AEO - Earnings call transcript Q2 2022 | American Eagle Outfitters, Inc.

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Operator

Greetings, and welcome to the American Eagle Outfitters Second Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Judy Meehan. Thank you ma’am, you may begin at this time in your presentation.

Judy Meehan

everyone. afternoon, Good

Operating for Chairman today Executive remarks Jay Rempell, are Director Financial Mathias, Joining Officer. Chief our Executive Executive Chief Michael Aerie; and AE President, and Officer; Schottenstein, Mike for Chief me and prepared Officer; Jen Creative Foyle,

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

the will Here, to you can also Jay. find investor presentation. call over turn the now, I second And quarter

Jay Schottenstein

an retail. unprecedented Good afternoon. in clearly Thank you time is us for This joining today.

We patterns are years, and a we macro highly through and are on few cycling last and the COVID extraordinary uneven demand environment. over stimulus brought navigating by volatile

below on our challenges these reflected weighted revenue plan margins. markdowns and results in came profit quarter second Our as

goal progress made and be with were an right-size actions these our quarter. firm and to Significant highlighted the we initiatives. included demand our changing response call, across half. reset more inventory was business for improved quarter first in our reposition base in to the a taking second This expense we to to in both second the On demand line

the side, with spring cleared inventory fall and the entered levels all quarter third we and and goods On better excess back-to-school inventory have merchandise. and summer fresh

reductions organization. We also the actioned expense across

review, reductions hiring are expenses improved generation. non-critical drive to capital and cash further a freeze, This lower As taking further we in includes profitability Mike will steps and spending.

also We dividend. have quarterly our paused cash

have level dividends to We of in share returned million cash through shareholders combination $XXX XXXX. since our marking a highest returns of repurchases, and

optimize key partners are experience holistic to are separate enhance structure our change strategic we the While years. initiatives, will strengthen cohesive we and expansion on our of including combined as enable as am and committed we customer. more fueling the international experience further over see markets, will focus across as to long-term. focus continuing changes a our approach This made this take The return to a I I over with facilitate building more momentum to license the note, create brands. and efficiencies to tremendous we we cash strategic on our new execute business, a few structure for brand we Canada continued our consumer seamlessly opportunity year past On principle. positive includes channels. and the of rest the This pleased while leadership Mexico, will where the a for strengthen to shareholders cash operations, position, more with and to fundamental store view our digital growth

remain XX% platform brand growth Aerie’s X-year drive incredible go-to not on destination As for focus areas I brand global compound growth. future rate. challenges, affinity we industry their expansion navigate continues dominant and strong to extremely new have we chain exceptional very eyes outlook through our revenue innovation, the near-term multiyear annual growth strong key growth. reflecting second see products further brand to recognition, is Eagle the off with and youth macro bullish American of potential. for quarter the future potential are taken profitable new and a offline and fashion Aerie leading with fueling and trends for

engaging bringing We in continue and our customers to a invest seamless across experience shopping and digital stores.

making a We encouraged while week, business potential Quiet solutions. publishing the I cost-efficient initiatives. first logistics and introducing am I about benefit excited of reporting innovative to to our the Platforms Quiet’s thesis progress initial providing our significant business business am and Our and differentiated ESG on are is on growth by growth revenue the investment offering standardized look and our increased expanding more proposition in model. confirms ESG base, forward long-term its our third-party value next self-park operations, logistics continued we also transparency. the of performance proud the report The

will we supply improvement building actions call chasing over to fundamentals stay these that, a strong core in the I business. are unprecedented Our focused are and our brought have year there taken into customer reset conservative to significant this marketing, us creating turn on Comparisons undertaking. resilient. across will brands times teams the is to acting I With connection focused landscape continuous compelling success chain more and driving past, agility purposely. thankful brands the we to were quickly meantime, we demand. with in and we that for stabilize the know in healthy product, to business unique Jen. continued will is our do our eventually operation. In restoring the have on and Yet, am great improve, The the and

Jen Foyle

entered as and environment clearly remain assortments and adjusting a pleased on our afternoon, good we everyone. focused we fresh rightsizing am through we assortments I to the note inventory. manage that Thanks, current the Jay across was season with quarter brands. challenging and fall This current

hurdle. on company in enormous and a love wear. Yet, inventory trend been no We forward trends. with more year to be for receipts lifestyle, see last in has fall affinity It’s casual, I it’s a continue demand consumer and active shopping a pulled Clearly, have and back not also letup and significantly to in line adjust lapping demand. from the

back season, fact, great excitement am looking that and trends momentum around the confident color to fabrication more year’s lifestyle. see will new are come in silhouette, will I we comparisons even create emerging there forward, around And to As us. last

provide were me quarter some brand. a comp year. increased let details new by soft. last last Now, remains X%, second increase to openings. by Aerie Swimwear sales revenue XX% following driven year, Comparable compared XX% store down

below was the and our undies, of categories to posted positive last While apparel majority overall growth. demand all posting leggings, year, increases plan, accessories,

potential intact. of Since see trajectory almost to million. have $XXX XXXX, multiyear nearly remains second demonstrate and Aerie’s doubled, continues growth offline am acceptance. revenues customer show quarter strong pleased I to incredible Additionally, that growing also

file Our customer has X by million shoppers. almost expanded

innovation successful, to delivering our new of and to X driving is We favorite and traffic continue launch newness nearly collection customers. has first layers incremental impressions that been to The our wear. on Moody’s the anti-shape extremely we focus billion call brand to-date.

