What Happened?
Shares of young adult apparel retailer American Eagle Outfitters (NYSE: AEO) jumped 28.7% in the morning session after the company reported better-than-expected second-quarter financial results that significantly surpassed analyst estimates.
The apparel retailer announced earnings per share of $0.45, easily clearing the consensus estimate of $0.21. Revenue for the quarter came in at $1.28 billion, also beating expectations of $1.23 billion, though sales were flat compared to the same period last year. The profit beat was driven by stronger-than-expected revenue and gross margins. Crucially, American Eagle issued full-year operating profit guidance that was well above Wall Street's expectations, signaling confidence in its future profitability and providing a major catalyst for the stock's upward move.
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What Is The Market Telling Us
American Eagle’s shares are very volatile and have had 27 moves greater than 5% over the last year. But moves this big are rare even for American Eagle and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 5.1% on the news that the company announced a collaboration with NFL star tight end Travis Kelce. The apparel company is launching a limited-edition product line, “AE x Tru Kolors by Travis Kelce,” in partnership with the athlete's sportswear and lifestyle brand. This collaboration is viewed as a strategic move to deepen the company's connection with Gen Z consumers and enhance its relevance in lifestyle fashion. The announcement generated significant investor optimism, especially as Kelce's public profile has been amplified by his recent engagement to pop star Taylor Swift.
American Eagle is up 5.8% since the beginning of the year, but at $18.12 per share, it is still trading 19.1% below its 52-week high of $22.39 from September 2024. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,409.
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