO sports a Zacks Rank #1 (Strong Buy).

From a valuation standpoint, AEO trades at a forward price-to-earnings ratio of 18.01X, higher than the industry’s average 16.78X.

Other Stocks to Consider

Some other top-ranked stocks have been discussed below:

Five Below, Inc. FIVE operates as a specialty value retailer in the United States. At present, Five Below sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies growth of 19.6% and 15.9%, respectively, from the year-ago figures. ULTA delivered a trailing four-quarter earnings surprise of 62.1%, on average.

Ulta Beauty, Inc. ULTA operates as a specialty beauty retailer in the United States, Mexico, and Kuwait. At present, Ulta Beauty flaunts a Zacks Rank of 1.

The Zacks Consensus Estimate for ULTA’s current fiscal-year sales and earnings implies growth of 8.7% and 0.7%, respectively, from the year-ago figures. ULTA delivered a trailing four-quarter earnings surprise of 15.7%, on average.

Victoria’s Secret & Co. VSCO operates as a specialty retailer of women's intimate apparel and other apparel and beauty products worldwide. At present, VSCO sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Victoria's Secret’s current fiscal-year sales indicates growth of 4.2% and earnings indicate a decline of 2.2% from the year-ago figures. BOOT delivered a trailing four-quarter earnings surprise of 55.5%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research