AEO - Earnings call transcript Q1 2018 | American Eagle Outfitters, Inc.

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Operator

Greetings and welcome to American Eagle Outfitters’ First Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Judy Meehan, Vice President of Investor Relations for American Eagle Outfitters. Thank you.

begin. may You

Judy Meehan

everyone. Good morning,

Aerie; today Chief for of are me President prepared AE Officer. Chief our Officer; Chad Schottenstein, of Brand Executive Global President Jen Jay Bob Kessler, Madore, Brand; Financial Joining Foyle, remarks and Global the Brand

the in certain today’s information make Also, and metrics that and beliefs. company’s this statements that materially our expectations events or statements. please no tables a new to earnings differ we are realized represents a section. on adjusted results otherwise, available note based company of GAAP update we begin in certain company’s website the factors financial included remind The that the accompanying which result except call are results release, the filings. or at press www.ae.com I the on undertakes call, Before in are Investor These Reconciliations SEC in results release, presented may adjusted obligation to or basis. the GAAP both risk The statements revise whether law. Relations need of during publicly to to non-GAAP you will as future forward-looking is to the upon actually by any based current attached required information, posted forward-looking as

against turn over today [ph] and discussion Here, And the Jay. you to X, and of are quarter-ended reflect week X, shifted XXrd the last compared April the XXXX. Comparable XXXX calendar period the Consistent can XXXX. will the to the financial year, X, sales retail I reports to XXXX also comparable May now, call quarter-ended find XX, first the May the presentation. first quarter-ended quarter with the quarters May investor reflect

Jay Schottenstein

into our initiatives extremely see pleased brands Okay. to Thanks fiscal and driven carry by gain X% market first I’m XXXX momentum compelling Thanks the strong back us strategic share Judy. joining our half merchandise. Comparable in to the XXXX. sales quarter, through from morning, everyone. today. for increased of Good ability and

of for XXth a drove the adjusted leverage our proud XX%. past four We marked margin milestone expenses, comps, years. growth positive achieved consecutive wins real operating share and quarter incredibly per higher of Inc. in This resulting a quarter of progress over I’m earnings gross margin and expansion, AEO the

and During a industry have equity, period and strong new have grown an exciting of Aerie. built incredibly significant market we turmoil share, successfully transformation, vehicle launched in growth brand

outpaced investment increased traffic. in a with marking saw business Ongoing are team's customer year. focus above omni regions XX% sales delivering including The increase. at impact increase broad-based AE was on returns. across and global in strong very the a now double-digit capabilities of We delivered positive Asia increase conversion and experience Aerie few see geographic our The a on stores. We in business. quarter saw digital and our points both and channels Now We quarter last comp, exceptional brands, in elevating US store X% sales technology our a rising outstanding in strength straight of truly performances. having highlights. comp regions. Aerie drove and achieved It XXth driving and growth our basis XXX were All XX% quarter. business our and improved metrics our markets, first business, the brick-and-mortar positive comp and to stands encouraging Canada, digital AE key Mexico, mall are XX%, in the

am and strategies deliver on AEO. and conference value the our drive to vehicles bottoms for pleased long-term results quarter. our introduced fueled in the strengthen returns. that financial regrowth, Aerie say those during accelerate our our position first On jeans share, growth call, market to connection, strategies I last our and customer leading include grow execution growth Those leverage we AE key to

First sales. achieved AE we straight within jeans our XXth record of the quarter brand,

and long-term focused styles this our on important very reason category best foundation new in developing fits, the the the Eagle market continue highly in strength fabrics, been the of has lifestyle Our why to to primary and today. remain a be American leader jeans. success We is leader

also best bottoms to looking ensure We are offering we beyond categories. across the have merchandise

upcoming fuel we Eagle see lines product to Our American are runway terrific, further and the brand.

short After me Aerie, growth and delivering record turn to our a strategy. Aerie shares your of is attention space. growth positivity the in starting Now, market rates the gaining nothing pillar next of movement, body intimate let spectacular,

Our customers Aerie. have to connection strong a emotional

thrilled our more detail, the product have and base response in customer we to with expanded review will growing Jen been As offering.

