AEO - Earnings call transcript Q4 2020 | American Eagle Outfitters, Inc.

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Operator

Greetings, and welcome to the American Eagle Outfitters Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Judy Meehan. Thank you, Judy.

You may begin.

Judy Meehan

everyone. afternoon, Good

for Chairman today Chief remarks Jay are Officer. Joining Chief our Executive Executive and Mathias, Officer; Schottenstein, me prepared and Financial Mike

In Operations Officer, AEO, join us Officer Brand Chief and will addition, Q&A. Aerie President; Chief and Global for Rempell, Michael for Jen Foyle, Inc.; Creative

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

the Here, you turn Jay. now over call can to also find like to the fourth And quarter investor I'd presentation.

Jay Schottenstein

is we associates families future. results XXXX, a healthy. success are customers, deliver positive power and and for Thanks, for Judy, preserve and in protect and action your our throughout new results growth. AEO us. quarter. brands to plan decisive consistent our and and of took people, good fourth our a developing thrive also while And the operations. profit enabled cash prepare Early actions to These tested on, our to COVID-XX Yet safe and I afternoon, am of you the extremely everyone. testament I severely hope our proud our our

pressures of in and We Looking back strong all was with flow to remarkable face we announced grew is with a pleased ended the quarter. year each year the Cash approximately in we the I'm on pandemic-related of a adjusted Fourth in $XXX cash note. substantial on profit very saw cash, operating closure difficult traffic start that abrupt This dividend. ended in total we in very the XXXX. XXXX, stores. quarterly our after compared achievement today XX% a strong, of $X.X improvement billion the reinstatement liquidity. and quarter million stores, a a

to preparing Power, tradition We a strong a proud shareholders, and have developing Real creation and Last returning value of Growth our very Real of future plan. for spent we year, also time long cash commitment. new and this I'm

is pillars, our in next years. you strategy in investor at January, which As financial well our I meeting believe on discuss heard each briefly key will of initial progress as we as these over support few each will now the top-tier area. X centered results

XXXX. revenue to double Our XXXX. first $X had pillar exceptional an billion to Aerie and Aerie is by

categories. fourth throughout adjusted the leveraged grew and quarter, growth. base. revenue to grew momentum double-digit quarter of In strategy across as brand. into marking operating with expense OFFLINE of category. part a highest lifestyle category. Activewear quarter and speaks a in July, our growth potential Aerie's Consistent active the Aerie, was incredible power the new the This expanded, year, it XX% During by incredible our our consolidated growth assortment our we maximize exciting clear our in to XX%, standout sub-brand, the consecutive margins merchandise broad-based of this an our was Aerie's trend as profit XXth the

pleased been customer extremely response. with the have We

brand. Aerie sub-brand to is our continue to growth, At the core to strong perform. Aerie's OFFLINE's the shows data new time, addition same In the attracting categories customers

rate For and grew the quarter, led a by undies. fourth bralettes double-digit in example, at intimates

with all and future to accomplished be We Aerie see continue as amazed significant runway.

Our second for pillar is profit ignite American to Eagle growth.

ago, increased to profitability AE the improved digital on pressure and With declined future. grew from major the drive yet the in quarter's Brand's progress XX%, continued fourth a meaningful operating few results ran sequentially and you more very As course X%, clear that adjusted This the remains consistent healthy a priority is XXXX. am and opportunity pleased most stronger AE's a we business, look the cash profit revenue to a AE's quarter. over XX%. was stores, I We made overall year. and with third as heard the weeks focus flow. of

campaign, Our a positive Netflix spirit. show share the Last featuring even week, in standout holiday as AE relatable and We the continues leading introduce gained campaign our franchise product-focused saw reduced hit jeans meaningfully marketing of Outer spring Banks. announced that AUR Forever and XXXX quarter. was to Jeans we stars growth. showcase are yet our promotions again we

We new with experience innovative Snapchat. also a launched in shopping partnership

about team's We I confident introduce customer new excited continue to will in we am execution, to Overall, great are and really fuel ways of progress to proud see as we continue this XXXX. engagement. launch the AE

fulfillment capabilities is continue over the during past critical developed customer-focused year holiday. priority third The to Our we invest to were operations. in the digital

that excellent the growth grew rate service quarter, still a levels. revenue maintaining customer really XX%. million and site able volumes, $XXX while were in by shipment increases and digital proud the traffic I'm to Our fourth experience we channel of during handle

industry the regional also delivering cost Our ensured mitigating pressures. a time. did increases, at had job inventory nice network the at places we distribution team right Despite right located the cost

advantage the transformation is This bottom support discipline. efficiencies chain growth. strengthening will Fourth, throughout results. competitive in ROI and initiative continue and line that a a significant to was focus supply evident Our our drive year

margin priorities. quarter, major optimization drove performance cash and we generated which will fourth strong and reflects gross the This operating meaningful During management, flow. robust and expansion remain inventory expense

growth as our businesses ever AEO in invest I see to before. for opportunity continue will we addition, more In than

a our going to AEO, of At company. great first power to culture. look and lot of awarding is across with Finally, social for In people, the chain the scholarships forward on enduring our months, inclusive real purpose. our and and are culture coming we work fifth There's justice. brands we the purpose-led company a optimistic pillar embrace

great rational environment environment, in we've although The to am also across operations, we and good on and focus continue product optimistic entering recent uncertain an with seen macro still we to about We XXXX real the the our our closing, than face I is more promotional response are customer lines. thrilled In environment are future. with momentum, the we years.

right real Foyle brands and and capabilities a The we today. have created most strong favorable landscape pleased Michael loved competitive operational share leaders in strategy and has Jen retail, in Rempell many estate in-demand profitable capture environment, to sustainable, We have X have the the gains I'm of improving backdrop. to and market retail and joining future. opportunities, the disruptive us

During provide our Q&A, brands on they further can insights and channels.

