AEO 2026 회계연도 2분기 실적발표 컨퍼런스콜: 에어리의 성장이 실적 및 전망 견인

핵심 요약

• AEO Inc.는 2026 회계연도 2분기 매출이 전년 동기 대비 8% 증가한 14억 달러를 기록했으며, 동일 매장 매출 성장률은 6%를 나타냈다고 발표했습니다.
• 에어리(Aerie)와 오프라인(OFFLINE)이 주요 성장 동력 역할을 지속했습니다. 의류, 언더웨어, 액티브웨어 전반의 호조로 매출은 25% 증가한 5억 3,600만 달러를 기록했고, 동일 매장 매출은 19% 늘었습니다.
• 아메리칸 이글(American Eagle) 매출은 1% 증가했으나 동일 매장 매출은 1% 감소했습니다. 남성복은 4분기 연속 동일 매장 매출 플러스 성장을 기록했으며, 여성 데님은 전분기 대비 개선된 흐름을 보였습니다.
• 영업이익은 관세 환급에 따른 순이익 1억 6,100만 달러를 포함해 2억 1,100만 달러를 기록했습니다. 매출총이익률 역시 관세 환급 수혜에 힘입어 980bp 확대된 48.7%를 나타냈습니다.
• 경영진은 3분기 동일 매장 매출이 한 자릿수 중후반대 증가율을 기록할 것으로 예상하고 있습니다. 브랜드별로는 에어리와 오프라인이 10%대 후반에서 20% 수준 증가하고, 아메리칸 이글은 보합세를 보일 것으로 전망했습니다.
• 연간 연결 동일 매장 매출 성장률이 한 자릿수 중반대를 기록할 것이라는 전제 하에, 연간 영업이익은 5억 4,000만 달러에서 5억 5,000만 달러로 전망됩니다.

주요 재무 실적

사업 및 영업 성과

에어리 및 오프라인

에어리와 오프라인은 오프라인 매장, 디지털 채널, 전 제품 카테고리에 걸쳐 광범위한 성장을 기록했습니다. 총매출은 25% 증가한 5억 3,600만 달러를 나타냈으며, 동일 매장 매출은 19% 늘었습니다.

핵심 의류, 언더웨어, 액티브웨어 부문의 수요가 견조했습니다. 경영진은 티셔츠, 탱크톱, 플리스, 하의류, 오프라인의 '클라우드 플리스(Cloud Fleece)' 라인업, 스포츠 브라 및 액티브 하의류의 성장 모멘텀을 강조했습니다. 아울러 '플로트(Float)' 브라 컬렉션은 기존 에어리의 와이어/형성 브라 제품군에 가벼운 착용감의 선택지를 추가했습니다.

에어리의 고객층 확장이 이어졌습니다. 해당 분기 중 서포터즈 프로그램 규모를 두 배 가까이 확대했으며, 고객당 지출액은 두 자릿수 증가율을 보였습니다. 경영진은 에어리의 브랜드 인지도(약 59%)가 아메리칸 이글(약 76%) 대비 낮아, 신규 고객 확보의 여지가 여전히 크다고 밝혔습니다.

아메리칸 이글

아메리칸 이글 매출은 1% 증가한 반면 동일 매장 매출은 1% 감소했으나, 1분기 대비 개선된 모습을 보였습니다. 남성복은 하의 카테고리 전반의 호조에 힘입어 4분기 연속 동일 매장 매출 플러스 성장을 기록했습니다.

카고 스타일을 포함한 여성 패션 하의류가 긍정적인 성과를 냈습니다. 와이드 레그 스트레이트, 로우라이즈 등 신규 데님 핏이 좋은 반응을 얻었으나, 기존 핏의 재고 비중을 조정하고 일부 계절 상품을 소진하는 작업이 지속되고 있습니다. 특히 반바지(쇼츠) 제품군이 계절 재고 부담이 가장 큰 분야로 지목되었습니다.

AEO는 아메리칸 이글의 마케팅 집행 방향을 브랜드 인지도 제고 캠페인에서 구매 전환을 유도하는 디지털 및 퍼포먼스 마케팅 중심으로 전환하고 있습니다. 경영진은 브랜드 회복의 핵심 지표로 매장 방문객 수(트래픽)와 구매 전환율에 집중하고 있습니다.

경영진 가이던스

경영진은 분기 초 이후 현재까지의 추세가 3분기 브랜드 가이던스와 부합한다고 밝혔습니다. 에어리는 견조한 상품 마진을 유지할 것으로 예상되는 반면, 아메리칸 이글의 마진 실적은 상반기 대비 개선되겠으나 재고 조정을 위한 가격 할인(마크다운) 충당금이 지속적으로 반영될 예정입니다.