design Additionally, I about expectations. to Aerie. the our future be exceeding is excited of Needless couldn't say, store new more

program sites improving pillar deepen the XXXX, we through our our and we making ongoing are digital is in billion and Through strategy. campaign really experience of very fuel as We we channels the x the the marketing that. store the our connection continue AE know special Aerie’s continue Connected. well we stages deliver $X new ME for connections, AEO our third loyalty REAL, designs, store unique Aerie our still customers Across of and with investments In best here growth. to growth customers. we on shopping in strengthening something are to have and customer's focused beyond brands, to our early will to We’re way are growth

the deliver pillar, financial returns fourth is top of the Our organization. mind across

seeking Bob projects teams will are our margins, these top operations, quarter, against comments growth, opportunities. and ahead. yet in delivered efficiencies we upon and in fixed margin the on more strengthening across As ROIs expand priorities expenses first see driving leveraging We The priorities. are stronger his opportunities

shares. an today flow to free our million to brands Combined quarter. cash with best returned we enable AEO $XX Our position repurchase growth dividend, in in first financial industry outstanding X.X the us the in with and strong shareholders retail ahead. leader million is

and to day. past the and the several to to brand contribution for experiences great congratulate like accomplishments entire continue enjoy thank customers over for I’d is years. goal to team Our create and product their significant our every

to Thanks, excited over ahead, look now and I phase strategies continue to of As to Chad. delivering growth the I’d we next as the I’m call turn shareholders. return executing like our and about

Chad Kessler

Thanks, morning, Jay. everyone. Good

indicated, a higher broad-based AE to was Eagle the of key second X% As attract to with the we delivered growth Jay that once it stores strong customers pillar saw merchandise. see gross comp and increase and through We position in say this positively comp is brand and margin. strategic great across a on to American again our We I’m compelling a regions, pillar continues brand American driving pleased plan. posted strength quarter. for Eagle quarter. consecutive our

delivered pants also was comp. The digital increases with X% and channel continue. of double-digit strong mall thrilled outpaced and ongoing a our traffic stores and categories. the positive performance jeans strong Our I’m

power the businesses, our these each With set the we season, mode of widen apart. competitive AE core and brand

up seasonal this the jeans demand and During shorts made such bottoms for cool in softer in strength and as bare knits. goods Spring, particularly

As and and the healthy since improved pleased men's weather women's delivered of meaningful we’ve rising overall I’m with the first with a in latter sales across summer performance spring April, of categories seen quarter, our X%, the pickup seasonal In collections. up genders, we comps X%. and part spring

remains develop profit great and believe of product inflection significant there strategies Work and creating customer point. Similar at and improvement. made on opportunity brand. improvement growth third women's pillar, growth the priority. assortments strong, a have to year opportunity ME on our engagement creative is we I new track, are and progress. x new connection Bottoms tops ahead a inspire between customers are believe are strengthening we accessories men's strategic category. accessories. is a for customer stronger With tops talent AE An to back an experience our In that remain we is women's and ago, teams the Our our into seeing I continue our focused building customers. area on are men's rebuilding

opening and experience our leading store new store update first mall to the forward and better elevate in-store store from This look to especially learnings evolving showcase We design AE line, jeans. to summer. Studio this product Boston will incorporate in are our our

ago, per the increase. loyalty Turning six overall launch we while jeans spend, months fit member dollars to our AEO Since seeing transactions, and enrolment new purchases our program, targets Connected.

brand. emotional our to Additionally, the customer we to deepen experiences are creating unique connection

innovation, the value, supporting best are As take what of and we another journey, in with their This style, XXXX have jeans and a Ball an they wear we while the make curated music nation AE focused artists, are and offer make own. we setting over the partnerships The fall their Brand inspire loyalty example, festivals. and team and emerging standards our With great partner, product American music Both to We we for raise jeans. is Governors to will Lollapalooza quality, continue sponsoring our will styles business. delivering through on for we collection bar. experiences to complement billion musical Eagle right live is customers will showcase ensuring unique our $X fashion and are The it we we to revenue. ended customers.

off Our for for dedication stage sights Eagle. start in and team we the strong their a a the billion for are to beyond work to are and Thanks and on year the American great set and XXXX. next hard setting

over to Jen. turn I’ll it Now,

Jen Foyle

consecutive last built quarter XX% our the Thanks double-digit of quarter yet. Chad, marked Aerie sales is and sales year. first and highest Well, good our for rate quarter everyone. Registered growth Aerie. XX% another on outstanding XX%, is XXth gain morning this This fire. a of a compared growth increase And simply on

focused so excited, momentum. the remain, and highly and on I team We ongoing are fueling

very broad-based consistent the was first quarter, all across During and performance pleased formats. four see I to strength

a Aerie's was a categories sales the Performance the led newness undies, spectacular nearly over continued the are record in growing. team's focus in area a this swim business second the categories and business on row store All number the first around producing outfitting by simply including is We and XX% the quarter. standalone and lifestyle. apparel, fact, In formats across all core growth. comp in both in sales side-by-side gain quarter posted building all volumes quarter. and posted XX% which of of bras, online areas and was

of and the body cozy, really very comfortable, casual, diverse positivity assortments a and This focusing is appreciate customers of active, for we loved also inclusions D&A our body our Our core on while customers. and merchandise by collections at build foundation the type.