Mike the Now results. the Mathias to review call I'll turn to financial over

Michael Mathias

driven afternoon, income sequential note ending merchandise everyone. to margins better with strong than and pleased fourth fourth adjusted and I'm saw Jay. operating of up each report on the pandemic. in quarter the that expected We year, a quarter, by year the across onset improvement positive Thanks, to Good last at quarter brand channels. XX% were far

with quarter, double-digit XX% and from XX% of significantly our Our XX% for quick stores. online rose single-digit Aerie revenue total in XX%. performance offsetting our represented year year total growth, up AE, with really mix traffic full and declined fourth X%, for the increase increasing sales, strong KPIs revenue conversion speaks approximately In sales with Online a XX%, of AUR. declines quarter XXXX. improved strong Digital and up the very Digital the the vision high company were strong execution to teams. action, the in mostly and

Our XX%, optimizing inventory control focus enabled and promotions full channel and mall reflecting revenue declines. on sell-through. tightening greater us traffic assortment levels decreased to price Store drive breadth

anticipated, across lapped store brands the which Super meaningfully both impacted Black events high like As by revenue were pandemic. and declined volumes, Saturday, seasonal as Friday store we

Canada, $XXX dealt AUR. X% partly last relative to quarter. closures that days the the impact to strong fourth was to conversion of sales By last in penetration, reduced XX%, also by in the a year's selling brand, by building by trend store and XX% grew greater on were demonstrate pressures other affected Aerie these brand XX% with the million Comparable channel increase store We quarter. momentum. fourth strong to total regions year, across increased offset throughout California more Revenue store Continuing year. continues the With AE's headwinds.

significantly, optimization XXX see reflecting in Total X% our million revenue to gross dollars margin continued Brand to third during $XXX initiatives. XX%. improvement the basis gross from were and declined we to X%. margins comparable AE or quarter. promotional and discipline Merchandise expanded $XX expanded increased sales profit inventory pleased million. points declined the quarter, AEO benefit the However, X%

product Our received, higher which enabled were well assortments price full selling.

increased leveraged of last $XXX expected, X%. compensation. income and costs absence well fulfillment was to have due and operating Adjusted result strong year. SG&A delivery As on XX% expanded This management focus negotiated expense and as margin from and incentive million significant cost was X% was higher Jay as X.X% a of per warehousing store-related quarter. the compared expense capabilities. compensation, rent higher savings ongoing EPS we than our incentive costs. impairments. declined in $X.XX reflecting incentive labor impact this, of pressure distribution points. to new our XXX to higher recent Yet, efficiency Offsetting In share better as due SG&A delivery, increased Adjusted saw the compensation. operating less across other the mentioned, expectation than of benefits benefits of execution would basis from Adjusted

XX notes. unrealized XXX count share our diluted was of Our included dilution shares associated with million and convertible million

I'm expansion merchandise Eagle testament rent improved both and operating $XXX increases to the operating XXX income really strategic brand margin Adjusted on million execution. basis XX.X% and despite our due decline. to some adjusted is income, revenue to to generate see American Now strong which in savings. XX% a to increased brands. detail margin operating our ROI points pleased brands mindset

was The XX% Aerie's at million, reflecting Eagle, meaningful opportunity operating down compensation. inventory and increased lower underscore operating to Adjusted Aerie as American from for demand inventory growth. is margin growth. inventory While brand improvement. incentive Corporate merchandise adjusted lower expanded to to incredible X%. well XX.X%, XXX Eagle future made expense clearance. unallocated to primarily revenue initiatives optimization year. support improvement declined have as progress there to $XX we $XX grew due want was million. to American XX% income continued end-of-season I leverage increased still profit XX% Ending basis to clearance inventory expense that due to points XX% margin last

returns higher validated very and This profit is generating XXXX, several we improvement deliver a a are ongoing, long-held will on our customer with I exceptional over work investments. meet material believe which by view inventory the demand pleased and on We is discipline that experience next years. our have an during inventory can while impact

an XXXX was continues sheet and advantage balance Our to during strengthen.

generated we $XXX quarter, liquidity, available fourth At ended $XXX approximately million including year-end, the million short-term undrawn was cash in with total During and in $X.X cash our period revolver, billion. flow operating our investments. the and

outstanding only our convertible currently Our debt is note.