4분기의 경우, 경영진은 현재 추정치를 바탕으로 매출총이익률이 소폭 개선될 것으로 예상하고 있습니다. 이 전망에는 6월 말 시행된 무역법 301조 관세율이 반영되어 있습니다.

리스크 및 관전 포인트

• 아메리칸 이글은 계절 재고 및 일부 패션 제품의 할인 판매(마크다운) 압박을 지속적으로 받고 있습니다.
• 경영진은 아메리칸 이글의 하반기 동일 매장 매출 성장률 전망치를 기존 '한 자릿수 초반대 성장'에서 '보합 수준'으로 하향 조정했습니다.
• 재고 수량이 9% 증가한 것에 비해 재고자산 금액은 14% 증가했으며, 이는 부분적으로 관세 인상분이 반영된 결과입니다.
• 회사는 유가 변동성에 따른 불확실성을 지적하며, 운임 및 유류할증료 발생 가능성에 대한 충당금을 반영했습니다.
• 4분기 관세 비용은 회사의 현재 전제치인 12.5%를 초과하여 관세율이 인상될 경우 변동될 수 있습니다.
• 에어리의 가파른 성장은 매출 믹스 효과를 유발하여 동일 매장 매출 성장 대비 연결 이익 증가를 제한할 수 있습니다.

애널리스트 Q&A 주요 내용

• 아메리칸 이글 데님: 경영진은 로우라이즈 및 기타 패션 핏으로 라인업을 전환함에 따라 여성 데님 매출이 전분기 대비 개선되었다고 밝혔습니다. 다만 기존 핏과 계절 재고 소진 작업은 여전히 필요한 상황입니다.
• 에어리 모멘텀: 분기 초 이후 동일 매장 매출은 10%대 후반에서 20% 수준을 유지했습니다. 경영진은 의류, 언더웨어, 액티브웨어는 물론 오프라인 매장과 디지털 채널 전반에서의 호조세를 언급했습니다.
• 채널별 동향: 에어리는 오프라인 매장과 온라인 채널 모두에서 양호한 실적을 기록했습니다. 아메리칸 이글의 경우 온라인 채널의 호조가 지속되었으며, 오프라인 매장은 2분기 대비 개선되었으나 브랜드 평균 수준에는 미치지 못했습니다.
• 마진 전망: 에어리는 견조한 상품 마진 실적을 유지했습니다. 아메리칸 이글의 3분기 전망에는 마크다운 충당금이 포함되어 있으며, 구매 및 임차 비용은 2분기와 유사한 수준을 나타낼 것으로 예상됩니다.
• 아메리칸 이글의 성장 재개 방안: 경영진은 제품 전략, 매장 방문객 수, 구매 전환율 및 퍼포먼스 마케팅을 핵심 영업 우선과제로 꼽았습니다. 재고는 새로운 트렌드에 유연하게 대응할 수 있도록 신중하게 기획될 예정입니다.
• 에어리 언더웨어의 기회 요인: 경영진은 추가적인 브라 제품 혁신을 계획하고 있으며, 고객에게 완성도 높은 스타일링을 제안할 수 있는 세트 상품 및 매칭 의류의 성장 잠재력을 높게 평가하고 있습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good afternoon everyone. Welcome to the AEO Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Alexis Tragos, Vice President of Corporate Communications. Please go ahead.

Alexis Tragos

Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Jen Foyle, President, Executive Creative Director for American Eagle and Aerie; Ravi Thanawala, Chief Financial Officer; and Mike Mathias, Strategic Adviser.

Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You can find our second quarter investor presentation on our corporate website at www.aeo-inc.com in the Investor Relations section.

Now I'll turn the call over to Jay.

Jay Schottenstein

Thanks, Alexis, and good afternoon, everyone. The second quarter represented another important step forward for AEO. We built on the strength of our portfolio, making progress at American Eagle while Aerie continues to deliver outstanding performance. The second quarter came in at the high end of our expectations, with revenue of $1.4 billion and comparable sales growth of 6%. Operating income of $211 million included a net tariff refund benefit of approximately $161 million.

We remain focused on driving stronger profitability across the business and these results underscore the strength and relevance of our brands and the progress against our priorities. At Aerie, which includes off-line, momentum continued. Aerie delivered revenue of 25% total growth and comparable sales grew 19%, reflecting the broad-based demand across categories and channels. We remain confident in the long-term opportunity for Aerie and our ability to reach new customers.

Turning to American Eagle. Total revenue grew 1% with comps declining 1%. The an improvement from the first quarter. AE men's posted its fourth consecutive quarter of positive comps, signaling continued traction and relevance. We are moving in the right direction, yet there remains work to do. Our progress is fueled by our people. I'd like to extend my gratitude to our associates for their relentless dedication and commitment to our brands and customers.