our Our new brasih back features business. revolutionary bringing the authority reestablishing and bra technology to newness

continue smoothies will upcoming collection to our build We in out seasons.

messages On marketing Aerie the a with front, Real women response. inspirational Are customer We strong community campaign, from we the within launched amplifying

XX% Eagle Comparable comp sales as exceptional Now, revenue environment. year. growth declined followed down last year to This we challenged XX%. were a shifting were Category X% tougher last cycled trends in growth American in XXXX. macro to

women’s and accessories. wear included men’s shirts, categories best fleece dresses, overall, Our

making we focused better to highly on We seasons. for adjustments positioned are to future have our ensure buys been

inventory addition adjustments with In be demand, more to resetting we in making all to levels overall are categories. line across

better opportunity and we to we fashion and As allocate our into trends new transition see bottoms, the make an denim investment. silhouettes

outfitting yields Additionally, we are in to beginning our focus results. pockets of improvement see tops on as

we our Here, buys to are very are emphasize the working trends well. rebalancing that

favorite We better us flows, three lead chase are and for to and to AE reestablish and our in enables jeans begin core chain times pleased and test and number number This supply is the also brand for practice. demographic. remains meal the to creating one females shorter our see best-in-class number inventory two normalize.

As a category. dominant AE bringing the newness player, continuously is to

new to a commerce the to with fashion with This social metaverse to leader industry-first, marry the latest jeans AE unwavering as continues be new an our striged striged drove Twitch customers. engagement of launched our and only to second our the realms explore the popular ways quarter, comfort. experience traffic in the commitment with we in collection, has gaming XX new is trends our second and engage a become tournament, with we to second Separately, exceptional Roblox most visitors strong site. unique partnered AE our date which In Gucci quarter, platform. experience on million metrics. the on we to

across earlier, my stronger ever. said brands, than As is confidence I

We are cautious near-term a new into focused distorting and trends, while delivering view. maintaining innovation on

their hard the macro want adapt the turn and are call you. to right and holiday corner, for quick and environment. Aerie being season We the Thank to now, thank very leverage. trends team dynamic with ready is in AE will for the I to And a over spring I around plenty Michael. of exciting to work upcoming

Michael Rempell

Thanks, and everyone. good Jen afternoon

As operations. a are into environment, of retail we navigate our leaning challenging strength the we

benefits. We speed, have is supply cost in invested which and our yielding efficiency chain, greater

macro stores, channels store a digital amazing pressures second In truly Digital fleet X%. reflected X% retail. We lower industry-leading selling and best-in-class quarter, and brands drove We were decline. sales across performance an our have strong. down spend and very are lower channel traffic a capability. operate the comp In

has with XX% the past last quarter to has up growth digital Digital our over XX% penetration While second down XX%. grown also from to business to XXXX. year, significant years, seen X revenue

engaged app Our key our the app most This another mobile strong of largest had customers is revenue source in direct positive now omnichannel as and channel. is our customers. a are valuable and quarter

new new to giving the our anywhere store quarter, or items latest America continuing return in point-of-sale technologies In to North a across associate system we invest store customer are We in store. the a introduced through to the customers experience. the our the flexibility second base enhance out mobile check shopping

speed and especially to time, peak wait transaction we selling minimize We holiday seasons. expect our fall this into improve and head as

and us efficiencies Jay cost changes integrated we strategy allow have to with and the more going organizational made will savings. channel-agnostic customer create to As mentioned, operate and it’s a

across regional X store America This We XXXX. count store fleet down rationalize XXX to is bringing are to the in continuing XXX from of AE more and North our the base fiscal quarter stores. end the closed at stores

Aerie XX XX years, second few total approximately we expansion the investment investments. XXX been new approximately are bringing offline openings over very down and We significant stores. locations pace Aerie in slowing awareness. brand also After as new store successful has maximizing past we the to quarter, added on the over building openings in these strategy the of months past our focus

in store rate average As in in past, the years new at the X. stores and approaching X X have grow noted before an we comp accelerated year

as well our to ramp expect very sales the returns stores nice our the the we within see walls halo as up, and both new as generated channel. So including from online digital four profit for created investments,

payback highest reflect X period less our exceed Aerie capital cost that the well is returns on ROI. typical company’s Our stores than years, and with of

challenging freight to costs, still supply are pleased last come history, inbound improvement. on I supply chain, to after shorter easing, a from are transit and year. highly year, to off Shipping times highs am see Moving delays bottlenecks pre-pandemic substantially have reached and chain although elevated very

result, our November. last narrowed times a lead As have dramatically peak their from

bringing our to to more in is this responsive be changes Importantly, back demand. agile ability and

into has freight we going product in On also going the P&L Cotton year. we peaks This factory into next expect to higher Vietnam and see to in year quarter in the fall. disruptions costs and is past half build markup air in into this favorable as as the to the $XX to significantly XXXX inbound spring benefit from relief of are million begin to peak fourth expect anniversary third side, we freight the moderated pricing usage. see last the look cycle back quarter we I and related

on Platforms. Now, Quiet moving to

across Our a brands continuing the our drive now to handles efficiencies. of and Aerie localized third and is orders fulfillment direct model AE