Jay mentioned, line XXXX, are and at In program. with capital $XXX our target pleased investor our have average $XXX in unsuspended meeting. dividend shared of reinstate As we also XXXX to annual from and to in which is expenditures repurchase we $XXX we up million, expect million the share million our

XXXX our flexibility, The of over year. including almost our from to were so XX majority around decision-making XX expirations. year, lease expiring including We The XXX locations monitor and store renewals have closed customer sales we We XXXX will fleet. our leases transfer this stores. our rates will these X store significant vast XXXX, actively locations total American Eagle inform for continue in

XX% be material revenue We stores, in to of At XX to including laid rent XXXX. OFFLINE stand-alones continue mix XX locations, Investor expect $X.X our and open and January, will to margin to to operating in a a by out billion negotiate area Day savings and XX Aerie we approximately side-by-side. plan path which a

to the expect continued coming Our make in back goals, year. confidence our increase progress these we half results in and

operating we Looking pleased on this uncertain, started we environment annual not the and year at remains strong guidance a with are XXXX ahead, to how to providing time. the put our we path our results Yet, so XXXX are us expect targets.

go-forward we expect operating and quarter from closing, income and drive XXXX exceed Aerie's In results profitability, on began leading to strategies the first AE's optimize the first we both quarter, establish XXXX. our of implementing to our investment to capabilities continue returns. and Regarding revenue focus growth,

in validates that it quarter proof our point Our future strong our and is confidence performance strengthens for open during a the we will our opportunity. key approach that, fourth questions. up With

Operator

Instructions]. [Operator

Adrienne comes question Barclays. first Yih with Our from

Adrienne Yih

momentum. well exiting done just with me in tough really year say good a on Let

congrats. you would is business, Aerie the talked for having to to on side-by-side? the often And open question on the any first on of about end trends? than quarter So days. higher to impact give stores growth port the inventory at about side-by-side about inventory you you're relative about the be can then congestion I locations, is and location And of able how sales notion standalone? color standalone us thinking the And the core then my the the guess commentary that going the February when Jen, of take access vis-à-vis that the talk these the XXXX. Can quarter being - the

Michael Mathias

last with quarter the can for even the date. pleased part quarter in challenge mentioned down really keeping of in definitely we've has a We're congestions, or how Michael much of so you here being and weather the is X, was on the there's color Texas especially are the on broken, we to a since pleased on of seen with or the what will a and two. question the all started. I just amount obviously, take general, there impact of week Southwest, quarter. we Adrienne, part lot noise But first are how that answer. maybe on the some snowfall week and shut for out with February the tabs port far you, And And add the weather. of Thank to compliments thanks which

sales really So I in where terms past total But results, signs we're the guidance quarter, a XXXX we which that. we think good as for and both of on level of against we're hopefully at and seeing line. in headed here gave we're March, today all what the operating as general the really we're income line expecting sit just reiterates we're why quarter early on

Adrienne Yih

those just was gross was on I the flow-through on - that sales. the of any flow-through follow-on, Sorry, color just margin

Michael Mathias

good the I We're merchant feel - Yes. We're still our in talking quarter. margin still we improvement we've really inventory about is about, mean, - is the great that been in intact, first shape. the formula continuing

are to We seeing that date.

operating So quarter half of in from what is rate the seeing the to leverage, quarter we from where are continuing benefit margin P&L third perspective, saw both we're we our and year a both gross fourth in expectation. back a and and the

Jennifer Foyle

Adrienne, about then, now, store growth regarding And our Right opportunity. we're even - equal.

approaching stores We we're footage we side-by-side, get true stores. a up more so where standalone and have XXX XXX have some standalone experience almost XXX cases, the mall-by-mall. and In a opening can this exiting square we're and And Aerie. of side-by-side

the mall-based on comes is on depending this opportunity that us. before deal the again, and and mall So depending the

XX this open So are to stores and year, we Aerie are OFFLINE stores XX then to year. this open going

beautiful the enter going use see a well. new as every as approach halo Adrienne, So we that is reap our we're as benefit When we you approach we're And effect. online just to opportunity. really market, know, to we continue excited And about growth that what market. we

Michael Mathias

Michael. it's Adrienne,

we proactive, ports. But adding very a situation carriers, teams up good flow quickly our I have different into real your They're sets inventory. did touching AE February. cause We And Aerie did now. feel very congestion, aggressive the like And ports the handovers, floor and quickly to and suggesting, of our about and tell our about experience from the January calling additional at delay identifying terrific on you you, Just did for the were overseas job. our U.S. terms to us both that on both moving very inventory ports. question in

transit our longer, while an for times it's guidance. we accounted all with issue And sales. in see So don't are

Operator

comes Our from next with question Matthew Boss JPMorgan.

Matthew Boss

other areas Congrats on share pandemic about Jen, customer of you're the side opportunity you from Maybe market the continued think in that how top leaning another assortment first, would to that we Aerie, into nice more of at acquisition quarter. drive see as the and you rank the here? momentum new

Jennifer Foyle

Yes.

year. concept. in a year. a results to this and like new remain I fired. business. that, we will seen very and OFFLINE innovate that we're seen dominate. the a tops excelled excel, And category then like XX I there. only really and for nice still certainly, destination. year, think in unbelievable continue we're today. to And had we're intimates, First, results, this small We're really, stores comfort think going opened categories OFFLINE. But grow, we've it wants us, to a still I'd throughout in mean, but we to really we've did category impressive to results brands, that great to great intimates, which continue we say, continue results testing tiny generation would learning. challenging I killer formats feminine, us just But fleece. All the during to really I Unsubscribed, X But is and category, pretty in Not mentioned, - pretty X apparel I was I team, brand, lifestyle dominate have the Every that as various just intimates in and really what going seeing and consider just Aerie

are grow. we going to So to continue

And of did Our we grow base to of speaking for XX%. customer ask that continues customers, more.