Before I turn it over to Ravi, I want to take a moment to thank Mike for his many years of service to AEO. Mike has been and will continue to be a trusted partner to me and I'm greater leadership his commitment in the many contributions he has made to our business over the years. I'm also very pleased to welcome Ravi to the team. He brings comprehensive financial and operating expertise a fresh perspective and a deep understanding of what drives long-term shareholder value. As we look at the opportunities ahead, I'm excited about the breadth of our experience and judgment he brings to the team as we work together to make AE a stronger, more productive business over time.

Now I'll turn the call over to Ravi.

Ravi Thanawala

Thank you, Jay. I'm excited to step into the CFO role. I've been at AEO for just a few weeks, so I'm spending a great deal of time listening, learning and getting to know the business and team. What I try to mean to AEO was the strength of the brands, the connection to its customers and the opportunity I see to create meaningful long-term value for shareholders. I'll be focused on driving durable value creation by connecting brand growth with disciplined execution, stronger profitability and the thoughtful allocation of resources. Those are the areas where I'm spending time on with Jay and the leadership team as I get deeper into the business.

It's still early, and I want to be thoughtful about drawing conclusions. However, I'm excited by the opportunity I see at AEO and look forward to sharing more about my perspective and priorities over time. I also wanted to thank Mike and the entire finance team for the support they have given me to redistribution. Mike has been extremely generous with his time and his knowledge of AEO, and I'm grateful to have the benefit of his experience and perspective. Given how recently I joined the company, Mike will be taking you through the details of the second quarter results and the outlook. I have spent considerable time with Mike and team reviewing the outlook and the assumptions supporting it. I'm comfortable with the company's expectations for the balance of the year.

Now I'd like to turn the call over to Jen.

Jennifer Foyle

Thank you, Ravi, and good afternoon, everyone. Before I get into the brand details, I want to share my appreciation to our entire organization. Their passion for our brands, our products and our customers shows every day, and I'm proud of the work they are doing. Aerie and OFFLINE delivered another outstanding quarter with broad strength across the business and tremendous response from our customers. At American Eagle, we made progress during the first quarter with continued strength in men's. There's still work to do, and I'm encouraged by the opportunity ahead.

Turning first to Aerie and OFFLINE. We delivered another exceptional quarter Comparable sales increased 19% and total revenue grew 25% to $536 million. What I'm most excited about is the breadth and quality of that growth. We saw strength across channels and categories with growth in core apparel, intimates and activewear. There was a consistent demand in aerie, apparel in teas, tanks, fleece and bottoms. Head-to-toe outfitting curated monthly drops, sleep to street and wear now fabrications resonated with our customers, mix and match, summer brights, strikes and a little leopard all words.

We are also pleased with continued growth in OFFLINE's cloud lease franchise, sports roads and incredibly strong results across bottoms. I love seeing this breadth because it tells us the customers responding to the complete lifestyle offering, not just one category or one trend. Our core intimates business also remained strong throughout the quarter. we continue to win with what Aerie has stood for from the beginning, Real Comfort. Customers responded to our focus on fabrication and the 20 years of Happy Body's anniversary campaign. In July, we also introduced our new float bra collection designed for waitless feel, Float complements our structured bra franchise and gives customers a new way to experience Aerie's signature comfort.

Our customer base continues to grow. We are expanding the Aerie community and deepening their engagement with us. Our Aerie real makers continue to be an important part of that connection. Across the quarter, we nearly doubled the size of the ADVOCATE program and found fresh new ways to bring new customers to the brand and engage them. As we move into the third quarter, we are doing something I love to see we are comping the comp. We are sustaining growth against increasingly strong comparisons and seeing strength across categories while continuing to expand our customer base.

So now turning to American Eagle. We are seeing steady traction as we actively work to refine our strategies. We delivered sequential improvement from the first quarter, yet there is opportunity to build on our progress and further accelerate our performance. Men's continues to deliver as we posted our fourth consecutive quarter of positive comps. Growth was driven by strength across all bottoms categories with tops continuing to meet our expectations. This demonstrates that our focus and strategies to restore top line growth in the AE men's business is paying off.

In women's, customers responded well to our focus on outfitting particularly pairing tiny tops with oversized bottoms. We leaned into the cargo trend and fashion bottoms performed positively. In women's denim, new fashion fits, including wide leg straight and low rise gained strong acceptance. And moving forward, we recognize where there is still opportunity to restore consistent growth across categories. AE's brand awareness and cultural significance remains strong. and the active customer file continues to grow.

Our marketing strategies are built on multiple touch points, tapping into differing interests, rituals and experiences. We have strategically invested in our presence at the mall as a place to shop, gather and connect on campus with our sorority partners to own a stake in Rush talk and in sports on the biggest stage of the year with global brand ambassador, Lamine Yamal. We spent the last 4 quarters investing in brand awareness to drive purchase consideration and now we are shifting our marketing dollars into conversion driving tactics. Ultimately, this is about showing up for our customers during their biggest moments, building their wardrobes while building our community.