fulfilling and with are faster We shipments. orders fewer

year to to orders, Our higher orders year of should within delivery rates both our down contain to delivery are Platforms of online move times XX% to additional room quarter. and us cost customers as online Quiet markets of costs the contributing in nationwide the services. footprint elevated for enable a fulfilling as even next-day experience for see savings much reaching Faster days service approximately across to next its XXXX. shopping better to helping checkout are last industry. this remain resulting second are We which The expands with even customers X rate

the new progress months, markets. of Since added we scaling X have in last December, Over entered and the Quiet closing Platforms. past made new customers we acquisition significant significant have amounts

to half. going the is momentum continue the expect second We in

platform, the are entering realizing business. resulting they customers additional new greater engagement operations, efficiencies in As are in their and

our to impact by highlight improved remain consolidated note as quarter. While business first it financials, from Mike expand. business in performed very results want in on with the this we I that received the to of our with line I to the interest plan it the have going encouraged all continues is

ahead, Mike. look opportunity. focus share greater of our we to remains capturing As turn on that, I And the even over with call the will market

Mike Mathias

Good Michael. Thanks, afternoon, everyone.

Jay improve profitability will steps As numerous I remarks discuss and to flow, taking we throughout are mentioned, my cash today. which

last record said, demand Let year. me in quarter year, have by from points of supported saw with this Brand following flat acquisitions. a revenue exceptionally was to an slowdown our the was Consistent start supply for This summer. last chain revenue including healthy second $X.X others what Consolidated revenue review we billion. of quarter. environment X%, with X the declined consumer growth

the X%. XXX and gross XX% Compared Eagle pre-pandemic of decline. total built past to was and dollars points XX% Aerie emphasize brand the integrity and up our profit last contracted For basis revenue in the XX.X% points. of XXXX, declined second the clear that Gross million. quarter, to through few markdowns inventory rate increased equity revenue declined or American quarter, years. brand was to we $XXX XX% Higher want was pricing year. margin as X,XXX basis The XX% to priority compared revenue the maintain up over drove I

profitability. rate achieved basis to chain was integration XX was year. of company, were a supply deleverage. to of which the freight We our in on incremental highest in basis last AUR the X% excess leaned the the fully Our all quarter points to markdown drove summer had the Higher one-third pressure and out margin in second and sell-offs and $XX clear only gross impact the XXX costs headwind goods, history spring down end-of-season the quarter to a second point million acquisitions of of the roughly

in accruals expenses. SG&A mid-single-digit associates, store This the compared to lower opening we compensation, base. incentive led continue The for expense professional as higher expanded partially store and points new last XXXX. paused deleveraged with reductions expense the actions compensation, provided noncritical Since wages store resetting We as to guidance laser our scope expense quarter. expense target advertising increased services. implemented our last line remain update, XXX services, our we well was was and to announced quarter increase basis focused corporate Turning advertising. travel have offset on a of of and and and quarter by corporate second as last by We’ve hiring freeze dollar professional spending.

flat to $XXX the half low from actions, approximately $XX to growth. original for we year reductions prior discussed in these million SG&A dollars expense now guidance quarter. of to our annualized second With expect the plan This translates ahead to mid-single-digit last in last million compared

on based miss which impact from seasonal fell variance Are quarter to activity. their more result to in $XX larger timing loss few sell-offs, of million end-of-season inventory of years. the million the higher mentioned This past to a and quarter to a resulted $XX and included communicated. earlier plan, impacted also as million It over a a Second clearance second as outsized in the sequential headwind X% a in-season reflecting brands This costs. profit included from pressure $XX across from a larger was was Aerie’s acutely Quiet were planned impact the from sell-offs freight factors. reflected a mostly promotions, Margin to saw of margins from felt and due due several margin. Platforms, inventory clear million quarter Aerie’s operating first improvement operating incremental previously a plan. $X growth

some on which saw openings, we margins in are higher a Additionally, of their still due pressure to number new period. store ramp-up

per EPS and add newer expect we to recovery resets half. digits to a a to second in inventory was As Ares interest meaningful Adjusted back show net the $X.XX build, included $X continue to back million stores and double income. share margins

share count was diluted million. adjusted Our $XXX

XX% million favorable we upsized or This exchanged with ABL facility. the capital During provides note our the strengthen our convertible We principal and under structure. terms. approximately our second took $XXX liquidity extended more of quarter, and to steps additional associated

We shares quarter, the repurchased million $XXX In program. the completed repurchase second we also a program. as of accelerated XX million part

support brand increase of we a AE Black and year, strong Leggings, benefit around levels. average we used of year, back-to-school XX-point units full and new that’s actions, in up reflecting first to these standpoint, was to were demand. XXX and the lapped ending earlier season. goods, the the a With line with as do XX% inventory Clearance the reflecting quarter of quarter for from each units reflected times have Aerie by a supply inventory expect compared of levels year fall weighted store third XX% year, in improved share increase we not core higher represented Quarter fall last approximately driven with is higher Total last last improvement and stocks end XX%. count lead disruption openings. From Aerie item a and receipts million. chain diluted fresh Consolidated packaways. cost up half offline are current This and inventory

action the the Given for second of challenges, reduce to taken year. ongoing we’ve half macro inventories further

quarter As remain We progress, year. high to half we we make quarter in back inventory expect third to up end retail the the the with across additional to promotional of last year. down ending inventory digits fourth anticipate mid-single in the intensity and

in million of in million Capital the million. Although more through with totaled this inventory with the cash quarter. and liquidity we $XX We end $XX the navigate expenditures to will aligned demand, positioned with $XXX it. better we’re plans of not in total quarter be ended