were So there our considering really nice entertain able when we to were direct still uptick stores brand. to new customers that to and leverage closed, business

Matthew Boss

exceeding think just as margin that XXXX on even opportunity gross gross levels to and there which were build IMU in costing, historical about any or we about how year, performance then gross structural the XXXX we margin, think best impediments inventory back higher? are you merchandise And can margin on management this Great. margins, to to meaning think as saw we

Michael Mathias

mean very see results year starting our a here category yet. still we the we tackled and to in - pleased It's just we Investor point, opportunity benefits. of the with. I But the I about really us. - the too, initiatives, Mike. was Day, of Matt. first significant work still in what initiatives I we're back haven't every No, opportunity the mean the half, have lot talked for - saw benefit inventory optimization And in Thanks, I we think. that We I we think And in those to think half

counts, on SKU refining in. tops being I talked AE and the there's Bottoms brand team fronts. other some a think working Jen a choice we category, are about lot your and and counts - and where opportunity

everybody So we I That think terms partner we or in top of beyond achieved to did one so was we QX runway license since remind in in of $XX - $XX our about, the our what we There's that's XXXX. The margin margin see impediments line. margin about plus gross benefit asked, see don't you a still benefit merch which to onetime side of in that to benefit expansion continuing payments. million the gross any to the piece XXXX. things, million line, have

of nothing our ourselves outpacing But one-time to if formula reminder essentially. The That's that's - else XXXX, is out inventory sort Sales inventory there. intact, a that that's still optimization, we're grounding position So inventory a in outpacing sales. goal. hurdle terms doing margin in just we're and everything else of sales.

Michael Rempell

right a Yes. Mike, to asked. back-to-school just through benefit he least see I add We markup now. that as do And since would on at specifically

markups we the shipping through three ability good the costs, year. achieve to first about very quarters feel So despite of higher higher our

Operator

Our Chen & next Company. with Oliver question from Cowen comes

Oliver Chen

you the you of where management what's and lower-hanging about physical particularly opportunities sure fruit, is some think AE just contrasting and and localization as making want also tops, inventory your have to the with takes digital the opportunity ahead and you there, Looking and continue men's there. map your you men's between Would road it? and the and where to women's with women's the are innovate love on inventory

Michael Rempell

years. take pleased We Okay. chain potential that the have that that we had of Mike extensively do is digital the you in management. we but of - than and expected you about expense, the the would there's we had talked what that your to very a supply better did deleverage just was delivery like results we And do I Oliver, nodes we better strategy, question consolidated with because like closer in deleveraged lot shipments. the and we've more because transformation, could about our scratching we're when has. saying, we're surface. I I'll going feel inventory set I'll less up that we our part take we're really, to and Obviously, your look quarter. And we fourth covers inventory mean tell to coming customers under first the

have making we productive sure even by by on much in-stocks more that making it profitable. doing So better inventory, so less size, store, we're inventory though and

we like few that expanding opportunity did quarter So strong We're great we another both, to And it's has for next fourth stores to pilot the markets leverage in feel ours about that. again, a same-day our provide to months. over that customers. business great channel, channel great XX experiences for digital strong

is So question top map. Inventory we're to productivity take also our there's customer road And Jen, on there's a but experience. lot improve to that you dramatically a tops? to do want the the do mind, on of going lot

Jennifer Foyle

Yes, Oliver. sure. Yes. Thanks,

my So and to dear Oliver. tops, near heart,

say there impressed is more team great the really team, And looked talent let started really always run with ago. Branches. That's impressed there's are thrilled talent, just woman bottoms design seeing with down just men's the really one full And thinking and resides that important, great was getting merchandising, we shift really really that with a where in to who in Look, a top. AE the X.X go when so a realigned X there's throttle. September, on start have some that We first forward team. Let I back outfitting, than to want with that were I because just really famous new items to years merchandising, really work I back we're buckled on and and René to and brought items. in. I'm the from Oliver. from to that first been really Fast new me at me and first key full we've I women's, we really think results over underway nice so that hard also bottom, made team

in that So we really bit with a back see move. say I seeing bottoms, little that, started more excited September, back in Oliver. shift with a And getting to bigger just going nice cycle. denim, fashion looser to into of we're bottoms we're a cycle would underway fits a here, We're fashioned. bottoms is We've done have to just a That Denim great assortment. Oliver, team, fashion think job. a a maybe And really test I scale. and machine. balanced really true

work said, we're really going practices we're really, That items back really that's getting Oliver. going - how it, with bottom. So tops to would best have look to And to I in the we're women's that still. at those key be again.

the price said, Just quality. going But Oliver. that back fashion we're we're quality in to Eagle. a value our turn I'd on we're American say not like to that and cycle, into for headed great the known

Oliver Chen

of follow-up ESG. ranks on well the ESG. Cowen lot for really on A surveys a Eagle

love focused on your prioritize with American know to about for what Eagle Just terms would important ESG. on take to investors of in respect or is what's

