- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the American Eagle Outfitters Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Judy Meehan, Senior Vice President, Corporate Communications and IR. Thank you, Judy.

You may begin.

Judy Meehan

everyone. morning, 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,

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

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

Jay Schottenstein

results third lap stimulus. tough you and Good above and significant quarter delivered Thank for expectations morning. well demand we despite I'm joining pent-up today. we macro that our us as comparisons conditions current pleased

to third profit of billion first the quarter half $XXX the $X.X XXXX. revenue operating million quarter compared also highest our exceeded of the material margins last in second pleased I'm profit While year's our down a improvement to performance, our of of year. reflected record history third that and was

are reduce reset actions paying and expenses aggressive Our to off. inventory

positioned. to make fourth quarter well very the continue We entered progress and

pace. also improved for achieved. healthy Aerie stores, strong of and as Michael of our standout margins quarter the at profits of and unpredictive significant review, stores. we've engagement new SKUs performance in which very strong on with Our reflecting will will brands Aerie customer to product industry, were strong operational I'm plans assortment remains as and XXXX, encouraged continues review. team's AE and as the OFFLINE XXXX Comp capacity the a customers. needed focus Jen demonstrate is flat growth third compared acceptance well by are proud in closing brands, multiyear the and relative our I'm as a trend. providing and to efficiencies our we Platforms rationalizing Quiet to sales improve place have unprofitable and the

up other in to drive third-party remain current environment. brands compete as base I operations Quiet. The retail customer better is upgrade chain efficiencies the look and excited supply also about their ramping for to the potential

of our strength an to to can go-forward best ourselves are highly environment, operations support and yet exploring we the changing conditions. position a to to growth. driving we strong in effectively direction, was As evaluate are focused Overall, our we further we plans, what In improvement. quarter future third control right remain step macro on the different macro leveraging uncertain options we respond

to continues supply the to As our this environment are advantage. chain normalize, we using

same the our free and improving on exercising a firm capital We into cash time, expenses to with are and inventories line capabilities and expenditures the tightly reducing are planning flow. also chase driving we demand. bottom At stronger focus

up to the stronger. cautiously key term, we near in our business, work I current and even to the took provide business strategic the decisive initiatives and allow will We now navigate months. want were results. actions swift we several invest over teams competitive our our advantage As dedication from their showing past a that across thank across for and hard and this emerge the environment is

ahead, disciplined. and focused will we remain Looking

confident strong. we to remain I great make incredibly brands will Our progress. continue am

Now, I'll turn it to Jen.

Jen Foyle

Thanks, Jay, and good everyone. morning,

Although XXXX, good made we across to brands. our stellar faced we a progress year comparisons in difficult

third cycled our past we our levels quarter, that demand a weeks season ahead from improved results August year. robust back-to-school the macro, record less During delivered as of we I'm last pleased Despite expectations. peak of

compared receipts through we saw in and meaningful also half took summer spring this to Aerie. goods. year, very recovery for forward both, first deliberate We margins Earlier and profit clear to and AE steps the adjust

As which highly competitive in a us a promotional result, in better much shape, is levels inventory environment. enabled to control

best second record achieved X% last XXXX. just our to brands to down up In nicely fact, third across quarter year's AUR we and high

very I step are healthy. As look brands our the at business, back and

and the doubled, growing play last roughly $XXX Since to environment, growth third different there also a clearly dynamics Given multiyear have more since Aerie nearly at year. XXXX, brands. tripled remains strong increased the of by on current are Record revenues XXXX quarter path. have than profits million.

OFFLINE for big Real new and amazing customers Compared all-time performing to technology up year, fabrication brand winning affinity which apparel trends. and Aerie's new fueling core awareness, given last I'm this results. tops, is two excited great driving fleece leggings We Aerie time results intimates, well. following and I with stores note our sports extremely waistband. quarter, seen active -- all are bras are continue million the are great this and expansion the expansion are first and holdup a adjacent introducing sports has be the showed with in to like our hitting expand cult high bras momentum We sets, our expanded incorporate achieving well. Me leggings seeing where pleased very our of matching to AUR. store and New increased ability into for franchise, milestones XX like have to categories crossed that us and to new an into

gift excited the For the our really positioning campaign, for the want destination. holiday Aerie, season, I'm Aerie new campaign broadest as I

expected. as was last yet did anticipated Pressure Eagle. American better results, we record year's to cycled Turning than we

contributed first nice from actions a improvement the inventory profit intentionally to Our half. reduce to