And looking ahead to the second half of this year, our strategic priorities across AEO are clear: deliver best-in-class products, maintain our investment in marketing tactics that drive conversion remain focused on our inventory management and improved margin health. We are also making strategic investments in product and marketing as we build towards AEO's 50th anniversary in 2027. We entered the third quarter with momentum in Aerie and OFFLINE, a game plan to make clear improvements in American Eagle and a highly engaged customer community across all brands. And I'm excited about what the brands can accomplish together.

Aerie's consistent growth, the opportunity we see in off-line and American Eagle deep customer relationships give us multiple ways to serve our customers across more categories, occasions and moments in their lives. Each brand has its own identity and distinct opportunities. Together, they give AEO springboard to grow. We have talented teams across our stores, distribution centers and corporate offices bringing these brands to life every day, and I have tremendous confidence in what we can achieve together. Thank you, all of our associates for all of your hard work.

With that, I'll turn the call over to Mike.

Mike Mathias

Thanks, Jen, and good afternoon, everyone. Driven by strong momentum across Aerie, our second quarter revenue and operating income hit the top end of our guidance. As you heard from Jay and Jen, we're zeroed in on opportunities for the AE brand. and are continuing to fuel Aerie's exceptional growth. I'm going to take you through the financial results, including the impact of the tariff refunds recognized in the quarter and then discuss our outlook for the balance of the year. Our reported results include the impact of tariff refunds.

Second quarter consolidated revenue of $1.4 billion increased 8% to last year with comparable sales growing 6%. Aerie's strong business continued with total sales growing by 25% and comparable sales up 19% with growth across [indiscernible]. A total sales increased 1%, with comparable sales declining 1%. Gross profit dollars of $672 million rose 34% from last year and gross margin of 48.7% increased 980 basis points. 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.

SG&A dollars increased 19% and 290 basis points to a rate of 29.6%, inclusive of $18 million of incentive expense attributable to tariff refunds. The remaining increase is primarily a result of planned investments in advertising. Depreciation decreased slightly year-over-year at $52 million compared to $55 million last year. We recorded a second quarter operating profit of $211 million compared to $103 million last year. Included in operating profit this year is a net benefit of $161 million related to tariff refunds.

Interest expense increased primarily due to the sale of tariff claims as discussed last quarter. Other income increased due to unrealized gain on equity method investments. The second quarter tax rate was approximately 25% and EPS was $0.79. Consolidated inventory cost was up 14% with units up 9%. The increase in costs includes the impact of incremental tariffs this year. Unit inventory plans will continue to be rebalanced between brands and categories for the remainder of the year.

In the second quarter, as Jay noted, we continue to make long-term investments in our business while returning cash to shareholders. Second quarter CapEx totaled $66 million, and the company returned $21 million to shareholders during the quarter via the quarterly dividend. We ended the quarter with approximately $148 million in cash and investments, and $783 million of total liquidity, including our revolver.

Before turning to our outlook, I want to note that Ravi has been engaged with the team reviewing our plans and expectations for the balance of the year. The outlook I'll discuss today reflects the company's current expectations. For the third quarter, we expect comparable sales growth in the mid- to high single digits with Aerie and OFFLINE continuing in the high teens to 20% range and American Eagle approximately flat.

Gross margin is expected to be similar to last year with full year gross margin up year-over-year. Operating income for the third quarter is expected to be in the range of $110 million to $115 million with SG&A expense up in the high single digits. The tariff rate assumption for the rest of the year reflects the Section 301 tariffs implemented in late June. For the full year, we expect operating income in the range of $540 million to $550 million based on consolidated comparable sales growth in the mid-single digits.

In closing, we're committed to building on the momentum in area offline, accelerating improvement at America Eagle and unlocking greater profitability across the business. With that, we'll open it up to questions.

Operator

[Operator Instructions] The first question is from Jay Sole with UBS.

질의응답

Jay Sole

Great. Jen, I want to ask you about the women's denim business at American Eagle. Can you just maybe dive into that a little bit more, tell us about how that business developed over the quarter? What you see happening in Q3 just from a sales standpoint and kind of what's driving that and the opportunity for continued progress from here? And then also maybe -- and second part to that question is you talked a little bit about third quarter. I think you said you've seen trends continue. If you can sort of clarify that a little bit. I mean, where do you see Aerie so far in Q3? And how is that factored into your guidance? Same question for both brands.

Jennifer Foyle

Look, we're seeing sequential improvement in denim. Sorry, I have a little bit of a cold. So just -- but we are seeing sequential improvement. As I mentioned in my last earnings call, we definitely need to pivot. We needed to pivot and we pivoted quite nicely into the fit that we're working 100%. Really, it was low rise that we really want to get into that business. And as you saw that, that was our marketing launch for back-to-school. So really excited about how we reposition denim.