Michael Rempell

reduction this of mean it's in like out Michael. goals is very coming Yes. carbon years. our feel And Oliver, I - leader. we the terms put important aggressive be to in a We

it. Our associates about care

a know and to teams way. results. a inspired great jeans on that taking by campaign received going we've sure sustainable way. iconic Jen's We REAL concept we're recently And launched really those in like more by are much and the developing making both and building and goals. our it, with they about product. our care were excited achieve that a Customers customers made GOOD in sustainable design designing I product more and Our

expect. future. the associates what us, and way expect. So be to think we good business. good our our going the that's both customers for - And That's what that's environment for for the That's it's

Operator

Telsey from Group. Telsey Advisory question next Our comes with Dana

Dana Telsey

progress. the see to Nice

how this seen being and side. new on bit American Aerie Jen, mentioned talking just a forward? styles you side that and go first for in you had through the that new we delivery the of little how due are for less spring them delivery be and costs fulfillment to expected You levels, on Anything both highlight on we then with than planning any going expand new and initiatives. some some on about particular And And on inventory Aerie on to as year? Eagle you're I've planning Can what having, you're thoughts products of watching the half about should break? the jeans you're for?

Michael Rempell

Dana. Sure,

I'll we Look, fewer every increases did first. Yes. did some using talk of But to cost about by closer shipping delivery by those were So order, able shipments as costs to carriers. absorb offset customer retailer season. last we increases per cost shipping by and regional some

the the to of great increases of very to hired wherever it's map a focus lot new road team. supplement to look they have We've that delivery offset had this we been on And effective year talent And a maniacal was team. for possible. that great strategy a us. So that talent really

us. big a actually for it's So opportunity

the in from is quarter shut product over were shipping shipping I kind we first trying our year place the stores, and down stores, liquidate. the about were product we we and of as As all to when we think are the

the as So costs were absorbed actually opportunity individual for units second had the stores shipping all an country. highest much the across we again, In year. our that higher of And creates delivery from quarter, we delivery. rates we

localizing our like and we job, regionalizing feel we job in leverage with job before, it's same-day so us. to still - early our I We an third creates opportunity inventory the inventory packages. that days like like better deliver the delivery, do local of the did for carriers to to there's team a supply did feel stores for that and more the And chain for opportunity fourth using curbside and fewer quarter, we the like feel although transformation said So and much we're strategy. that proud to in shipping and extremely inventory, customers

company. the path for It's obviously to focus the forward. of like increase but mitigate growing feel the of good we huge we going a a expense, is much delivery So really and much deleverage have a

Michael Mathias

And number can really it, there, quick from inventory the fourth just I the take spread, quarter call down to of we end Dana, you side the individual piece being performance. And X% XX% quarter then down saw fourth the were X% real XX% of which the at XX%, growth. revenue, inventory it, XX% with down each down on up inventory on, really Aerie AE X%. on sales, brand commensurate

that Really, So brands first is back total And year, quarter, refining something this of at then plans. we ahead at year, and maintain. spread is speak. the we're level the in have really for QX refining still time the for us looking of but still our as definitely and we're first of looking really, QX, the the we're we're time some half half to those the

Jennifer Foyle

we're just really had And I'm returns unveiling Dana, is break, tailwinds launched our and favor right all tax of really did to in to campaign, with we which and of results Without out. ready great and We were package, the new pointing receiving. organic our which us, is some campaign. we million so fashion I'd And we're really in nice love Swim these to the Banks Outer are categories up. a and at to starting likes get best look, impressive get now, their for seeing ever, to of weather all last they're week, the excited. on, to and of in some ready to is we some out that break. our regarding speak, comments shorts when that which pretty but a are to kids and spring key masks that nod from Instagram weather stimulus happened our is views, big our say the us. products, that results the it's number secrets, seeing break, X the AE, like for end starting open and

all just think have ready entering break So fire. time our period. look, And guns we're we I spring to

Michael Mathias

again. Mike It's clarification. one Dana,

Just about compares. half, as at XXXX inventory we looking the first I the levels for are talk

inventory XXXX well. at activity for understand not Just not the Obviously, to both QX are comparables. and so the inventory once those all benchmark pandemic - to was good inventory our first QX the that, with so you probably a revenue our look but on as hits, XXXX only -

Operator

question JJK next Kloppenburg comes with Our Associates. Janet Research from

Janet Kloppenburg

Congratulations a of great change. year on lot good and a

I'm to I'm as little see those this And those store talk productivity levels how any year from if of still looking it at and a to can bit Love well. you're 'XX? And change hearing satisfied. cetera? match you little the as and returns? Are digital abatements, out. thinking pertains where settle them starting it we a growth positioned? lower if rent for just seeing reopen And styling fashion about threshold Mike, for to wondering you you up And levels, bit if And go Jen, fiscal also what about Jay lastly, what stores improve? you're maybe to rebounds? Or shift. slow a just about for about First, casual because more How could to wondering jeans, expect et and should you're there? this to dress level will trends. shift as be spend you'll be productivity complete your hear a you're and I'm traffic away in