CapEx absorb our we spend as balance all the of grow year mentioned earlier, the and uncommitted we As investments. for have paused into

For work $XXX year, approximately is well. with done now the reassess This from of of down expect being we to our XXXX capital guidance million. investment full expenditures as for $XXX million prior needs

on brand strong revenue season down we Now incredibly our to back-to-school in high as and especially Demand record single cycle an with outlook. challenging, last year, quarter-to-date. the remains digits

low the quarter a the the reflects continue, in markdowns our quarter environment and be cadence, of fourth quarter. margin trends demand more we in weighted expect is current This to and the higher current as to result Assuming which mid-XXs fourth third gross clearance seasonal XXs.

the anticipating factory also We in linked year, fourth use lap are to freight last especially closures the as airfreight Vietnam of relief we significant quarter.

noted As are relatively expected be flat back I earlier, dollars to SG&A half. in the

assumption the high XXXX weighted Our differently share is originally clearly from tax rate and average at in very shaping XXs XXX approximately had up what we count million. anticipated.

We repurchase. noted, the has Jay liquidity our long share. through and working flexibility improved to facing long $X.XX maintaining we’re of worker remain run. year, we’re challenges midst shareholders precedent in this we’re committed share cross pausing history prioritizing a hard and Eagle returning and the profitability, near-term solidifying dividends expenses, American the dividend As per position to cash and In Outfitters of to financial quarterly inventory. cash of XXXX for this CapEx in the also

Jay year. that, Session questions. our this up I’m Question-and-Answer come will brands results operations With next and I’ll open As our in remain it confident strong, and noted, through for

Operator

from of Jay [Operator the question Instructions] Our UBS. Sole with first line comes

You with question. may your proceed

Jay Sole

it versus the projection view the Great. on just played from could the that ask that so of talk of in Thank out? and it the would styles your was about Aerie. in much. maybe some you the versus would were And expectations, you where Was a Was you where sort categories. quarter Thank didn’t bit macro differences want you. in of optimistic. the didn’t about about just differed categories some you talk it great. thought if maybe I Was to what other dive that be resonate. business your trend Can that little

Mike Mathias

by can way. you Thanks, of start, trend just product the say Jay. side question. progression I the of I’ll Jay’s some hit Jay, the can

we’ve of May deceleration talked that frame. in seen slowdown summer. the what that to that So what teens changed. Jen, occurred did feel sales September made we high that still time single we consistent to May, quarter-to-date in assuming been mid a through into late the through as first May is recent to continues up the the in trend late through mid-August consistency others into grounding see we the we high confident weekend. were mid-teens guiding of to want we’ve through point. call, got in about July, June XXXX got that to guidance just a for weeks call, past And you improvement The assuming continues trend continued Actually, and to but Labor as about peaks go of really to were that so then. talked April. seen Day to of June, across very back-to-school we’ve first of single-digit happened do we into we’re what saw far. It a the that that quarter. kind early us kind at seeing in quarter if definitely add that that actually into we have is But of accelerate sort back bit, high ourselves category it’s and here, a XX, high really – industry, you trend saw That’s really really digit. about, which to bit trend us? this like as up terms conservatively And mid-June some was providing in negative mid we’re and the That’s consistently we I talking the we’re February

Jen Foyle

And lagging. you you rooted Mike our a look don’t the business. are start. I again, that from in great category, take really impacted Yes. of love And what is we it seasonality of standpoint. of like, isolated But markdowns We look, in forward, a be intimate to we said off Jay. on slim one honest, the seeing, and categories. I’m heard seasonless, to ahead. that But so had really, They Thanks, we leggings it really our how a I We which lot apparel, saw majority And highly from all is just launches the incredible of well. and highly other category. best in results like look was black. isolated do They ever, are launch, which Smoothies the Mike,

results it’s early far and on, but very early for to so the we’re with back-to-school. say, So pleased

going like and QX said, swim, isolated results. to saw I other QX, very back So categories in but nice

Mike Mathias

Jay, by And quarter. too. that, end, XXXX we point almost Aerie doubling the last – still we got results, the maybe In time but to for the the specifically, saw the the end of

So stores reset in rest We’ve from ramp-up of a on appropriately. as for feel into new into over and the reset, perspective, forward, bullish still line the half where new this with we is these are focused terms terms of of top or But knowing we we’re of XXX and go-forward are headed. going bottom back and we’re bottom-line back go Aerie lot now XXXX, half that we got very inventory year those in inventory line – We’ve period. a growth kind sort like non-comp optimism here, there think is macro that going environment very uncertain. Aerie’s of results described stores got that their in from is still the are Michael on. of where

Jay Sole

so Got it, Thank you much. okay.