What we are needing to work through right now is just some of the older fits and really just rebalancing our inventory. It's as simple as that. And our numbers reflect the guide in AE. As we look to Aerie, I mean we continue to launch new ideas in Aerie. All categories are working. All categories are firing. We can't ask for more. I mean these numbers -- we're proving, I love what I said, right? We're proving we can comp the comp. And I think the team is really geared up for holiday. We're seeing a nice continuation of the sales comp again reflected in the guide.

And with all our new launches, we relaunched our booty campaign, our Andes campaign, intimates is gaining share. Our float bra launch, we're going to really work on bra innovation. That's a new playbook for us or we're going to reinvigorate it because we're excited about some new ideas in broad. I think we're really going to compete on that end with really launching ideas that I think our customers are going to really embrace. So some new ideas that are coming your way and that will build into next year.

And then, of course, apparel. Apparel has been really on fire. The numbers are incredible and they like completing the output, right? We're building them from inside out, and that's what we do in Aerie, and off-line certainly has seen incredible growth as well.

Operator

The next question is from Matthew Boss with JPMorgan.

Amanda Douglas

It's Amanda Douglas on for Matt. And could you speak to the difference in merchandise margin performance within the quarter with improvement at Aerie offset by the American Eagle brand? And what are you specifically seeing on markdowns by brand entering back to school?

Jennifer Foyle

Sure. We've seen a little pressure, as Mike mentioned, on seasonal ideas in AE. So we continue to see a little of that pressure as we go into Q3. So we're working through that, again, rightsizing our inventory. And Aerie has been doing an outstanding job leveraging this customer base. That's growing our brand awareness. That's another thing that I didn't mention in my last answer, the brand awareness in Aerie. We're feeling at 59%, albeit it's growing. There's still a lot of opportunity for runway and Aerie. 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, they've been doing new drops, and we've been easily able to reconstruct the promotion activity between brands so that we're balancing this out.

Operator

Next question is from Kelly Crago with BMO Capital Markets.

Kelly Crago

So just wanted to dig in a little bit further on the third quarter comp guide up mid to high. If you could just break out expectations by brand? And any color again more explicitly about what you're seeing quarter-to-date at the 2 bars. I think then you're speaking to some maybe higher promos at Eagle than you were anticipating and how that might impact the margins in the third quarter?

Jay Schottenstein

Kelly, I can take that Jen mentioned in our prior answer that comp guidance by brand is in line with where we are quarter-to-date. So AE relatively flat. So some sequential improvement from what we just reported for area in the high teens to 20%, again, similar to what we just reported in Q2. So the trend continues there. And also, as Jen said, I mean, comping the comp and actually maintaining comp trend against tougher compares, which is what the team has been going after. So we have a good proof point here quarter-to-date in are on that front.

And then, yes, the merch margin performance in Q2 and some of the markdowns in AE that we guided to back in May. -- alongside our $45 million to $50 million guidance. Those did come through kind of in line with expectations and resulting in us hitting that high end of our operating guide. And then for Q3, we do have -- as Jen said, we're still looking to rebalance some inventory. We have some markdowns in the Q3 merch margin guide for some potential markdowns as we go through that work, and that's covered in our gross margin guide of relatively flat for the third quarter, and Aerie is continuing its nice performance there on the merch margin line. So again, a little bit of a mixed brand outfit where Aerie is maintaining strength in margin definitely getting back to some strength, but we do have a little bit of markdown coverage for some of this inventory work that still needs to be done.

Kelly Crago

Got it. And then just -- just my understanding with the tariff refund, I noticed you said something about -- I mean, that you're accruing some higher incentive comps here. Can you just kind of walk through how that plays out in the high single-digit SG&A guide, I think is for 3Q apologies if I'm missing some of the details here, is that like related to the higher intensive comp marketing, anything else there? And then how does this sort of play in the fourth quarter as well? And that's all I got.

Jay Schottenstein

Sure. Yes, we did book in the second quarter against tariff refunds, some incentive comp commensurate with as the refund in line with our full year income targets tied to those incentive plans the accrual for the back half, third and fourth quarter, I think I've guided to it now back in March and then again in May that that's more -- that elevated accrual is up against more because it's up against a lower than historical result last year. So this paper on in terms of that accrual is kind of more average or more historical the impact of -- there's no impact in the third and fourth quarter to anything tied to refunds. So that was isolated against the refund benefit that we saw in the second quarter. Any kind of incremental number.