powerful reaching and #aerieREAL very we moment, and brand continues more customers a and media expand are Our awareness new every follower’s to day. impressions with is social

our Yara And customer the Aly brand over Iskra have revalent very improving Aerie such supporting And registered customers. retention the at added as a is models, customer are X.X also Not been quarter, Lawrence accelerating first million pace, new are once plan. Real are growth that mentioned, the only as talks. Our campaigns tops we customers acquiring key events but grassroot have our Aerie over ambassadors. In our we in actively through early we Aerie delivering on role strategic at Amazing They we file. we Raisman, a year, we increase and the growth this initiative double-digit are Clearly, highly again, and opportunity. in-store rates. of Also, past goal. stages within including steady AEO are are Shahidi, Jay our,

to America. expanding addition In and new customer markets we into strong are engagement, North launches new product in

on a market into improving our new number of are our we Additionally, renovations store within presence design. existing

new Lexington We exceeding Raleigh feedback and they on the on definitely Nashville, expectations. and design. XX in City in initial customer New performance with York in Recent this and are thrilled are openings new malls

opening SoHo our these results the selling, driving initial of to Street only also forward performance continued store in-store also looking our new they plans, on July. within markets. are Spring the elevating stores We’re which includes strong online are in expansion our Not

innovation stores up teams year. to on XX Aerie’s leverage We to this platform strong momentum, total XX with highly of kicked business the newness. unique drive track a and product and talented open our brand We stores are capable year continue to and

into growth towards next as XXXX of drive $X we continued beyond milestone for billion. and well-positioned We’re our

are is As you I’ll my always, #aerieREAL. they Thank and unwavering future your now, Thank you. Bob. over thank And Aerie to for team, the I amazing. turn to dedication

Bob Madore

Thanks Jen, everyone. morning and good

the in the last of in regions to year. sales momentum make latter continue half building gains brands, we across we saw across broad-based excellent business geographic cold saw the progress weather, quarter first in quarter. the on Despite channels, our We and

and operating to higher achieved addition adjusted we adjusted consistent topline XX%. delivered by expense grew gains, growth In EPS XX%, posted of leverage, income margins,

tables investor rising the adjusted the the focus certain X million which financials, release as presentation. items revenue will million, $XXX and detailed from on comments X excludes Total first through X% in million Our year. Pages to quarter $XXX increased press on last $XX of

on $X approximately calendar total agreement year. based which Comparable same received to sales, of X%, million revenue shifted compared year's benefit the retail onetime with last increased a third-party As reminder, are a included net the from of a the last the licensing operator. period termination

mobile of quarter which By with from Additional across sales half all and X% biggest increases increased Aerie the information X basis Mexico. owned this up Page fourth American greater channels, company mortar comps approximately quarter last the XX%, mid-single stores of in be from represents business. comps reaching well investor our and stores now continuing our posted coming We presentation. points positive I’m markets, the comps of comps brands that Digital can up quarter. the rose XX%. XXX in regions as our consolidated digital both brick Eagle the basis, sales and U.S., note for total geographic found combined increased the on saw and XX% were a from digits China, year. revenue, brand, pleased international trend Canada, On XX% app first positive as to

year, consisting increased increased Continuing Depreciation from XX% driven counts. of of see XX of mix, over rate last a markets. points basis selling year. increased a severance. to favorable year, $XX transaction rate, expense compensation made Regarding comp million sales. Adjusted traffic basis per we points of favorable gross unit revenue. organization. mix The price year. revenue. million share strong margin of operating sequential healthy the sales and led last points which million in U.S. XX% as to an to the General basis to last strong leveraged and rate last by $X.XX by delivery as a drove was and ahead, $X.X margin operating an million to leveraging activity. and $X.X progress, quality controlled last profit leverage metrics, reflecting as as markdown continuing conversion and of primarily amortization Gross basis last Administrative $XXX This Adjusted revenue. last rent XX% in improved due million to and driven income $XX rate increased million reflects legislation. year. or transaction higher the value to as this as increase decreased for XX% well XX% to throughout The to million it which XX.X%, Unseasonable our due of mostly improved in to saw improvement and points majority we XX average restructuring from XX Adjusted increases, dollar basis $X.XX increased consolidated of as was and offset the to rate $XXX $XX higher impact On rose expense earnings of a to our to the from sales promotional million $XXX to year. operating EPS to X.X% margin charges This largely of pleased tax revenue, X.X% sale expense. and Store rates, I’m limited weather efficiencies the seek also improved improvements of excluded digital the a expenses. affected we and approximately to increased incentive corporate Total effective retail opportunity a clearly the rate $XXX year, in a well across quarter. savings The is compared tax rate. expense upside million look XX% quarter Selling, partially year-over-year increase as wage XX.X% by sales XX very mainly