Jennifer Foyle

I mentioned and regarding shift And looser Look, definitely earlier cycle. We denim trends, Janet. really fashion for a are in denim. a it into flares. seeing women's, Thanks, it's

at always of comfort forefront However, we do. I the think everything be will

jeans we in are most And jeans I both women's. Our think results men's in comfortable the really posted businesses, jeans. our great and

everyone for speaks run-in nice period volume this We denim were that sweatpants. it time only well. where selling assumed think a had as I So really we

to were make what with going for But to and the hints items right lounge. about that are with - to the the what that balanced the are key stars in always And and are rises, sure what And think there, Rises - comfort well when Aerie, our bottom we certainly, then we as have with we're in work I look, it seeing tops. that our we're everything am getting fashion always think seen in and that going are I results fashion. And pandemic, certainly assortments innovation we to aligned really and excited and as And foundations, still the about have really about is results. can high, shift that XXX teams we with tops we're nice intimates that right? for, do continue the side-by-side. we're again, tops been some are that. and and we're brands, support mentioned this, have the bottoms, the these seeing. some balancing to both we that talking right? I've So what of what pleased the in really are new out of And trends I

able with and - Aerie think leverage brand So you but we're in really the we're be support going going brand, intended, about to AE to great pun the fashion too. that, there, no to intimates when

great it's both sit both to and maximize for brands. OFFLINE really brands So try I where get I both because to today,

Jay Schottenstein

Yes. for was given the shop. the the news I'm dose Columbus, that very the J&J this And on in shot Center Schottenstein about that very the we're in optimistic. Ohio first past was great at Janet, J&J. J&J This world week proud first

of are we proud So very that.

Janet Kloppenburg

Congratulations on that.

be. should You

Jay Schottenstein

next you. case, the My give a XX vaccinated days, will out. be go country very is feeling Yes. at lot this rapid that to to is a and of confidence that Thank people going

tell some And for seeing already being to wait to to in affordable can't get that that going locations right I at up out, are us. malls. were probably very for offered us new great rents about get best locations this out people the we're that the want out. People could excited pick is you in new now. We opportunity

the see year, things to 'XXs. going believe this going be next roaring we're few So like a think to into to boom will And that I It's a we're going very months, then country. in start next optimistic. getting I normal. back

to of going see lot You're excitement. a

last And gone hasn't and digital. good people going enough time, would and You're is same our be see to with getting people the shop challenge get they to out. At us. to want look, that experiences online down. It's It life people keeps several growing. And use the today. if of at it more getting part business, years, of you look the more

Janet Kloppenburg

- Mike, any yes. Yes. of kind

Michael Rempell

Yes. change goes I is but trend bottoms for a great it of without AE would just the - saying, business. in

should gives for wardrobe, it. Chad I all be strong out a know AE really, So to Jen and and and over the bottoms And anything really teams, reason refresh their they're their that go business. people

Janet Kloppenburg

pricing cotton Okay. And just lastly, right concerns now? any around

Michael Rempell

watching. I all back-to-school. But it's there's Like No. raw feel the about increases we're we're with. good definitely something prices I that said, in that mean cost definitely we we that locked dealing material through have

whenever and there's merchandising strategies us some that And We fibers and book helping platform also. can. fabrics early are trying to we are yarns

of that strategy that less were assortment deeper and Jen's of and productive. costs being lot markups of narrowing the that rid So narrower the actually gets styles a more fringe had lower and

cotton. paying watching taking - to. try something We're mitigate to we're action But increases. we're definitely to So attention it's something aggressive

Operator

Simeon from comes question next Markets. BMO Our Capital with Siegel

Simeon Siegel

cap to the year. Nice

great obviously, for revenue growth So Aerie.

about What I follow-up do think similarly, them I a clarification. quick revenue understand Aerie spread? international. help to on? guess, through I'm then I'm the a quick going with go charges just to trying you missing those? why can is assuming just - impairment new us How just sales but stores? something, comps lagging And Just growth to comp Can the then think you are forward? had are speak on you I'm And Mike, that the

Jay Schottenstein

our excited, operating we're seeing and middle XX% though at the of at operating great and pandemic. remember You stores one We're of most we're in we're the XX% still we're still In optimistic There's states, pandemic we're thing. a a progress, still have on. still to capacity. going some even in capacity. That

Michael Mathias

Yes.

And revenues. spread revenues, Jay. the I mean, that sure, explains total total because, actually For

external reporting so then versus the we're with all revenue year results, versus reported count last California, excludes Canada. total the right, - closure activity, So comp

out total and comp revenue. for pulling this purposes, reporting for last we're we're year So out - pulling year

against than revenue is the this That's helps impairment year. So on the that last Aerie comp. explain front. If in a lot of And why little lower that. a cases, revenue revenue total year you're reporting no then

if in think short-term QX. be you flexible stores. here lease or the care and mall-based we renewals. So what being terms, or we what in QX, activity activity the took about talked about you up reported most year of about lot when stores, tied then the would lower-tiered just that disclosed - and this of and really, of just our A the the think in activity stores closure QX, we

So opened a the impairment lower-tier have XX assumptions back more some around do The up. later, tourist locations, here almost group. QX actually the of back mall-based of with now X, locations urban had in we some or QX months had lot not that that reopened to flagships,

and time really an hit around that of were - that around, assumption calc back - Aerie, came exercise for that accounting specifically, that's sort was you're urban tourist of sort the flagship were change, this of what of we So which we in the locations using, again locations. a impairment and the impairment some and part being

Simeon Siegel

have a international license Got business. it. And then you nice

do EPS think of about contribution year? how forward? big the how So - or you And what's EBIT going this that