So the back half SG&A, we guided third quarter up high single. That includes, again, the impact of that more historical or average incentive accrual versus the lower accrual in history last year. And with the rest of the line advertising, relatively in line as a rate of sale in the third quarter, some leverage in the fourth quarter. As we pass through -- look at SG&A on a go forward on a 12-month basis, advertising, we're lapping this elevated spend as of this quarter, as we look forward on a go-forward basis, advertising will be a leverage line item into 2027. And as we normally get past the next couple of quarters, with a bit of an apples and oranges incentive accrual impact, that will also be a leverage line item as we go into 2027.

So as we look at a 12-month basis and for the full fiscal 2027 period, we're looking to be back to a position where we're leveraging SG&A at a minimum at a mid-single-digit comp, but targeting a low to mid-single in total. But again, the team and Ravi will provide more color on that go forward. And specifically, when we give guidance for '27 in March as usual.

Operator

The next question is from Jon Keypour with Goldman Sachs.

Jonathan Keypour

I was -- you guys gave color about Eagle and mentioned that men sounded good across the board. Women's bottoms sounded good from what I heard. I'm just wondering what drove the negative comp? And then I have a follow-up.

Jennifer Foyle

Women's bottoms has made improvements. So while we still mix the business, actually, other bottoms, so that means pants, cargoes, for instance, have done very exceptionally well, but there's still some balance to do in denim. But we are excited about the momentum in denim and what we've seen headed into Q3. So we're excited about that.

Jonathan Keypour

Got it. And then you guys mentioned in your inventory comments, some rebalancing going to take place and some continued promo activity extending into 3Q a little bit. I'm wondering, is that entirely overhang from the 1Q inventory in women's bottoms? Or was there also a little bit of overhang from 2Q that's moving now through 3Q?

Jennifer Foyle

It's primarily concentrated on some seasonal businesses, short being the #1. And there is some fashion that we need to ensure that we're clearing.

Operator

Next question is from Dana Telsey with Telsey Advisory Group.

Dana Telsey

As you think about the later back-to-school time period, any assessment of if that had any impact on sales in either of the businesses? And then as you think about stores versus online? How is the performance for each business, whether it's in the metrics, traffic conversion in stores versus online and how the remodels are performing?

Jay Schottenstein

Thanks, Dana. I think with us reporting today, we're through the full Labor Day period and Labor Day shift. So we have a good sense of kind of where we are quarter-to-date accounting for those shifts, and we'll pass really all the peak back-to-school periods to even that were shifts within August and shifts here in early September. For the most part, we've got line of sight to those. So our again, the guidance by brand and in total, kind of mid-single-digit comp -- mid- to high single-digit comp for the quarter and the guidance by brand is commensurate with that quarter-to-date trend. And at this point, we've seen, for the most part, any kind of impact from ships.

Stores versus online business. I'll start with Aerie. Aerie is positive across the board. I think I used the description last quarter that all the conditional formatting is green. That's still the case that we're no quarter-to-date, stores, digital traffic in both channels, AUR, UPT, AOV, customer talents, you name it, all going in the right direction with strength across channels, strength across categories, strength cost metrics. AE at a flattish result with guidance. Stores are definitely on the low end, lower side of that and digital is stronger. So that's what we've kind of seen for a few quarters now. Seeing that quarter-to-date here still in Q3.

Stores have gotten better. So against the negative on comp in Q2, what we've seen quarter-to-date here in Q3 is stores coming back stronger. We always -- we tend to see that don't speak period to be our destination in the mall going back to go on holiday. We'll see how that plays out the rest of this quarter. So a little more rebalancing between channels versus what we saw in the second quarter, but stores still on the lower side of the average.

Operator

The next question is from Joanna Kim with TD Cowen.

Jungwon Kim

Jen, just on the Aerie side for the holidays, I know you had very strong holiday last year with pajamas and other key items. How are you just thinking about the product assortment this year? And then especially on the Eagle side, is there anything that you're doing differently also around the holiday season?

Jennifer Foyle

Yes. In both brands, we're very excited about. Obviously, the brand held for both brands has been extremely positive. So let's start with that. So what we're working on the American Eagle side is really converting those customers and entertaining them. and we're very focused on getting them to stores. This is when we really gear up. I do think long legs are going to build into the -- into Q3 and into Q4. So with AE, that should be hopefully positive and some optimism there. Again, still 8 weeks ago in this quarter, but we're not into full long length yet either. So I think we have some opportunity there.

The key items that the teams have worked through, the new ideas, all of our fund it is that we do during the holiday season in both brands, I think, really going to excite the customer there. Color, optimism, fun, Aerie is going to continue to do its drops as well as AE. All the newness tracks nitrate have been working. It's new ways to reengage our customers and get them into the stores. And I think we have a lot brewing for the holiday season.

Jungwon Kim

Just one more follow-up, Jen, on the Aerie side. Any color on how intimates perform and how you feel about those sort there?