Page inventory year, of be the across up last reflects increase units, million, ended We from regarding our inventory Now, is with the which investor strategy. XX% on with of the support store XX additional of in-line Approximately $XXX quarter presentation. expectations. clearance company's can which found inventory, one-third help the

strong sales jeans increase. long Eagle the trends to apparel in Aerie American the contributed Additionally, and and bottoms,

to expect quarter the in $XX the and be the year. expect relates new $XXX range Capital for to to balance to and and second and single digital Roughly Omni the in million be in half the channel we CapEx million general maintenance. corporate quarter high to openings remodeling inventory we the first totaled of store to projects tools the expenditures million Looking of forward, support ending $XXX business, spend digits. up continue

million of million a our investments in quarter strong As million last invested and share This after $XX repurchases, and ended $XXX dividends $XX cash compared result or million we flow, was the in million, million free up XX%, $XXX to cash to we with shareholders. CapEx, $XX total in of $XX year.

opening portfolio, of a and five this we’re to estate track of AE Aerie on XX real approximately our total closures. Stores net to year at Stores Looking XX

As is over healthy very I’ve indicated operating XX% previously, our profitable store at with level. fleet the

through nearly XX% have DMC We these malls. with lease up stores, from are XXX fiscal lease the Of over also the flexibility XXXX. negotiations stores, in

Additional through store on Pages information could XX in be the investor XX presentation. found

Now, looking to the quarter. ahead second

the business. We continue with pleased pace of our be to

$X.XX sales We to quarter and share expenses. margin expect assumes per positive leveraging $X.XX gross fixed of to EPS our guidance and on of improvement continued This second mid-single-digits. based comparable

We XX%. tax of approximately expect a rate

and and adjusted $X.XX Our of per guidance the start to compares of second earnings potential last very with year. charges. happy quarter year the restructuring excludes impairment We're share

continue As to your take like focused And the discussed, show on now to our strategic Thank very we’re and initiatives to we would teams financial our believe questions. will we you. shareholders. returns

Operator

with RBC comes of Capital from with the Thank Please [Operator Brian Markets. line you. proceed your first Instructions] Our Tunick question questions.

Kate Fitzsimons

growth category one lead and what also, what for Brian. then here margin in questions. first merch the on the and our to basis business, dig that did much. And rate I brand Kate on on would into of Yes, guess if my on Congrats the bit could the a are Thanks today relative I results. was question that size you little AE? strong QX? any just is swim taking hi. This you Aerie, for be Thank very in its seeing deeper and way,

Jen Foyle

swim and the our is Really Hi. It you? we’re or still but have our apparel, mean, Chill. said, in we outperforming, leading but this, all say the really including so How of opportunity our XX much really It’s growth I for way. script including which category, seasonally, remarks, every performed mean are sweats, business say is in track mentioned I as leggings the everything I swim. Jen. I opening and on categories, only Move. tough in is really always Play. I will so was business, a that just business states. the

So, the customers and to we brand, what these brand have out get world customers the offer what even these majority and of we to we have in all offer this and to our really really need show haven't in show seen our there categories.

we had being a the lifestyle continuing Aerie perspective, just margin always have amazing on we of leverage a our through that continued go of just begun. continue the flow our are at from we’re We the only bras accretive this expenses on you plan is maximizing company. years proud core and year, and as flow brand, to We know what we and through do. with We’ve on. And to

going brand and to to We’re $X get going to to continue leverage. we're this billion

Bob Madore

a to clarify very just little margin that comparison between two more comparable. brands, they on the are And

similar. as margin flow gross brands between drive to through, are as positive very in to continuing far what the rates Jen said, So, Aerie addition the

Chad Kessler

they their Jen Bob, did American comparison years volume current in add, base build volume, Aerie metrics. it is a what we it’s and as as was and a few to its how years to ago, Eagle far all amazing said, between volume, are a like and what current takes also And the certain its similar like,

very of in So, stages I’m the standpoint, the proud from early we're of my Aerie team. just Aerie.

Jen and is and movement life. done They message, think the her mean real I They I in the is the They real all job. has a have this on. going live a dedicated team an excellent this believe team. excitement.

Kate Fitzsimons

Great. results. Congrats on strong the

Jen Foyle

you. Thank

Operator

Thank you.

of line your Please the Company. from Oliver & with proceed comes question Chen next question. Cowen Our with

Oliver Chen

just in to about lot that continue as the results. managing Hi. of the leverage What AE and is impressive you. as on to rise? are as thoughts a on your engage that brand program basis. likely a digital will that to opportunities and your long-term way? Thank And what about are penetration a use to accretive thoughts promotions there Connected and customer thinking to to What information can really related continue the your continue rate happen Great well margins is

Chad Kessler

everybody. to Data is very, very important

have over seriously take We it here. We million members. very XX

have We with us, we up analytics end data hiring. scientist

the We them it’s our speak to the customer have what a out major we’re and understand through, a challenge. best we them, data at that, end on the be of and whole analytics and have study to whether really to day-out groups I to day-in, mean, digital We department. what and continuing day, likes, commitment our that we made to channels sites. the figuring wins the speak it a how

more We’re our figuring can make lives. important brand customer and all out want them their data collecting wants our they things in we what how the give and and

Bob Madore

question on the We quarters business experiencing on our growth. digital business, And been has XX growth. of sales digital had your double-digit unbelievable consecutive Oliver

digital Our business, business very our profitable. is

the total margin [indiscernible] companies. is retailers, We operating digital operating in business tell accretive business, will you that different our to many and margins improve vertical continue I to

Oliver Chen

Best you. regards. Thank

Bob Madore

Thanks.

