AEO's $200M Accelerated Repurchase Plan to Boost Shareholders' Value

American Eagle Outfitters, Inc.’s AEO Powering Profitable Growth Plan has been progressing well. The company’s shareholder-friendly moves to boost value have been encouraging.

In the latest action, the company has made an accelerated share repurchase agreement (ASR) with Bank of America to buy back $200 million of its common stock. This equates to roughly 18.1 million shares at the closing price on March 14, 2025, hence representing roughly 9.5% of its wholly diluted outstanding stock. 

AEO intends to complete the ASR for its existing share repurchase authorization of 68.5 million shares. On March 11, 2025, American Eagle announced a quarterly cash dividend of 12.50 cents per share, payable April 25, 2025, to stockholders of record at the close of business on April 11, 2025.

In the most recent quarter, American Eagle returned $24 million to its shareholders through dividends, with the year-to-date cash dividends of $96 million. The company repurchased 3.5 million shares for $60 million in the fourth quarter, bringing fiscal 2024 repurchases to 9.5 million shares for $191 million. On March 11, 2025, its board authorized an additional 50 million shares for repurchases under its existing authorization, having shares of 68.5 million available for repurchases through Feb. 3, 2029.

Hence, the latest program, along with the dividend payouts, highlights the company’s strong position and disciplined approach to capital allocation, thereby enriching shareholders’ value. American Eagle exited the fiscal fourth quarter with cash and cash equivalents of $309 million with no outstanding debt. As of Feb. 1, 2025, the company had liquidity, including a revolver, of more than $920 million.

What Else for AEO Stock?

Despite such actions, shares of this Zacks Rank #4 (Sell) company have fallen 26.5% in the past three months, wider than the industry’s 20.1% decline. This downturn is owing to its soft performance for a while.

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We note that investors remain cautious about challenges stemming from retail calendar shifts, higher markdowns and a tough operating backdrop, including evolving consumer spending patterns. AEO is grappling with headwinds related to the consumer and macroeconomic landscape. Both earnings and revenues fell year over year during fourth-quarter fiscal 2024.

For the first quarter of fiscal 2025, American Eagle expects revenues to decline in the mid-single digits. It projects the gross margin to drop year over year for the fiscal first quarter. SG&A dollars are likely to remain flat while operating income is projected to be in the range of $20-$25 million. This reflects nearly $10 million in adverse impacts due to the strengthening of the U.S. dollar.

For fiscal 2025, the company expects revenues to dip in low-single digits and the gross margin to decline year over year. This includes a roughly $20 million adverse impact of the strengthening of the U.S. dollar and about $5-$10 million negative impact from U.S. tariffs on China, net of the mitigation strategies. Management expects a mid-single-digit revenue decrease in the first half of fiscal 2025, with declining profits.

Eye These Solid Picks in Retail

We have highlighted three better-ranked stocks, namely Nordstrom JWN, Gap GAP and Urban Outfitters URBN.

Nordstrom, a key fashion specialty retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for JWN’s current financial-year sales indicates growth of 1.9% from the year-ago figure. The company has delivered an earnings surprise of 22.2% in the last reported quarter.

Gap, a specialty retailer of clothing and accessories, currently sports a Zacks Rank of 1. GAP delivered an average earnings surprise of 77.5% in the trailing four quarters.

The Zacks Consensus Estimate for Gap’s current financial-year sales indicates growth of 1.6% from the year-ago figure. 

Urban Outfitters, a fashion lifestyle specialty retailer, currently carries a Zacks Rank #2 (Buy). URBN delivered an average earnings surprise of 28.4% in the trailing four quarters.

The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 6% from the year-ago figure.

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

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