Jennifer Foyle

Very nicely. We're exciting what we're seeing in intimates. There was some market share gain. And we're really focused on newness and broad as we move forward. Sports broads have been working other bras. We really want to gain credit for all the innovation we do in our core bras. And I think there'll be a lot of work and some new innovation that you'll see on the go forward. Keeping in mind, as we had to keep you into Q4, we definitely dive into other categories as well. It's a gift-giving season, and I think Aerie does it best. .

Operator

Next question is from Adrienne Yih with Barclays.

Angus Kelleher-Ferguson

This is Angus Kelleher on for Adrienne. Jen, you mentioned are brand awareness is still around 59% despite the strong growth. What's the marketing plan to close that awareness gap and how much of the incremental ad spend in the back half is targeted at that versus performance conversion marketing?

Jennifer Foyle

We're not going to really disclose our ad spend contribution. However, if I looked at AE's brand awareness, which is roughly 76% look at that cap rate there and think about the comp Aeries is able to drive. So I'm pretty excited about the opportunity there. Our goal is to get it at least equal, if not exceed, the brand awareness that we see in our portfolio. What I will say the teams are up to everything. I mean from in-store events to our double down on digital spend, which I think has been really optimized connecting with our customers, building on our Aerie real makers, building on our advocacy program, everything's really begun -- we're firing on all cylinders. And the customer and the community is really responding. This is what -- where the magic happens in Aerie. This community that we're able to build and retain and add the spend, our spend is up per customer. Double digits, in line with these numbers that you're seeing. So I think the team -- it's our secret to us, so we don't share that, but I think the team knows how to deliver on this.

Angus Kelleher-Ferguson

Great . Great. And then just a quick clarifier for Mike and Ravi. Buying and occupancy or BOW, they leveraged about 150 basis points last quarter, but were roughly flat this quarter. I'm curious if there's anything to call out there regarding distribution costs, occupancy or anything else like that? And is that leverage plan to come back in the back half?

Jay Schottenstein

Yes. I think for the second -- what you'd expect in the third and fourth quarter to be similar to second quarter. First quarter, there was a little bit of shift between things with kind of the disposition or the wind down of our client third-party logistics business. So the BOW line, I'd expect from here to be to have similar results from a leverage perspective that we saw here in the second quarter. With more work to come, teams are constantly the rent delivery, distribution costs that are in that bucket of expenses. There's cross-functional teams still in place working on all those line items that we've -- since our expense initiative a few years ago, and that's still in place.

Operator

The next question is from Rick Patel with Raymond James.

Rakesh Patel

Can you unpack your expectations for gross margins a little further? How do we think about the puts and takes in Q3? And if that differs from your Q4 plans. I know that inventory cleanup is ongoing. So curious if that's done within Q3, if that's something that spills over into Q4.

Jay Schottenstein

Yes. I'll provide some additional detail there. So I think in general, we're looking for areas continued strong performance on the merch margin line to continue. AE again, definite improvement from the first half of the year, some placeholder markdowns to cover us as we work through some of this inventory balancing. I just hit the BOW line item, similar expectations in the third and fourth quarter as the second quarter kind of been relatively in line with last year as a rate I think the other moving parts. We do have some hedge in there, I'll call it, or the potential for some freight fuel surcharge impacts. So we believe we're covered there. We don't know for sure exactly where things are going, oil is over $100 a barrel again, but we want to make sure we're covered there, not surprised by anything. Nothing significant to date, but the potential for that to happen is covered.

And then from a tariff impact perspective, Q3 will be kind of a negligible difference to last year, again, with these -- the kind of the rates in place just announced in June versus kind of a partial quarter impact last year, the dollar difference is pretty negligible in the third quarter. And then at that 12.5% rate for fourth quarter, up again, it kind of full EPA tariffs. Could be a little upside, but we're also -- we know that there's still kind of analysis and studies being done potential for some increase to those tariffs in the fourth quarter, some impact of the fourth quarter doesn't happen, could be some upside there. So gross margin in general were -- all those ins and outs relatively flat for the third quarter, modest improvement in the fourth quarter in the guidance.

Operator

The next question is from Alex Straton with Morgan Stanley.

Alexandra Straton

Perfect. Maybe for Ravi and Mike, if our math is right, on it just looks like you're trimming the full year EBIT guidance just slightly compared to last quarter. So some of the follow-up to the last I'm just trying to understand, is that just higher incentive accrual? Or has your view on other pieces of SG&A or gross margin changed at all?

Ravi Thanawala

You're right math would say we are trimming the back half quite a bit from where we were back in May. I'd say the #1 driver of that. If you remember the color expectation was AE to be up like low positive or low single-digit positive or given flat guidance for the balance of the year. So that's a piece of it. A little bit of markdown placeholder as we've described, alongside that reduction to revenue expectations. Flip side of that, at least for the third quarter, Aerie at a high teen to [ 20 ] is ahead of where we thought, but the mix of that still taking a bit off the income line based on the mix of that comp performance between brands.