Operator

Thank you.

next with question. with Please Susan Capital Anderson Our FBR question the comes of proceed Markets. from your line

Susan Anderson

morning. good for Thanks taking my call. Hi,

Just good despite gross front, a there the question quick performance margin on the weather.

about magnitude? promotions, it wasn't pulled the that You maybe a you are And back about know also, for have And in on you a Thanks. but then second if how quarter? then, feel expectations talked the weather? like your I little gross what should we better more bit margin, promotions bit think for could

Chad Kessler

at week, gains, promotions to every the driving every the and every share is environment promotional think, profitably market as business weather drive containing this look it impact, while goal we and can. month we our when I just quarter, as

QX. bottoms jeans business huge us a the strength real, long for I in of think and our win the was

strong with weather, continue cooler in the our cooler go is think drive in QX we the year-over-year. promotions brand forward we markdown and leverage the to contained promotions AE were I weather, even try contain and we goal to and to well, our With as expenses results able to

Susan Anderson

That's nice really like well. and follow-up, if I products And all it new helpful. comps Great. Aerie, one could, performing sounds there, last the on are

of know has somewhat been? how of if that's other there, I side Thanks. some maybe some intimate been a on curious, point the color things pressure so out can with Just you that? give retailers

Jen Foyle

as to about we're there and well. down innovation, and Yes. we Intimates undies on has build holding are and far more product and we’re QX, been simply is We’ve the repositioning core bras have definitely what present the us we great. – as excited to QX about bras some come in but been road, really the seeing in and momentums doing nice feel

the after business. side we also but is the toe, side you of know why with her which business apparel to our when head in particularly synthetic well the pleased from business, have dress as of of gone continually we’re the and want So, that we side to

Susan Anderson

Great. Thank you.

Operator

you. Thank

comes the Stanley. line question next proceed Please Morgan with with of question. your Our from Kimberly Greenberger

Judy Meehan

Hello Kimberly, there? are you

Kimberly Greenberger

How are I hopped you may the Thank I just much to missed this call on late. could it check I so on little you I Sorry. morning? was on, if have you for question. a wanted and the taking because mute.

and the sales total your on give there more growth the was And if you between could you the fiscal that comp year? helpful in of in in just here color how on from quarter should cadence rate here would be any the and did that comment the quarter? first spread through think shift If the understanding specifically e-commerce contribution a calendar, first about we the

Bob Madore

Yes.

Bob, questions. Kimberly. So, good Very this is

digital we missed XX growth, had have I you may in e-commerce our our Regarding think it, comp business.

represents revenues. company's of digital Our total XX% business

comp shift had total comp comps we the plus difference or X%. the increase performance between of of total X%, and revenues Regarding total revenue

by spread one-point termination by with which the offset was partially comping really operator. the $X million one-point was driven spread. a not payment So, shift, That a licensee mainly by,

versus on minimal comp revenue quarter. Total had it So, revenue. very the impact

Kimberly Greenberger

the the so comp think you we about sales what thinking Thank that should quarter, in how loss in of much. just week? and the third calendar then, the quarter, fourth shift between total are about quarter, second And for given you the extra and spread

Bob Madore

related in school the shift, a do week lower August, the XXrd the spread and of between quarter volume, beginning and revenues we approximately week comps. five-point Regarding our beginning pick-up the in which total drop to volume higher back will week, a drive the of to

Operator

you. Thank

Our & comes with Company. Anna Oppenheimer the from questions. next proceed line with of question your Andreeva Please

Anna Andreeva

Great, back growth, and secondly remind maybe go school maybe biggest XXXX in us Chad, the Jen Two brands? to thanks. expectations first guys think X low-to-mid SG&A, I and how guidance, think you for Good on as the up to a single-digit to congrats dollar and what morning than opportunities terms, and higher XQ full and you both should then guys. about in that drove questions, we what bit see little Thank [ph] so the much.