As closing selectively unproductive and last been reducing focused on noted the year's SKU brand, meeting, promotions stores. at and analyst we've resetting counts

these of a As better SKUs profits excess to Rationalizing seeing XXXX income operating improve with is channels. up XX% greater providing margins efforts, are across and result focus. we

fashion and We address adjustments the good into feel really making newness to trends emerging customer. about are we're bringing the

and in also example, last denim cords, very and silhouettes, We've quarter For Strigid collection bottoms as the to well. of emphasize demand. our launched which seeing such new woven is are cargoes assortment all doing nice wider shifted trends

more supply chain the to As nimble. improve, we are becoming environment continues

as ahead. With a silhouettes should rhythm, plan setup emerging new a chase back to our into and meaningful fabrics on consumer near-term and which we have agility fashions, into are going getting to We test shifts positive demand, horizon all in respond great XXXX. and is the a we renewed

very to are and Prelaunch been also to a sub-brand men's tests We excited launch have newness our bringing men’s, business. new innovation encouraging. in

continue explore We commerce and to social new leverage engage to ways to customers. with our

efforts continue Metaverse engagement. across Our drive the to and TikTok strong

became Additionally, launch first the on brand to BeReal. major this fashion quarter, we

collections, as across focused AE over consumer our Thank wishing macro updating look safe the turn the performance you our wear focused And I'm and Michael. and our our teams forward to than not stronger in opportunities you, holiday. to profitable big While growth for remain I overall and for certainly everyone drive you We on seeking is ever. staying is the easy, innovation always, businesses. and and A ahead. affinity and thank next on intensely confidence quarter. forging healthy now, incredibly Aerie call to brands holiday casual I'll great my a excited for and to

Michael Rempell

we how and the in good pleased third through the Jen, environment. Thanks, morning, Overall, with particularly we managed an as I'm quarter, everyone. unpredictable navigated business

performance. with Let tough we than a revenue macro X%. compares. amplified pressure start revenue digital X% last of This faced year, constrained environment our more declined me a Store declined year, while review to channel from

pre-pandemic XXXX the really seeing levels, I'm However, we're business. compared in pleased what with to

example, up revenue XX% For with digital across store growth both, channels. brand and was

to in digital penetration period, business, from over this XX%. with digital Our grown has XX% particular, expanding XX%

digital to speed functionality invest continue our the We of in platforms. and

powerhouse, to engagement a Our both focus. strong in driving be total is Investments continues brands remain spend. for and mobile business digital digital capabilities XX% approximately going app a of strategic to

are the experience visiting speed have and view several experience. stores. are past creating customers need I including noted customers better shopping. incredible of the customer the opportunities years where a our and behaviors go-to-market last changed how brought we efficiencies aligned priorities. top digital to dramatic continue seamless we the evolve, store the Lifestyles see over and Connecting As shift digital, channels integration when customers and creating more of are dramatically and operations, and ensure as all strategy with together best greater across quarter, how, shopping to have we is for

is experience U.S. customer including they're improved the checkout of great a incorporates much The example going integration further is new up and be program. new it especially upgraded flexible. stores have compelling mobile that holiday system point-of-sale as a to seamless to now lines. rush. come new on the provides leveraging we seeing It the speeds innovative Our beneficial checkout our All a to and elevate system, we're several capabilities system mobile is This shorter more of loyalty and technologies experience. transaction new

associates connecting through road exciting new in for with style one-on-one and engagement stream we're our comfort Shop be experiences offering advice live to shopping AE the testing customer This talented the build an Aerie will to have customers homes a map of one-to-many store sessions We other shopping and XXXX. platform holiday, Aerie. out capabilities from virtual that their Live,

physical modernizing can our by brands, and where believe assortments productive placement these across leveraging confidently operate productivity continuing the intelligence we in stores a to visibility, transition we're new By areas. in leveraging levels or variety to focused our to We and market, be markets on truly improve our customize and we a productive from ensure There maximize cost stores inventory by in to updating inventory are technology least stores, efficient ultimately, the best our and and can some relocating elevate value sales close other consolidate of unlocked artificial also significant structure. to store e-commerce and more locations, all focus footprint we customer investing angles, to with most our approaching is to channels. experience data

