What Happened?

Shares of young adult apparel retailer American Eagle Outfitters (NYSE:AEO) jumped 7.1% in the afternoon session after the company announced it would buy back up to $200m of its common stock. This represents approximately 18.1 million shares, at the closing price on March 14, 2025, or roughly 9.5% of the company's fully diluted outstanding stock. This announcement underscored management's focus on returning the value generated by the business to its shareholders. 

As a reminder, a stock buyback reduces the amount of outstanding shares, ensuring that more profits accrue to existing shareholders.

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What The Market Is Telling Us

American Eagle’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock dropped 16.3% on the news that the company reported disappointing third-quarter 2024 earnings. Revenue and gross margin missed in the quarter. The real bad news was the guidance, though. The company guided for same-store sales and operating profit well below Wall Street's estimates for the all-important holiday quarter. Overall, this was a weaker quarter.

American Eagle is down 29.9% since the beginning of the year, and at $12.03 per share, it is trading 54.1% below its 52-week high of $26.20 from March 2024. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,365.

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