Michael Mathias

Yes.

an we're you digits. double low to the that. that somewhere 'XX, EBIT that in to and international I get been double looking contribution was if go the digits, And significant contribution $XX EBIT 'XX, to probably - those think the For even in from around levels in bottom low for without QX, line back 'XX, perspective benefit would have back surpass

for all sort on conservative growth we likely we're bullish levels see. around counting beyond our being just conservative. term We'll we conservative. the in targets. bit we're achievable. think, of kind Short in big And back an think getting or 'XX that be be - a I again, little believe very what international 'XX, that be is levels above to that possibly is 'XX to We'll we're Investor said as we could not not Day, opportunity. or of And

Jay Schottenstein

Yes, I would our very business. towards say international conservative

Operator

from with Tracker. comes question Retail Marni Shapiro next Our

Marni Shapiro

North Wasn't have to a back welcome I ago? after you. guess, big-picture years. I Dawson's And So Jay, XX-plus question Carolina long that actually Creek Congrats. for

You strong balance guys now. have sheet very a

ground. it. stocking over of couple been and Aerie guess Dormify ahead And growth these and in are you And are It's years, has Urban about investments cool I've in of tough the friend are today, Snyder. it's the it guys doing of small because Unsubscribed lot during meaningless. and kinds and had things. curious of pandemic? are of just because know random of OFFLINE, Todd the a from at lot last Necessities of I'm you things of actually you you those tiny thinking I a a solid have different guys what to how a invested go there I have of mine, with that You curiosity lot where on which lot dabbling a a companies company

Jay Schottenstein

to Unsubscribed, not All right. is which it's cash. have a first of baby. question, I'll good answer better answer the the question the of Jen part let them the what I'll in and have about sort than first all, of other Well, bank cash

we're And on focused. our we Number I our we even happy we We we're the Mikes do the to we way we're American make both that position that But we us, complements are our that we're that sure the that hear one. that we it, something this out for So a can if Investor right see you big That's create see that Day number in a that could upside. that in wheelhouse, now strategies see they're at call even we the are call what questions, we that on. believe interested. on last opportunity month, questions if sitting upside two, on what very doubling the is sitting tremendous answers of think We business. doing. a our Eagle shareholder laid very stay have focused goals answer business. point value. Aerie's bizarre, Jen We We have way we the had initiatives

came something So We to makes that's us. for take that's sheet. a us right the opportunity it our it very major it's We has could game to worthwhile something do but us, advantage complements and of plan. it, that balance be But beneficial have belong. and good

Marni Shapiro

Necessities successful Urban and ones have or have the Dormify been like you've successful? your in And been invested view,

Jay Schottenstein

of learned from test it. Look, we working Well, Whether shows it lot store. we're Urban Dormify, Necessities was things not, a of lot with. we or things. a a still operate us

talk big. that. Todd to have be upside OFFLINE too big OFFLINE received. is it's experimented opportunity I we a Jen going OFFLINE. good to we think And I We on, mean has think let that because and But very an very too. opportunity, for it's Unsubscribed, been that Jen? I'll Snyder well something was that's

Jennifer Foyle

the during up opened pandemic. We Yes.

store And open Hampton. East end up this store month. is do Our in first Westport another at the of we in

that felt on opening, sure a was slightly really and slow just team a Unsubscribed opening looks was going like amazing. the - delayed, our plan right product get team things all we're excited concepted, happening And that a The they're amazing. the next results tiny just understanding that that try there third-party about we customer and nod we're what store. we're What for to so you but were have working Westport. there, and new Everything in We organic are but - - look, call amazing. out out retail to is there thoughtful and I room our The looks response been Dara delivery. has this that generation, we everything at just it yesterday. it's craving, has up-cycled, And for was in really be now. XXX% - track spring name all been just store is after to great. and So this not fast little the We retail, or fashion, there, whether recycled. slow to XXX%, our right, green make zip-in retail, it. artisan or what received

the launch team And concept. look, little brand. So this to we're really proud that of we've leveraged

we it So - right - now, and at it's disruptive all. don't not find we're

our because it's little learn complementary and other scale and test for we learn it's brands. higher can a there, fact, end, and and In

competitors, positioning. to opportunity really again, with we're open the definitely OFFLINE. And line. when So looked see that numbers that there gracefully I out that in business the right not we that going It's OFFLINE, surpassed and of like But sort up I now far at some I the it's numbers hear in other in some spectacular. year-to-date have already. And number and we

can't again, think business, that special. stores want in So the to get those is I resonate normal this is open brand really to customer OFFLINE is get we the and with back that store. stores a to the going know because I

growth And opportunities. we're path just about excited all now. our billion on So we're to $X the really Aerie,

looking $X our and now right this years X hit we mark, for we're growth. And of So next billion time. on

our the ready. they're eye prize and have team, billion We on that team, Patty $X that And growth. on

way, So about we're humble going but opportunities. excited remain along we're pretty the to these

Marni Shapiro

follow-up. the quick One stores? size the great. of That's OFFLINE What's

Jay Schottenstein

Friday Also Aerie add, like that we're to special mark. celebrate billion the going a celebration to to have with $X this team

Marni Shapiro

stores of average? helpful. that OFFLINE you're the on That's that's What's awesome. Oh, building, the size