continued supply has environment improve. chain. to to The Turning

planning freed environment time last a Although year. different remains, have still compared constraints to This operating some we factory up. has presents times this dramatically under, volatility the capacity were normalized lead and

us option to We open into more chase have is our in agility which lean lean, and demand. greater the far operations, buy giving

provide significantly On costs the seen stabilize. down eased tailwind which has freight over and continue are is significant levels XX to going costs from the months, past in to a sourcing side, pricing Cotton XXXX.

were much needed cost platforms our levels. seamlessly quiet to months, Digital as XX% of to new capabilities days efficiencies orders, in with the the Quiet fuel We're the enabling want to inventory and to year following delivery in Quiet more our quarter higher delivery continues to with provided and capacity advanced On underscore really costs within orders side, customers near effectively down approximately fulfilled we cost investment also the last three third us several business times outbound I and reduce past fulfillment AE network that fewer customers over further Aerie savings. handle leveraging to shipments. online reaching checkout. located

business customer the prospective base, continues of strong, from the customers to to expand. service grow. continues third-party as Our Interest nodes Quiet with awareness remains

and signing our capabilities. which further transportation, fulfillment technology We expanding the are is new partners onto platform, also

potential growth is turn we over curve that's very And its the transform in Mike. mentioned, our I'm call to a Jay industry. going that, believe the to As exciting Quiet and Thanks. to has business with early

Mike Mathias

morning, Good Michael. everyone. Thanks,

third profitability. quarter our both, The and across results expectations revenue exceeded

the expenses to cleared second inventory year. As actions levels profit goods of the the a quarter the lower recovery resulted reduce in excess from through and half noted, team in spring first

our As the the manage improving we and sheet. profitability, we on remain cash of environment, current balance continue focused generation to through health

anticipated our of Third Brand revenue to was down gross to growth billion, of from mid-XXs including of $X.X markdowns. margin points Quiet was year, better of ahead demand expectations than revenue XX.X% consolidated declined lower rate quarter last and due X% The Platforms. X X%.

ended with third a fresh goods. fall the noted quarter, last quarter As position better inventory we in

rate and very quarter a to our increased with actions, a Compared product activity promotional warehousing rate due SG&A of XX compared last last increased down costs earlier review year. a actions basis also to integration while points the As on margin inventory a last decline. compensation year markdowns expense year. XX%, moment. more declined to result lower ended declined Rent the profit in points to of year, costs. XXX our drove as gross we were sales, million of progress accruals and successfully to approximately XXX inventories, rate gross of and Platforms Quiet Higher drove dollar The moving as incentive announced able basis a through control deleverage. We with units. against I'll basis lower incremental the offset points approximately this by $X dollars strong

We base. continue expense resetting in our make progress to

noted quarter, expense $XXX As over million should last in in these our reductions original result actions from plan. annualized

SG&A quarter. the We fourth expect be to flat in approximately

profit operating XXXX, it third was from reflect to margin. Operating Although This of Quiet million XXXX. was up included a $XX below million quarter $XXX Platforms. loss a profit X.X%

we the $X up to Quiet's $X.XX addback million interest convertible outstanding improve included ramp linked was volumes net holiday per line As into sequentially. expect securities. bottom selling a season, the income to to share, EPS

last year. Our count XXX diluted million, share million from XXX was down

by Comparable X%, operating margin Aerie a XXXX, into double revenue brand. doubled solid to some color than tripling of marking digits, back with recovery driven increase new XX.X%, Now, as an an I'll following $XX Aerie last XX% stores. to operating more XX%, year. revenue declined total increased Compared income sales planned. million. achieved provide the by nearly

combination merchandise with Aerie. higher are improved for growth profitable for durable This path strong the brand. of driving a margins creates growth, Continued combined profitability

fueled ramp appropriate an levels. Additionally, back-to-school quarter. profit as up, reflecting productivity. operating following the more more last XX% a also showing controlled, seeing XX%, were increase relative continue comps to by margin declined season. new second improved stores year, flow-through American achieved inventory Eagle Markdowns strong AE XX% exceptionally to of an improved we're