Bob Madore

question Anna. good Yes,

wage incentives was biggest our that up year, minor the second some the payroll, QX combination retail were was of contributing increases, things, mortar then last prior rate higher expense two quarter. stores then comps that driven then higher to million there Half SG&A brick other in year. SG&A, by and was and piece $XX a increases of in Regarding of and

Chad Kessler

innovation innovation, it continue and I’m We're to fit going the the into we’re I the not to and time driving For to but to everybody, collection, category, back-to-school, more going and a about back-to-school. selling going every you to fit, be marketing lead is have with going we quality campaign have on will The leading sell in on jeans go detail leading jeans focused for a value, make relevant jeans. business we’re sure to will focused the year the back-to-school. highly that tell we of

Jen Foyle

on going is think I the to well is And of really, but for intimates, same. the continue really lifestyle focusing of portion more campaign of our it to course grow We're Aerie, the going to business outstanding. marketing we’re the already have think all be back-to-school, team going me really this that blood, be proud. shown some into for tears gone to has campaign and I The previews and sweat,

what to for excited come. really So, is I’m

Anna Andreeva

Thank you.

Operator

Thank you.

Jefferies. next of Our the question. proceed with Janine with comes from your Stichter line question Please

Janine Stichter

Jay. morning good congrats. Question Hi and for

versus business positive little being for on mentioned in being and business key a bottoms like just other you like history? And opportunities? some elaborate the You on XXth you the more company's visibility as a just about see then history? of bit how the sounds first consecutive from you. quarter Thank milestone – periods performance the this give feel you the more and why is and category improving in a well, view in a as would company, do little that point on where can the forward by you then biggest And can the the then stability quarter driving just go the to color tops comps Chad company's men's, and details you are

Jay Schottenstein

Okay, company. it’s as opportunity is of at much all as would see have great. It in straight shortly. be first XX quarters, very I which XX But this well this I seen ever time,

more earnings. volume we I open have mean, it type and explode. at more the great we focus, see a Aerie we right we that is now we accretive do, think the stores I much their are like to point more I think ready to becomes

entire great stores of of is be it interesting Aerie So, denim but that we're Jen the changes number which country, her big yet as believe the we thousands eight number biggest really is there selling we’re number United because Walmart, the denim. may States stores, Levi’s seven of have but held everyone's they when number the that brands there excitement and one interest look focus, are opportunity. be stronger. has and have love two. other American it Stores. a are far that Eagle Eagle, that sell is and brand, second look denim big which you some two selling brand business in has whether the itself, for great amazing as that a one it’s to have stores their great the seller you different for in brand I retailers, bottoms It’s the opportunity. as in business we denim we all at through for at denim, to getting has transcends see enthusiasm. bigger excited are more itself, She very and organization, a they see our we are we

great I think team we working denim. the have a

fabrics that I number years we response, wants. I really long brand some we innovative next number be brand. being in the United of ago doing selling brands. the denim the in believe wasn't went one denim. and great getting what brand. know short-period bringing new It didn’t the brand being Number could think the Eagle a for Number the today name we're have we’re We X customer XX States I the I sold and from And zero in years one other there. an ago the few We're be not X country, to in brand, that satisfied that to American

be Our to be in number committed the see States. our to the goal opportunity to And for number we one is brand that’s And growth be one. – the United we're goal.

Chad Kessler

men's, growing business and quarter bottoms not in in build comps. men’s, spoke like and are In tops terms bottoms the each and with categories I tops. well momentum quarter. to tops as growth go Jay bottoms the We of the In in think into is, positive in going within but just to second positive saw a of strong those, continue was very to of the those recovery

summer. looking of forward and to back-to-school the So, rest the

Operator

Thank you.

Janet JJK question. your Our next with with Research. the Please from comes Kloppenburg question proceed line of

Janet Kloppenburg

to and environment also, bit react great if that? you slow of and just and bit way you softness it real of momentum mentioned And the positioned And be? the outlined on seasonal you any just with the wonder be for shorts wondering – to like there summer some congratulations them if some just wondering, and everybody, on should momentum I have is you inventories you in both is why Hi for category business could Jen had in quarter little then just sounds Thanks. little you the lastly Chad down, if the terrific? nine, comps maybe a you, comparison, to and a reason are in about a similar the them more to like inventories the talk quarter. promotional a mid-single, did guided the should

Chad Kessler

out and QX. we're how Janet business on happy came very positive we the of of very Yes,

especially the it year in promotions of continue over our promotional continued has time promotions, the But be out very period, to key terms driving promotional lines, In our environment, our lease happy sales less expansion there. and and we’re promotional channels on and were Easter very can. results, were with the focused margin contain we last to we than and be comp where we we

later cooler bit the accelerated but based this categories through seasonal up about are inventory is In season later little we concerned have on they they I mention the not on really QX. year warmed weather that terms weather, did those as nicely categories, coming the of and in or turned

Bob Madore

inventory will the started QX further the gave through more progress we I the quarter, the in for year, that we be inventory as guide longbottom last QX and that we in and investments start comping levels QX. jeans see you And much out as of of line remainder relative to in will next and some and year,