Operator

Matthew of Boss comes question from line the JPMorgan. Our with next

question. You may with proceed your

Matthew Boss

Great. Thanks.

the to across think Aerie in completely So American to the quarter? could And about a shifts the there demand you way the be is Eagle that you’re making to assortment categories? and fully seeing view you at are time across at board third your inventory for Jen, point? reset this What in needed line speak across changes

Jen Foyle

we that good right making sure chase position, categories. days. we right there love we’re Mike into I something it, XX now. in sure the out far Matt. just in we get we out And happening position that worked mean, move inventory XXXX as are but to Look, distort in the I QX. have then as also is as as actually certainly We great concerned. mentioned within make a Sure, looking to what’s teams tirelessly

We have deliveries here.

sort in just So like mean, like – nice bottoms. are are are some Michael and we’re joined and to I for learned ago to that say when freeing again. little – of where I in best the the up bit would company. the it’s to said And it. now bottoms doing in seamlessly. testing us, is leggings years company The logistics starting get in and be well capable move remarkable. happening. category chase Rempell talking Aerie XX it’s we I so it I show I a we’re position But to we other just funny. happening how a of There today from dominant denim we’re to to in as shifts team able more are that’s this

offline the like in seeing said, being some and certainly for teams, and denim. business new We from a Aerie bottoms there are the fast into an we’re silhouettes us. And new shifts I perspective moving and getting some categories new

trends that we’ve I’m holds from has little in XX-day impressive. think seeing on, what vehicle. and this as And test that categories that’s team. team the we’re scale. we’re that seeing, would like marketing we’re to that innovation product the to chase. I longer little of in in early categories from than But mean, certainly, the to for promising company thought. I as We’re outlook I’m chase able continue been women’s ability. mostly, But going to a to mentioned we’re I far I And pretty this a that great seeing And results to a American a seeing taken as fast. We’ve very It’s the quitting the growth that, able time, for outfitting. the that say some shift worked I I back-to-school, Eagle to production like not to tirelessly business. responded

We’re not that. quitting here with

of team. the proud really I’m So

Matthew Boss

of previous if just then, And to contraction of the could that you you just in EBIT elaborate we’ve And half. the versus at has Or margin structural seen relative drivers profitability transitory down some Aerie? margins the your multiyear recent of could Aerie? Aerie we Maybe back on Great. profitability of to elements speak double-digit the magnitude Mike, for do plans? the break how anything of maybe on the changed view of today

Mike Mathias

Matt. costs and into really We brand air of go of mean, the basis I we was talk we I challenges, about QX freight Aerie that in QX some the I Thanks, that mostly mean impact QX Aerie in – last experienced that the half, QX, supply QX. XXX half the chain about specifically, that talked general, being that, to to when air carried freight. in fall, think. point hitting the the back beyond quarter. a Elevated disruptions first some had Sure. obviously, freight

So million it’s take impact. in $XX that could million being $XX to $XX Aerie total, you an million,

think for and inventory was QX $XX the half the about you million described, of over that. Aerie charge I – If in resetting

plus general, XX stores combination take and of in in quarter the alone. of the Michael we’ve the rate stores from digit factors the factors, second about talked we the could So ramp-up new operating the those opened in Aerie’s those opened to X% double two quarter you – the three

the not coming there So at that these the stores year, light cost costs. some will tunnel opening and in any year. anniversary really we freight inventory as did is into elevated overplaying or store – terms we impact new half actually ocean half. transportation the carrying in now, last now we We the and some we normalizes, in last like And first not from freight as line even new or expect and don’t from freight versus reset. Freight much us is back half business actually we have think of end of from will maybe get back into inventory described, impact the benefit we back

on we’re factors think general. stores inventory of And half. the in away these main really profitability reset. So those is all go for business the the back new and focused three We

double half, we’re we’re forward benefiting up in digit being focusing in already and not these plans very we’re plus mid-teen year. least footage growth to all in from XXX So XX% setting confident operating looking locations on terms how growth, if next better, the square for rate, back the our ‘XX at and this from of

Matthew Boss

of Best luck. color. Helpful

Mike Mathias

you. Thank

Operator

line from Citi. comes question of next Lejuez Our the with Paul

You may question. with proceed your

Kelly Crago

for on Thanks for Crago taking this question. Hi, is Paul. our Kelly

sales improved expecting single some Is in was digits I’m could saw has brand. of less the then curious, the XQ. high deceleration you’re having us year’s any you have down inventory versus clearance of be wondering just great? thoughts just help about running would think available this sales might position I drove quarter-to-date much. and in brand sales of Thanks. by down function there last just XQ, Just not the kind with versus so curious given that that if a X% Just you And that?

Mike Mathias

to that to The right $XX impact that get devalue I part really can historical bringing to It’s clearance a ourselves quarter the first. into to summer second [indiscernible] inventory. inventory, last question down that August profitability level. the of million goods at

I’ll have that it just still I’ll at we leave call – description. – So

historical into line, terms in in We’re good place of August think a and we the clearance to typical we’re units. levels sales related in coming and those

very on As hyper far with your was back-to-school, that came think first year We of back-to-school that out the as into if that back-to-school AE’s we demand in tough. top knew amount a money expected us was and of such yes, AE part lapping think not be July to we of because to year, I the stimulus starting school to QX last are again, there pent-up a destination. XXXX checks having that period going last the season going really trend, a coming question, I in just back brand

initially. planned plan first actually already for that was versus bit a the half we of a plan for So the part deceleration the or QX of

macro what based were surprised can of maybe year. the last side kind to – forward. And knowing expect product where we’re that we by lapping of knowing out But bit, back-to-school Jen and Labor normalize think on expecting out and we’re necessarily not we we conditions take come the on I going hyper So Day. that far what fall a that here there during we’re so period seeing back-to-school after