As our improve is focus initiatives to continued Jen driving profitability mentioned, on results.

to as basis was margin points with Inventory note is that XX% operating quarter's ending cost third up revenue a XXXX, XX.X%. work was X%. compared receipts compared last current to This profit operating inventory increase the for expanded same we improvement to holiday down demand. the line pleased from up to reflects XX% quarter X% last and While units X% I'm to year more at up was in bring Consolidated season. over meaningful of brand XXX period, with

million. million expect We in of to continue with and the ending We and the million sequential quarter liquidity ended year-to-date. down quarter $XXX to Capital $XX total cash inventory improvement $XXX year. fourth expenditures with $XX quarter in plan million last totaled

the For year, approximately to capital $XXX continue expect we full million. expenditures of

OFFLINE the coming should the new XX made we our future strategic provide comp of significant and This stores to Aerie business. quarter, expansion over last which fuel past benefits years. investments mentioned growth support includes As Aerie in year, and profit the in

we be focus into on investments, we CapEx in lower annual As absorbing growing to significantly these and XXXX. expect

move outlook, operating that quarter for pre-pandemic rates third quarter surpassed want XXXX. our both, I I Before third to and on the American of in Aerie highlight to our Eagle margins achieved

XXXX. and expansion As run, is in Product costs, freight completed point. quarter still just we elevated perfect. the easing quarter for third compared this about margin far a while think the opportunity notable long to from The were we was

significant We're levels up inventory. stores average industry are OFFLINE ramping to of as an reach environment operating a new promotional have intense that fleet the of in process the still number profitability. of We through works and historical in excess Aerie

Additionally, we opportunities significant improve still see inventory productivity. to

factors, these quarter half the nice margin not while reflecting I'm confident that third the improvement ceiling. Assessing our year, our of from is performance, a first

quarter bulk similar quarter. brand play a This our is broader be With the the to season With Now brand down is promotional still out. likely what to on quarter market, yet revenue fourth digits. weeks comps to the ahead, selling we're the key third trending in of holiday mid-single implies guiding outlook. to highly

of XX% to of our the quarter and be expect fourth We end low-XXs. margins XX%, on outlook between prior higher gross

in cautious progress taking just significant position, a made view, the our we discussed. given rightsizing inventory I we're factors While

the at improvement over Our moving rate count prioritize high-XXs progress continue million. approximately assumption tax XXX in We've weighted is forward. and quarters two our resetting cash flow in last and and average to business, significant share we'll profitability the made

team the in the as our our chain, Additionally, intend we use agility this advantage. to to and we've supply noted, regained

the we're as on to next signals evolve. I'll it on forward the knowing the react more ability outlook inventory to for up questions. demand providing to that, I open our read XXXX, they we planning call. and XXXX For expenses tightly, detail and With have look

Operator

from Morgan. Instructions] with is Boss Our question first JP Matthew [Operator

Matthew Boss

Great. quarter. a Thanks. And nice congrats on

So, inventory in how your feel this just do for on the maybe positioned market potentially bold one into actions take the any you competitive elaborate share just the on holiday Jen. backdrop? are you assortments both to Could brands? And read took holiday in that trend? And quarter across quarter and maybe fourth you third early

Jen Foyle

what as we helm reminder, really even we starting Matt. commentary, actually in as And mentioned SKUs right QX. just we mentioned certainly move two little items in -- shape. are focused early years Of just for. we up did back and what the that action now. still Look, in are AE for what the coming, getting It's we stand bottoms been denim far Certainly, as rationalizing we've seeing you, swiftly as course. knew inventories do Mike like we the brand, serious at for highly holiday. of we've I'm back -- Thank the we took back to in to just and remember our ensure we a now over been to, what very right what on brands, on But was there. both a I it. everything want It's early. and in

to certainly of all We -- I'd went terms. we own us. that way. it our we our But we are playing saw in like the have say week ahead to malls, a I just and big competition

to performance, our on earnings our don't are our can But as like we we While that want about competitive, terms, are strong. should of back, ensuring coming the by said feel -- promotions say, at we day, to be positioning, it. into is line we're again to because results. and position a and strategy cleaner clearance be think I you see strategy. of I few is us help this I to what that is, Matt, couple back living stand, mentioned -- we and we're told our where the really Mike long-term and our I end earnings analysts really a And what our we think the on years deliver confident want going years inventory certainly up January, we -- bottom I less should feel inventory, good the that. to about that

