American Eagle Outfitters shares tumbled more than 11% in premarket trading on Thursday after the company released second-quarter fiscal 2026 results and updated full-year guidance. Net revenue increased 8% to $1.38 billion and total comparable sales rose 6%. Aerie and OFFLINE delivered standout performance with 25% revenue growth and 19% comparable-sales gains, while the American Eagle brand posted a 1% comps decline.
Gross margin expanded dramatically to 48.7%, up 980 basis points, largely because of a $161–179 million net benefit from tariff refunds. Operating income reached $211 million. Management raised full-year operating-income guidance to a range of $540 million to $550 million, well above the prior $390–410 million outlook that had not fully incorporated the refund windfall.
Despite the higher full-year number, the market reacted negatively to third-quarter commentary. Comparable sales are expected to grow in the mid- to high-single digits, with Aerie remaining strong and American Eagle roughly flat. Gross margin is projected to be unchanged year-over-year and operating income is guided to $110–115 million. Investors interpreted the margin outlook and continued softness in the core American Eagle brand as signs that underlying profitability momentum may be less robust once one-time tariff benefits fade.
The stock’s sharp decline adds to pressure on the consumer-discretionary sector already facing higher energy costs and rising interest rates. Retail peers will be watched closely for similar margin commentary as tariff and input-cost dynamics continue to shape second-half expectations.