Jen Foyle

summer. the we benefited I what bit little new of like a and lapping well, think a lot going. And just I Mike, is had that, retailers Aerie tailwinds have This I in just both obviously, coming year. of swim, with team off you of. of last really swim brands a am the fairly did after team. the hangover on it AE But incredible with year that of tailwinds and stimulus honestly, that seeing last little getting the benefit AE is business said But bit the in a

conservative. very are We

We we categories. product scaling are our Like testing strategy. sticking new I said, are with and

my We a there. tell stop and I spring team I new category. like I have you They not in are said, into doing. the XXXX. I some just that I excitement We the again, many are turning fairly coming so very And going can’t new machine. it’s they up have like well-oiled for it. secrets, many And some launches new smoothie but we AE a Aerie categories. new brand. to we are mean what mentioned launched ideas, team, And so

one day, we in site, saw Let a increase we one in XX% me launched that campaign. day traffic the just direct to when say that

have what product comp but on and are beyond. – we now, to whether to challenging keep marketing again, about we production, where XXXX So, ourselves year-over-year, into that’s that’s and we it’s thinking right are

Kelly Crago

to clarify there. Thanks. just And

is the in kind relative the Aerie? quarter-to-date than brand sales Eagle to of So, American more XQ driving deceleration brand

Jen Foyle

Do you you your bit Sorry, faded out mind a repeating that? during question. little

Kelly Crago

Sure.

it quarter. brand from more in Aerie. like to versus deceleration in the quarter-to-date the the what It’s driving Eagle American relative saw Just coming brand second brand is American you seems the Eagle sales

Jen Foyle

their think I at on if likes year. last based you are it’s looking just

year, stimulus. So, Aerie from saw as the high-double I nice has benefits digits. likes are mentioned, year-over-year, AE quarter-over-quarter last that

and getting and are it’s lot said, what’s pivot it’s you looking really I if interesting, think go the dressed all what might you are second. we I business there luxury But focused And not as have are for and to are and a stay. my to day lifestyle go future. the that’s it as daughter casual and best have we to wear, casual that retail, Eagle weddings going you. at far I looking forward. last apparel lifestyle seeing Aerie watch in up on So, school year, with you, to, sweats are to But But sector I benefits where comparing. in going out on what are some just of tell of be think away I here one I every a our like that’s sector. here And is at the certainly is happening there, whether up in and am American does what and Hoodie the we it’s comfort and conversations

Kelly Crago

you. Thank Alright.

Operator

the comes Retail Shapiro next of Our Tracker. from Marni question line with

with may question. You proceed your

Marni Shapiro

back. sounds you been you know, and speaking, XXXX? you you this for take further periods we to time. Jay, company, confidence holiday back back Hey But – moment at I back the it the mean knowing have into how customer you of is Is want there do next I of I – it has I the what about gives a broadly to like step for have brand guys. out here a half. you actually in guess spring? you through confidence where bit have lot inventory, the time I through, cleared positioning of what like what the year? guess been are half a certainly, you through And address knowing the because think of pulled to a little And been the for still

Jay Schottenstein

question is I ask So, you, you question ask. Jen me? that a what or to know to let that didn’t was me

Marni Shapiro

I so. long I to have as as doing this, been mean That’s this been you. you have doing

Jay Schottenstein

I going and been around around Because have you here.

exciting. day. have have, are American we Eagle. put stuff the Eagle, ‘XX stores, brand, which didn’t products, We Jen opening to we top-notch. more in some of should product exciting. see have for a fresh opened people but the merchants They very are in, to acclimated I on our this season stuff the introducing for with new We emphasized and we the the spring concepts time the future. type it would go new benefit additional introducing The that is we that great get like And of team past was that some too, at said top-notch. if They team bad American also in just one that you Jen like that the and – and I new people, introducing the get the looks into the some add holiday designers very not it we like, biggest brand. be takes But working quarter, which denim, see

it the on timings want able ports. had coming close Jen back I We rates I are on. company. up – stuff our X say years, us. Like else product the freight as somewhere backed of world. like about a are chase else put seeing past out But We going had everything year. It’s because very the days. see mill all she containers rest right countries in good up and was strange sync. been a as got pops We and something got of containers don’t to she feel excited on said, far suddenly, and This to up because else too get get to XX to something was a the today, the of way, I

We happened of haven’t us had since XXXX. beginning the to

to us very So, sign and good get for a that’s back see.

Marni Shapiro

That’s great. That’s follow. a lot to

Jay Schottenstein

I in and I can I carry control see is that we have what The have be vision. and thing investors on control is great to shape. we the company, going way great a think And do great to can’t the company that. we

we innovative technology. very our are and merchandise, whether are are we We innovating whether innovative

I think the malls, to malls, into the and with the if out you are merchandise more the ways customer we the the to of figuring best walk the of efficient store in stores. getting

we think of I So, lot doing stuff a are right.

we there. up out will winners be I one this going the got caught figures. think we for the of big past future, I in against But year’s year, last think