Matthew Boss

Mike. just then a for follow-up And maybe

into fourth margin elaborate gross or takes you and ago, just thinking we versus think So is less quarter I you lap more couldn't reason if guess, even to And Quiet with more there any merchandise guidance your if we're on flat as year we actions? inventory freight a puts next margin could versus Logistics? so, expansion markdowns the year, these maybe why see about

Mike Mathias

Thanks, Matt. Yes.

the the being continuation brands our For a quarter, revenue X. it's fourth of down guide with

As well. to deleverage being We've to promotions, overly Jen strategic on guide just implied. be. that And have with being mentioned, then but need we'd margin and promotional, gross with our comps quarter. on similar then will again as be but got the where drain negative not we're BOW that competitive in Quiet we And competitive a and ready revenue we're expect

together, We moment. team tag that's next And something of we tailwind at can the next higher on if different into our both actually year think So see you those Michael good aspects here, year, I low-XXs then and just about I as but to incurring impact mean, for -- last cautious ocean maybe going in feel the significant quarter or year the been stance that end guide, some previous start air piece we're I that in rates, here, product our last to for everything -- the both talked a know the for the where costs, we've quarter of was fourth X freight fourth goods year get was freight air we've now. recap about and freight quarters. X the of

back it's year. margin Product think they like in costs forward next general, place, looking think I look tailwind freight with of into IMUs, look know next beneficial. case costs our we capabilities back -- we could that? As pre-pandemic if a be benefit in now, year. We anything I be add to almost you to you which to a get Michael, types would to can don't want gross have

Michael Rempell

well. it said you No,

be I should think merch year. better margin next

We the are have It year, IMU lead long demand. had chains we was chase much we're run business a tighter, very could leaner so into that times. unprecedented. benefit. Matt, up really Supply And and against

stimulus And We normalized fueled demand. against much a against are next up going we're more year, environment.

quarter this able inventory So we're next I something in do this is good being year, the year. position believe which to merch between IMU business we higher benefits and absolutely react couldn't margins have very next and to year, going ending to that a

Operator

Jay next Sole Our is from with question UBS.

Jay Sole

question made remarks. Aerie really have in It is questions. my comments sounded opening first Jen, two some I prepared that bullish. you the about

you you Just then behind bullishness if days the And logistics quarter. maybe talk see to was or give the for bit? path about you. given what XX Thank in over about little last kind negative beyond. comp idea secondly, gives the us developed the And what talk can it conviction year a that Michael, profitability of next you as has an and it's platform the

Jen Foyle

markets. we to in And -- feel And said particular believe about annualize something going well, share we're think to then, good be we're Jay, and new those year, I we to it that when that to that's we gain going just believe store we're really openings, start Yes. market next these going anniversary Mike we that that.

talk our it's it, Aerie be best casual a customer. not of of These my I good team I to wear, on in opening feel we feel commentary in mean, that all, results a about And to are Aerie. a about said we're leggings there. OFFLINE It cult honest. offering, so is but amazing. that innovation product that lot business perfectly I've here been show. really it's to about The our Second this I for true. is it And something innovating about I have new early-on it's that really slowdown never remarks. following. launched seen is anything Look, seeing brand COVID, leggings. during in we good year-over-year. like there's definitely the that

in We're feel we So, a has some strong type Aerie think I these casual softness about more of seeing cornerstone not businesses. there. a And these categories. really

following cult a only the not our just for. leggings, So, on like we and brand what but stand

going and to we're in deliver both doing honestly, that just innovate continue we're and brands, Jay. to So,

of like Some those so new AE, pivoting the ideas, in and newness no I'm We're are right categories. bottoms just the of into other. I proud And some think qualities about. feel also spring, good well, about going to it say I early really And a around new that what launch that I but have excited so. one. is, can't pretty we're as new spring

Michael Rempell

clear Yes. -- so. And to last or I the Aerie, Jen Jay, a for year just new ton just saying, sure totally on what of opened want make it's stores we've building was that in