The SG&A line isn't much different. We talked kind of in line with sales mid- to high single. So a few million dollars there that we're still working on, but not a big driver of the guidance trim. And in fourth quarter, it's similar. Essentially, we're guiding AE to flex actually fourth quarter -- our prior guidance was AE is still low single positive for the back half in total, which meant fourth quarter as well. AE is flat, and we're looking at Aerie kind of more in the high single to low double range, which is the same place we thought. So the trend in both quarters is really the AE brand flat expectation versus up low single and a little bit of markdown kind of placeholder against that.

I mean in total, we are -- the third quarter guide implied similar income results to last year, so much improved from the first half of the year, with work to do fourth quarter implies some operating rate improvement and kind of mid- to high single-digit income increase. So again, a 12-month basis goes forward, making progress here in the back half even with a little bit of a reduction to guide and -- but positioned in positioning things in general across gross margin and SG&A plans to be back to revenue outpacing expense, opingrowth outpacing revenue growth and operating leverage again now that as we get into the back half into holiday and into next year, we're past tariff impact for the most part, even though there'll be some in and out there, but mostly absorbed at this point SG&A structure deleverage, like I said, at a low to mid-single-digit level in the next year. So we're confident that as we get into the holiday period and then into next year that we'll be back to income outpacing revenue growth and some operating rate improvement on a 12-month forward -- 12-month forward basis.

Alexandra Straton

That's super helpful. Maybe just on AE as a quick follow-up. After it gets to that maybe flat level in the back half. How do you think about the return to positive? And like what KPIs do you care most about as you're remindering that trajectory? .

Ravi Thanawala

I think traffic is a big one. I think Jen can weigh in here, too. But I think, look, you start with the mix of what product strategy is first. I think the team feels good about where things are going forward order to build on the sequential improvement we've seen quarter-over-quarter here. we're given a flat guide based on quarter-to-date performance in Q3. We're playing that forward into holiday. I think the team hopes to exceed that expectation through the balance of this year, plans in place next year to comp negative results. But being prudent about how we plan that and not -- this is his inventory work is making sure we're not getting out of our skis in terms of inventory, again, the comp expectation for the first half next year, even though we're up against even though we're up against negative. So we want to make sure we're positioned to chase trend and not get too ahead of things there.

So I think I guess the intention going forward is for AE on the metric side, be driven by product strategy first. I think the marketing rebalancing we've been talking about were first -- the third quarter here is our first path that rebalancing that spend towards what was kind of top of funnel, consideration, brand awareness to definite conversion driving purchase behavior type spend on the digital marketing, performance marketing away from bigger campaigns and top of the funnel, and we're seeing some traction there with the sequential improvement we've seen so far quarter-to-date teams are building upon that into holiday and into next year as well. So I think the traffic against traffic in stores and conversion against that traffic are definite focuses alongside product strategies going forward.

Operator

The final question today will come from Marni Shapiro with the Retail Tracker.

Marni Shapiro

Congrats on Aerie. It's really stunning to see it in every single hall for back to school. So I wanted to actually talk a little bit about Aerie. You're focusing on the bra brand, I love that, and I thought the float was great launch. I'm curious about also the show off and that collection, which feels a little sexier than I'm used to seeing from Aerie, I like it. And you also had a couple of sheer raws that were always towards the front of the store and seem to always be selling out. So I'm curious if this is a shift for Aerie and you think that there's room for you guys to compete there? I think there is. And then I'm also curious if you're seeing that your customer is buying the match backset the matching stripe bralette with the matching voice or and then matching stripe sweatshirt to go with it? And is that helping to drive up basket like you're fully outfitting her now?

Jennifer Foyle

Marni, I think you could have taken this call for me. All of the above, that was perfectly said. Really, all bras are working. And we're going to really look to build out each franchise and find new ways to navigate bras. That's what we're up to right now. We do see these set selling. We love how they go back to the apparel. And you'll see more of each category and probably some naming and claiming down the road. We have some excitement as we head into the back half and we go into really spring and really into back-to-school with some even we have plans. Let me just say all the way through. We're already planning how we're going to try to comp next back-to-school, and we're going to do that with some of these ideas. Excited what the teams are delivering as far as innovation novelty, leases, new leases, they're doing an excellent job. And yes, match back is definitely an opportunity.

Marni Shapiro

And is the sexier look in intentional look? And is it something that you can carry over to Eagle without getting away from the core DNA of the brand?

Jennifer Foyle

Absolutely. But we have to do sexy in our way. I think we do it in a different way, and I think it's relevant. But I think there's ways to do it that can be cool and understandable for our customer base.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.