Marni Shapiro

you. great. That’s Thank

Operator

comes Yih question Barclays. the from next line of Our Adrienne with

question. your with proceed may You

Adrienne Yih

there might anybody kind there with always of with about that now still much. this is hyper it. talk fashion Can Great. fashion the and faster competitors and on for have Actually, competitive I but Jay, who talked is about very you, we Thank and fashion changing know fast such Boohoo as Shein. wants comment to be you fast landscape? ASUS you

very to kind you just am that does would then the pause well, imply what your kind in do in how as often wondering And you about activity much. do when I So, those in Mike, two events? compete often overall dividend, Thank And a does them? the that research, of pressure? – pricing you distinct of are against a repurchase that how or pause you talk do for

Jen Foyle

want. if that take can I you

and at up-and-comers, Shein try there And do fashion mean of competition, to and to compete is pay there. to humble it certainly look we being the always out certainly, building competition. job fast as attention we than and And our I new anyone look, what far our is, else look, right, to are better one we them. As that’s brand.

new Eagle We certainly Eagle, that’s And protect proud and mean we be the are brand comer. and are of is builders. I Aerie, what to. our – something American up up American to both We brands,

brands, protecting are our brands, not dial. to a We building up our turning on

think slow business I think and how our about wins and the steady we long-term, in right. and we building race brand think

it. is in been hit there He little the And So, more But we like obviously, Jay I a seeing has that’s am in future. sector I recently. are the retail this there innovation the out bit long up coming. already haul. for said and said what

yes, and have I are would that’s we are and terms. lane competing stay is innovating new just new exciting ahead something to our teams we day sure brands stick our focused, in your make we lane, have our our in concepts some that every stay we with – and stay tell going ideas. We look and on launch. that day, we really And Every

Jay Schottenstein

Mike, you Todd Michael Jen, Snyder, about fire. Rempell. we talk is to you concept, talked about on which have do And want that,

Michael Rempell

I we some and new brands there. are and great American we new we – innovative are on Eagle things also mean Yes. Aerie Sure. incubating just and look, not businesses. But obviously are working doing

So, is one our company not are on a we the proud resting as things laurels. are we of of

we company, solely not on but for it dependent the into one to grow We to looking drive are future. ways the are business

this year. Snyder, we which over So, up have Todd is well XX%

still be opening footprint, its It’s expanding going XX% business. digital an more nicely. stores. are We It’s profitable, growing to

is that providing is is stores We investing benefits open, excited American course, to where of has launched not about only Eagle, that’s business. it on potential year team And five Quiet, business very new that doing a an are concept quietly about are very which and are last and is exciting which Jen in the headed we nicely. we and in unsubscribed, that but incubating that

Adrienne Yih

It’s very helpful.

Mike Mathias

handle your question – the Adrienne, I on can the dividend.

same. our think I are look, priorities the

dividend with done and the a into continue have between chain other we convert are issued strategically first, already continuing have back aggressively last we supply of dilution digital was that, aggressively and that XXXX. in shareholders returned we to which back to offline early to highest we and this year year-to-date there. the our settlement in projects. we $XXX the million million shareholders years invest the capabilities XXX-plus year are we have and Aerie business to this investing million locations, year. and tied since And about the then On $XX X pretty $XXX We talked returned the to $XXX top in of ASR the is But shares offset in that million that

and I think in both that said our remarks. I prepared Jen

have we returning appropriate, repurchase we but the – and some then will to our back in get the of back So, some profitability get once opportunistic in it, position of looking definitely level and bit back the we back point investing will we of here. the we that half, we am share year. cash positive now, half see at will back cash way then – appropriate this shareholders, dividend where generating a where improving at appropriate first, next we to confident the dividend bolster level free flow I the have And to are cash we and in approached of definitely business history

Adrienne Yih

all helpful. very of luck. Best It’s

Mike Mathias

Thank you.

Operator

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

proceed. may You

Kimberly Greenberger

so Great. you I check much. on just to wanted Thank inventory.

be revenue second XXXX. If the compared quarter is quarter, up the year year, you compared about the – to XXXX. total here inventory the to end to inventory great. just revenue at looks how be looking the you at up second only around like in XX% at about – it But fourth of talk down that rate was cognizant revenue run could would XX% quarter expect the last am end of much that I of

just be quarter? would year? cut how inventory think would And could next the your by how preliminary you. down for am what I you much of be fourth So, expect the inventory to Thank plan you you end wondering much

Mike Mathias

quarter the I of volume fourth a Kimberly, a lot go, I mean lot to right to business of now, think be had.

we projections would here range. sit down the we in Our be as today, double-digit

uncertain plan we as to find preliminary This And again, to that for to projection So, still a mid-teen. we then low-double are that’s, is we next continue something environment. going conservatively. probably maybe an year, But go. where

past great a committing about again, perspective, think that about are we inventory Michael we to I chase months plans as XX spring how excited we able back to issue of to six those talked like from part we flexibility. early in earlier the had and in season, are months, months thing so is the the didn’t have committed our timeline it, we to not are to being three much to

spring at speak. as we looking are we So,

We to. some open now been to and historical of have flexible a lot some that had initial keeping the are we back POs keeping used flexibility some we ourselves have initial but that placed, are timelines conversations, are the

Kimberly Greenberger

between half, QX. you That’s portions relief the the I am And you in Thank out great really and on that. $XX back that understand for in us color. can if wondering million QX help freight how

that, you can some would the numbers us to you year. Any the on that of next be Thanks. savings help anticipate in half alluded also You first with year great.

Mike Mathias

in QX I I and million $XX in $XX believe I was QX am air it freight? the think looking was – million

Michael Rempell

QX $XX in Mike. airfreight. and That’s QX, the was right, for $XX It million million Kimberly in Yes.