I becomes prepared the quarter, his of Starting and headwind third early year for Mike in tailwind. openings That part all in were think quarter. said comp fourth through -- a that those remarks. a even this of the over

will, stores mature, provide provide seeing. revenue up planned So, if quarter. Quiet, as these yes, stores and believe to And starting become as a on to history for is more be the stores itself, excited themselves, -- what anniversary it third-party be stores, should repeats really to we they those new Its we're about should fourth multiyear Those customer new based tailwind continue it relates significantly. in Aerie, we comp those actually Quiet.

quarter, other unprecedented. in people benefit the fewer the you business. you American per up in results, customers They XX% of is are those the if And a our the we of at talking in kind split results okay, retailers, to neighborhood retail, at unusual. in look look this this And everyone had the other shipments business healthy. XX%, Eagle XX%, other for case as results, might Quiet and We've our it. order, year. for be cost for industry, wants lower in Again, extremely think, new it's pipeline incredibly And results. I we're think for brands, I proven when the their

results new other in more that unique have quarter. very advantage customers brands end we'll Eagle the about industry we'll to of. of talk that's providing business retailers So, it's that want for that to the the and confident benefits and But at delivering American take a again, we're are going fourth

Operator

Paul next Lejuez Our is Citi. question from with

Paul Lejuez

up quarters curious being is about the of of want openings on Aerie the if to terms this a year year. what last a next three follow through response a you guess, all drag the openings for being plan drag, Just to similar would in expect I the drag first question those and -- from versus the sides. to Also, a standalone first looks think a about new any first Aerie to were class side costs going tailwind. then 'XX. mentioned how of would of be love give you hear And can detail performance by if I half half, you second Curious product of that openings.

Mike Mathias

product a remarks. Aerie few maybe cost just in prepared can Paul. your -- the stores, -- we for question. said add me prepared add let your on answer things, my But start Michael or about what said to and I'll Thanks, on to Michael

year. have over be 'XX 'XX, But We if stores. XX all of XXX across all it'll stores look last back the you and of over actually

effect a invest markets, we you to happens stores talked and that we're So, what that our see you all some cases stores existing the for aggressively, impact brand as and an there. halo digital store in time, as the quite were that growth adding to about where digital already new we've impact typically within see with

total sometimes markets. And see comp over a we're negative to a to see as start that impact a the in lift. we -- market then, comp after then describing, XX-month to of period, X- XX-month bit a X- So period, you

play out we these past that over So, years. two

comp comp within then, a as XX you we And contemplating quarter, business talked we Aerie, locations mix forward 'XX, the fourth into in see similar into result this guiding play could performance that improve. of we better or depending Michael We year. As head as quarter. said, fourth but actually the believe the positive maybe only on could comps, the next to about a Aerie actually in we're opening

impact comp up from So these XXX-plus that you 'XX any and their ramping won't in have maturity. any growth, coming -- stores around significant of many really

about terms talking brand, we're next in the side-by-side in the excited overall you what the performance, that's investment tailwind asked beyond don't really think formats think is that's now. growth. of aggressive that we're So, I growth in what right openings, seeing some really between Standalone I means and aggressive and and about year year, comp about. we're a significant to difference next and

can So then into assume can you costs And that. product I on year, take think you next that. Michael,

Michael Rempell

second Yes. -- first on we certainly to And was lot benefit a year. seeing Paul, it in -- the first the In a it's just next of this of half? being the comment haven't question We really was see markup lot we're business. year. half what half, too are we're than half, the we seeing early better second seeing actually, of

ending getting the I we're the quarter inventories think fourth and full spring we're the as sourcing we're weaker of benefit fact summer that clear, a demand with environment still products.

markup markup see pre-pandemic any and XXXX. half. seeing for way, I So than spring in [Technical first we're in better better Difficulty] than And XXXX summer, the

Operator

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

Janet Kloppenburg

shape quarter product. should what Jen, kind And talk see are it’s little everybody. congrats Hi, comparison you're relatively a about Inventories a can in just promotional fourth of on great on bit year-over-year levels the excited of the easy. the basis? activity in results. we as you improved a about And and

look impact Jay, consider about if terrific. could how for year. on watching next any off may quarter. consumer spending put year it should as business, year, would out enlighten and just fourth were you your we what us that wondering on SG&A, be the in for investments lastly, to next your should next there for this that thoughts are we we year And So, be I'm And that

