American Eagle Outfitters, Inc. ( AEO ) shares are diving premarket Thursday after the company reported mixed second-quarter results.

The company reported adjusted EPS of 39 cents, beating the analyst consensus of $0.38. 

Revenues rose 8% year-over-year (Y/Y) to $1.29 billion, missing the street view of $1.31 billion. American Eagle Comp sales rose  5%, while Aerie Comp sales increased 9%. 

Store revenue rose 7%, and digital revenue increased 12% in the quarter.

Gross profit rose 10% Y/Y to $499 million, with a gross margin rate of 38.6%, up 90 basis points. This growth was driven by higher merchandise margins due to favorable product costs and expense leverage, particularly in rent and digital delivery costs.

Total ending inventory grew by 4% Y/Y to $664 million.

Capital expenditures totaled $61 million in the second quarter and $97 million year-to-date.

Outlook: American Eagle Outfitters ( AEO ) projects third-quarter operating income of $120 million to $125 million. Comparable sales growth ranged between 3%-4%, with total revenue flat to slightly up.

American Eagle Outfitters ( AEO ) now sees fiscal 2024 operating income of $445 million and $465 million.

Also, the company revised fiscal 2024 comparable sales growth guidance of around 4%, with total revenue rising 2% to 3% (vs. up 2% to 4% prior outlook).

For FY24, management continues to expect capital expenditures to be around $200 million to $250 million.

American Eagle CEO Jay Schottenstein said, “Our Powering Profitable Growth strategy is off to a great start, locking in a strong first half and setting us on track to achieve the high end of our prior operating profit outlook for 2024.”

“The second quarter marked our sixth consecutive quarter of record revenue and we successfully leveraged our cost base – advancing a number of strategic priorities to fuel growth across brands and channels and drive operating efficiencies,”

Investors can gain exposure to the stock via Avantis U.S. Small Cap Value ETF ( AVUV ) and Invesco S&P SmallCap Consumer Discretionary ETF .

Price Action: AEO shares are down 6.68% at $20.25 premarket at last check Thursday.

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