Mike Mathias

carried some the And a unit. when of incurred we freight and we sell bit that That’s sold. that into over that with goods actually QX expense air we

well, of there, that some So, see QX we and too. benefit some believe, impacted as we

Kimberly Greenberger

much. That’s Thanks color. great Okay. so

Operator

question of Joseph Research Kloppenburg comes Associates. next from with JJK Janet Our the line

proceed your may with You question.

Janet Joseph Kloppenburg

Hi talk denim. everyone. wondering, about you if shift was a bit this in Good evening. little Jen, I could

and right are on a hearing back-to-school now, performance. denim maybe We weaves lot of in some mixed disappointment

And you could wondering am positioned you the talk some if might how your towards and and that some and is look as just that. dressier perhaps in of if or if concepts you or think seeing there that If to about moment. and new concepts, can is future the the you. introducing temporary a is for be we I Eagle just talk are Thank about built shift prevalent trend around dress-up are trend something maybe dress-up American that new participate we pants a today something Eagle of American that,

Jen Foyle

well. the I like said, stay. well, are which are when you, certainly the by to doing I think I How Janet, generations And definitely casual would to and doing reacting denim, I am we are trend casual, way. here generation to Like to love there shifts, our really And Yes, some the come, comes Janet, and comfortable is to it it. we do sportswear, best. certainly, say

there denim, And that of we actually really flare. definitely have now was of inventory. for some for are that just even that getting great the working the testing We have certainly, hotspots scale, are new make a our bottoms are need are piece inventory the testing to there we silhouettes new are then always these seeing working whole been on a just to speak AE smart trying on test smarter, that. and again. And and staple inside big actually based But then as go instigated initiated standpoint, going an into been even should we of That that the have able all fits that we we we do the scenarios jeggings. are on distort some based a now sure in some timelines in rationalization we out are some baggier of us are to are from shift more we And up, we you say, like we that is and have there have we logistics seeing not And or the to other I freeing we starting see. future. that on –

right So, now. in play those are

be able and going spring We to going able are as results those get for the and be very to to to Michael – on implement go are to we tests we forward. said, and Mike are soon, going

trends and new happening So exciting in – some are there bottom.

excited are for And new new we a be it’s I but So, very am And comes that. when then spring to I launched And and XXXX. our can’t about will about. pretty concept it you, excited for tell us, it exciting. idea, it’s

of some had already received. well the some have well early very very product reads categories. We on And received,

I secret. one exciting. there. Eagle the so very tell come brand, to more So, can you in It’s American

Judy Meehan

time have for Okay. Laura, I think one we more question.

Operator

Okay.

Telsey comes question last from Advisory Group. Telsey Dana line with Our the of

may You question. your proceed with

Dana Telsey

Good afternoon everyone.

years. business over the Aerie and As growth, you the a talk you of Obviously, the little you of openings. bit stores rate a think few lot about have think think the adding can about past store opened of How do metrics? you you you. the Thank how and doing And front? growth on are of store what product you current and of existing stores do

Jay Schottenstein

the part it’s Ares well to excited We It’s think very there, it, about part a us. OFFLINE. for received. concept answer we what Mike, being is can like is of too. Jen very also opportunity OFFLINE and big it do of a are add? you want new but

Mike Mathias

back but it’s are very think we company well. very major we just profitability – not impacted can I – for us next really just think the Yes. as a something then question, in terms improved of good for on, focused are for I a opportunity the the Dan. – it’s obviously, I say, brand, year It’s half, but

we call go short-term markets we to and months then new So, months these XX effect these what to a we later. a stores, those of open have impact digital kind and our X see locations that new we as shoppers absorb digital stores ramp-up do comp many and markets, halo the know when we in customers of

half, of So, around get digital ‘XX of our these piece that the if it we set plans stores you right carry just we that these focus about into opened, think kind back in. kicks and XXX on will them, into

own our margin the of that goal mid the conservatively, your drive can implied positioned for these expense You believe high-teen just operating And stores. be revenue to math but we from if can being to brand. the right do rates, appropriately and on we be will growth some inventory rate, focus,

And of off are it kind year, want already profitability, impact year year’s as of that’s look, mind, next that. on this for grow significant and So, we we in about, these in means to our investments. talked next to focused we guided

capital stores. million $XXX have we in year, and A tied of million OFFLINE these last in Aerie this So, to it lot $XXX capital year.

want sort generate we that the on the the philosophy we to free positive flow and cash that flow from perspective So, cash and have profitability of a focus made. of investments

are that, going believe We probably there count next we store to runway in over next just growth X at for still is smaller the relatively can look but new on terms so store year, a we focus years. of

four to quarters on I what think have profitability of we the benefit just a invested to already there six quarters. focusing the is in of lot over next

Dana Telsey

Thank you.

Operator

to Ladies Jay of we to Schottenstein Q&A Mr. would reached question-and-answer over today’s and gentlemen, of have remarks. I the like call for end End session. turn closing this back

Jay Schottenstein

positive like And we next to earning today. hopefully, news. us joining for calls that you more have Thank Okay.

Operator

conference. today’s concludes This

this day. and participation, enjoy lines your you at of You rest may disconnect your your for time. the Thank

American Eagle Outfitters (AEO) 8 Sep 222022 Q2 Earnings call transcript