Operator

you. Thank

the Capital. line question. of next Laura proceed Loop with question from Please Our comes Champine with your

Laura Champine

thanks question. and taking for morning my Good

housekeeping. quick just ones first The

brick doing I they think Chad some so my support just terms such rate a love addressing hear had? Jen X%, of significant you’ve traffic the question phenomenal they to American terms is if positive on sort in growth, mentioned I’d that was that and but growth showing level which growth this mortar to of can that, continuation brand, chain Aerie rate of up create scale labor, wondering are what the store how Eagle supply growth of I'm the in from challenges, comped rapid are a challenges more phenomenal is and of

Chad Kessler

were X%. say this did stores AE we up Yes,

was comp. did mall but like leveraging positive slightly we team got stores in that traffic than drive the job the a Our negative, better fantastic the the to was and converting and it traffic traffic

Bob Madore

the also Inc.’s division. that American the the Yes, the question outsourcing Aerie is support of about the about supply, Aerie Eagle beauty has

as dollars it established. So, has so we billion a as business source far Aerie year, product of growing already the a few

Jen Foyle

business, plan this stage we plan, strategically. we fact, this In

been it comes this. So, when to we’ve supply, planning support, store growth everything,

strategic So, and our been we’ve ahead company. the this this the curve need of in we certainly to people plan so. here, staging support growth well we’ve for been the is Again, that incredible

certainly ahead of we're here. So, curve the

Bob Madore

supporting done The we that job seen. phenomenal have growth a has team

we and issue Our accelerate is now this get enough making continue can store growth. that to sure new locations

the anywhere past, out our we only and any to retail business. really As see brick states. open mortar a low pointed mortar Jen brick digital we effect, We has store XX and a have real in pay huge presence and approximately

be So, going growth representing the is incremental us exists for any this business, that. and we significant space really that of to to to looking white are accelerate

Operator

you. Thank

Our question from Telsey your comes Telsey next Please Dana Group. the Advisory with of question. with line proceed

Dana Telsey

congratulations. everyone. morning good And Hi,

wage pressures you in you about too Thank that distribution compare how does wages the how and of As see you and are you. in store what there, going the this out are planning forward? think center versus

Bob Madore

some technology obviously managed we the than experienced have that some increase Yes, course of We’ve that. really wage and of more leveraging year, the a last little through over tools. our

coverage a great tool, focus allows associate have things to We us on really customer to ratios. management workforce like

and see we’ve areas seen, we’ve the outside in to and have do centers, wage seen the of have the task minimize our our eliminate those in as our again distribution we some field in also some trying with or stores addition in Dana, more I some done of centers power centers but been as we’ve to been, do task stores, the in automation hours combating historically work our only that really more help of impact yes, on managing distribution and distribution where wages. really that has that really we efficiency in We’re competition technology we out the we have of mentioned. And through but not increases work to

Jen Foyle

Dana. Thanks

Dana Telsey

you. Thank

Operator

Nomura/Instinet. with Simeon proceed Siegel question. question next Our comes your from the Please with of line

Julie Kim

taking for This you Kim on Thank Good for our morning. Julie Simeon. question. is

Thank the there? in opportunity pressure Just increase terms in the and gross and resulting the in strength on of and you mentioned, shipping trying and any leverage margin, getting trends what there? you can what you of in the And you cost the cost quarter reduce some continued things separately, are saw touch you. saw you given improvement e-com do some accessory shipping the can to

Bob Madore

relates can we that levers few a expense. are pull it to as There shipping Sure.

those the combat our phenomenal honest and of of be our model leavers. at done in bigger we improvements that a order, our increases delivery One and the on that delivery constantly we're had reducing through we’ve some positive significant price impact team we’ve has to it overall ones cost different of tweaking I’ll per made providers as job a seen. some shipments just looking managing

and efficiency, just things more seen. and are price increases of We manage drive of there the some that do combat increases, we we can victims we’ve actually is pricing how business, the

Chad Kessler

to new I have accessories, details into get don't we in and come business we are visual that we green back. by and new category, in merchandising strategies, product have it to And are recover but want see strategies, to seeing, starting shoots starting we see some and

tops same to we which women's year, last in the I it told and accessories. at continue about year and see this the saw starting time, group compared that that I improvement we men's because I throughout men's So, feel the to are expect tops it to

year total have that improvement the see throughout We opportunity that the business. see add and to hopefully to

Operator

you. Thank

Retail question. Shapiro The your question proceed of Tracker. next from Our line Marni comes with with the Please

Marni Shapiro

a on congratulations It’s everybody, fantastic. Hi great quarter.

Jen Foyle

you, Thank Marni.