Jennifer Foyle

testing we're still formats. various in of So the process

a - shop shop we're So we open within have up Avenue. on to Greenwich about

We have side-by-side. a

we're with to zone playing the still should X,XXX the actually I square feet, of X,XXX footage. say perfect we're So X,XXX. in square But

Operator

Fitzsimons Our Markets. next question comes Capital from RBC Kate with

Kate Fitzsimons

on guess, the cycles Congratulations on silhouette or I shift results. I tip Jen, the is of opportunity these about duration this guess, the experience, speaking obviously you And really your what of, that within when mean, about cycle excited I the then, OFFLINE see Aerie. in - of we are Jay, that the you some we're fashion meaningfully? seeing Jen, you're

cross-shopping OFFLINE cross-shopping noted the Aerie seeing the be with to speak helpful. We of Any those into would new brand. AE? go there You OFFLINE often customers customers with is What Aerie? is you insight Are bringing AE.

Jay Schottenstein

Yes.

answer let Jen So then for the I'll second, the part I'll answer a rest. and first

The important is we denim Jen? thing strong as see ever. as

Jennifer Foyle

the aging myself Gap, denim I at of but this, fashion well, I - this Yes. one - I my say, cycle. I I first mean, was I have think when when say I'm to saw

definitely I have So that and shift in transition. have been and there experience that

I today, also survive like again, question nod embark strike brands and see make pretty Again, and our now. But we a brand. balance. answering our to excited sure the and that about that you - have cycle. trend and we're I that and are that's drive about into part and Michael our thrive we back leverage I And about that and fashion market face, we sure right, on it of where but opportunity. and the but ones And happening feel in for the the using the our excited on able those I'm what really there, I we know, fast saw well. items a sit cycle don't I to the I think And If the and on have what important. keep focus a opportunity lot I still feel a we making I like denim But have like share, word pretty fashion. come keep of to again, profits because that's have and I'm retailers this. I'm It's are really we assortment get and the our fashion. really But balanced, it go, I ones it's fast key to heritage about we is fashion our that your saying want said that's to a but longevity We're So timeless. from have well-oiled Look, right right - that is really just feel items that's IMUs not that back-to-school exciting. have it,

Operator

Citi. with Lejuez from comes Our Paul last question

Kelly Crago

Paul. for Kelly on Crago is This

quick you XQ guidance. a get you what to Just Is a you sales that? on then about Eagle could well to any think 'XX? quantify question way bit be the in And above 'XX on sales as to there that brand Aerie's? F think you when American expect more granular XQ when Any way about brand level, expect you as XQ be do versus

Michael Mathias

yes, at real level, but and we're the said with this this the any more comfortable We're no point specific not beyond a put what because total providing for at continued exceeding we guidance that thanks around no - of revenue uncertainty. than question. point. But really granularity Kelly, more quarter general at So guidance just real bottom line,

Kelly Crago

it. Got

fourth where high-level a on just basis? F And would some did you quarter think on so, And are Anything line of mainly as can on margin you about around Okay. that lastly, year this strength about you the to If 'XX? some Or think the about that item savings versus gross margin as how then well? think any shakes versus see we be buckets And then great. detail should What as to that 'XX? in merchandise think was marketing? far Any out just SG&A, F occupancy in thoughts quarterly big leverage expansion? that cost quantify? on in the XQ,

Michael Mathias

Yes.

second the occupancy quarter, in first. I'll significant take margin question So leverage, Gross fourth yes.

reductions, but of so the the impact also rent negotiations, it the rent was both. combination Now took, from impairment we

line gross occupancy largely or So we delivery the rent saw costs. within because the But buying margin merchandise did was our significant buying leverage drop headwinds. offsetting the bottom and we within from to was cost distribution leverage occupancy margin -

Right again, uncertain. There's now been target, So variable - SG&A a I'll 'XX, flavor you year give as about XXXX. you as of a being within moving SG&A. it's little we lot can for the bit full of imagine, against a because costs talk

now, to at against growth, As we looking sit high single-digit that here XXXX. it, it mid- we're of sort in call

mind any 'XX. kind cash over But going keep year - of single-digit didn't pay in implying X of couple a rate So that's - XXXX. things back We X- from there's again, low to when growth incentives. period to

sort which is rate would placeholder you, implementing have - have that we we're in just forecast in of managing how there can - rolling approach of And pretty I terms the a robust a to thing that you then imagine growth across we gave So other year. the could say we I move. we're

a perspective revenue inventory line. line we the as see our at we look we expectations - we're the we and demand from that, So expense thing around set and top at same shifting look doing and on

expenses advertising, variable other move So that. definitely with labor, could store

is of of high but kind moving on current I'm to and to a that's parts expectations, giving mid-single-digit, So that. there's lot based little revenue range higher a - you variability

Judy Meehan

our everybody. That Thank We'll to for you, today. concludes participation. you talk right. Thanks All soon. Okay. call your

Jay Schottenstein

everyone. Thank Stay you, safe.

Michael Mathias

Stay safe.

Michael Rempell

Stay safe.

Operator

This conference. concludes today's

great disconnect day. have may at your your lines and participation, Thank this time. for a You you

American Eagle Outfitters (AEO) 4 Mar 212020 Q4 Earnings call transcript