Marni Shapiro

was continue think I should share, after after a continue talked lengthy really back drive both think promotions, you yet some about yet fourth curious, of how at the year as competitive, you at environment, you and Chad, conversation market guess balance I go fourth you you so to are about the to momentum, but the after that environment, I half on but goal to back and said the we not quarter Aerie the going to that. share, Eagle quarter healthier less fairly had market healthier a a pulled you

Chad Kessler

sales as margins try be growth, to to every We continues well quarter. in share drive it as our goal. think and I Yes, gains market

brands that to customers I positive is a bit do to in quarter way, but is as and shopping different with fourth stores than comps, strength today, think the that, day-out that some to products, strength and of unique perform, as in with my but our there does leading can. promotions continues look think seem that web performing quarter and so grow to grow group we but retail continue healthy share, and and terms are a that where promotions customers, be we're our more to well goal gifts to is day-in we’re contain to really for our are comments and I the fourth slightly of extreme our doing after we

Bob Madore

are And marketing dollars. we’re spending they still marketing. we promotions, say When

Marni Shapiro

looking at your And is are share? to of you on things help of market customers and marketing influencers side, of the actually, more to question drive you are one my kind that this are that relevant like

Chad Kessler

mix. the part of It's

We great part of sauce. marketing secret That’s our have department. a

Operator

you. Thank

Research. from the proceed Our comes Please with Yih Wolfe with line next Adrienne question. of question your

Adrienne Yih

Very Congrats. morning. nicely done. Good

Bob Madore

Thank you.

Adrienne Yih

You're welcome.

specifically talk So, impacts one this couple so of at know number kind more of fashion about shift questions, can how adoption wanted and the you the evolution point sort this of the Chad, top. uptake of of I if it to a and of mass

how generate couple million sort positioning, top Secret in you about If terms there of of have you do turn exiting of years the bottom a and already million have swim $XXX offering business, think Victoria's exiting year-round of all direct channel? $XX you could to swim roughly that then the now Jen through velocity continue an much. Thank kind you very is [indiscernible] business, you the swim the ago of

Chad Kessler

Yes.

at goal that We in everybody. have the bottom to forefront to drive and it their is customers that to shift the want that a have for stick fits are And we are customers they with. our fit fits always have favorite have but silhouettes, of seeing we

we that. are anticipate as we to, impact are all, able it We And of bottom seeing though tops. we’re silhouettes seeing

shift We to We’re coming within, in to February, of beginning go the of able days. as key with days always some the to XX we’re able did within tops in assortment had see trying QX. learnings impact by we the XX to are maybe shortest assortments in jeans. that assortment the that from and end and new But we quarter. we impact the happening, And tops design the to [indiscernible] the tops tops the a

have tops we very our sure is the and most So, we make that will agile, relevant team always tops.

Jen Foyle

And for an Aerie. around for year sure, all we business definitely swim see

XX in I As we're on prior well. mentioned as calls, still or states earlier only

following, in surprise service competition years to powerful us Real our... going to power started these as just the said is And to see Aerie platform categories some it keeps didn’t in I on is forefront, it a wanted a see the southern good This I chance a definitely it only talk and for year but but and Marni, about ago, nice here of around excuse say, prior, Real. with we I keeps direct I belts it the in so that for we're swim. answer it get platform the not but us Aerie our of to up me brand ahead business, game. this the the we So, continue question to like and is just business your product channel, and customers of And realness penetrate to

Judy Meehan

Okay, question. Melissa have for more we one time

Operator

you. Thank

from with Our Duval Rebecca BlueFin Please comes final this line proceed your question with of the questions. Research. morning

Rebecca Duval

Congratulations thanks squeezing and in. me morning. Good for

the depths for for some business about of current there? for being of you. obviously SKU or on And a another guys? men's or do to be tops further how couple you secondly, prices assortment, feel rising your of pressures of of Just such improvement combat high the denim both and a for you see thinking or penetration Thank you Chad, some about you that there the opportunity are then women's question starting how are of sellers any to of feel quick cotton best do kind count should the you guys to the on ways tops One, if is you questions. that kind

Chad Kessler

Yes.

sure of to very that. hard and we cost. in in nice jeans, we decreases terms we sourcing year-over-year continue make continued and margins department the our see that In works the see expansion And – we’ve margins to like-for-like

the are around But business depths think store key light men's and I make the bottoms Some has and each have good, we our to we a have in make items have if and build to try noticed, in gone the pulling have counts. enough. between feel drive of with our items there and do drive total we choice accelerated to some our chasing that good we We inventory key forward as of key some balance in you those items business, like enough sure in we sure balance It business. feels have of depth the the to we tops to work areas.

Judy Meehan

in Outfitters. our American concludes great your Eagle continued call participation Thanks day. That and Have your for today. Okay. a interest

Operator

you. This concludes Thank today's teleconference.

time. your your Thank participation. at lines for this may You disconnect you

American Eagle Outfitters (AEO) 31 May 182018 Q1 Earnings call transcript