Jen Foyle

through we're going Look, of I sure. think see what They're these to is our competitive to to remain step couple going big us, weeks you're for weeks. for we game next and want up

to will I December what I better we we opportunity So, through competitive. my have that hopefully, do be believe run then But ball, crystal in -- businesses.

had year, QX. on last side Aerie margin you If recall in opportunity definitely the

where liquidation period, mentioned, look January, the our when Janet, store you'll have new trying make including promotion January deliver approved And that So, I we we're on we're really our we're and as has, That's don't step up highly on can to our our so set. in on newness, inventory I surprise we pull and men's. our allow set phenomenal. spring. of and know, to you for will we up compete levels that They back yes, -- competition definitely us when and early protecting again, believe, to a terms. that's going keep some going December, us it it's sure that Janice to just see spring just -- the success opportunity, that. for like And in

Janet Kloppenburg

Thanks. on And SG&A, Mike?

Mike Mathias

year. the Yes, QX. with most. progress slightly think thank ask cross-functionally the -- fourth about base. all -- down year. But a it's achieved is we're it's half you next very the quarter. pleased our still We just teams our not the be We not expense And for again in work date. fact not to about been the It's it's will asked we efforts. an We in done. work the beginning that other tend even I plans we're for most or the you I really guys flat focus of through flat focus questions only but since progress. is -- what to though their talk SG&A, SG&A the working We're believe It's for

area next gross down every plans that looking basis, impacts we year and look and as next every So, a impacts. category we're margin depreciation longer-term on years, even across through of at few even for SG&A in sort for the

progress. XXXX just and now, the work for we're beyond. talk We'll quarter on done. And not about expectations more next So, in

Jay Schottenstein

you you excited the And otherwise, retail of business. lot this about be an in things. optimist, I'm be In a can't business, to have

product launches I of be new some think Jen Company. to the that about that these exciting for very was going talking it's

the see as earlier, have costs ability, of the was We going see to coming our the down. cost freight levels. back we saying down We Michael XXXX

to closer be need for the chase So, able to to there's and we We have see optimism. work ability merchandise. reason the

So, optimistic. we we But only positive. can everything I'm pretty control control. is can And what

And think better expect. that was the it's will follow of going I that. be lot that down. signs. than start good Hopefully, I a people coming mortgage to I there's interest think reading rates

Operator

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

Dana Telsey

Nice to progress. see the

expenses the go any margins? we spring and the in what levels core just exciting for even As in new you. indicate and through some business, Aerie particular freight very further the you pickup as the that American see the Thank holiday denim Eagle trends, then, about how think on sales season the of you of launch. tailwinds go business, And that Anything you're for in with of then And do Jen unfolding men forward about the demand? costs differentiation that cotton seeing, of seeing? on besides terms could you're watching leggings the be should women, in a we

Jay Schottenstein

Okay, Dana.

going keep -- down, months the freight That's trends with everybody cotton up was down, the two going still last freight to going months positive. going keep years, up, eight positive, was was prices The going up, opposite. ago, the and eight cotton in I it keep forecasting way. keep go news. higher going opposite all remember good to it's On to and were and commodity ago, higher going everybody

I positive. are things think So

we think buying cost. against the And at in that deal products the don't like of of market. factories a I States, softer that United world. continents, just other also Europe, world a compete it's that around countries, softer lot advantage gives with think we in better And stores sell other our I the us

customer And to able is that's we be selection. that a one to I'm a the positive offer. give sign thing great So proud

of -- I lineups in the think we one best have the retail.

is quality number a our a is Our number and value X. X

I it's the done And later. as buyers and job. will the year, talk next great think We that exciting. that Jen a for think have was very I excited. as our and very we're about team far planned know designers So,

I it's positive. think all So,

Michael Rempell

with agree, carrying And so inventory costs throughout I and spring you're important our transportation to as as year cost higher inventory flows this getting be through the a -- so. retailer over Jay. and if is And you're from think clean Yes. that I cotton saying into Dan, it ending it better reason going The season, the -- keep next it I the P&L. carrying is you're see year, ending is, as unfolds, I far how it

very we'll have little that. of For us,

benefit So, the general, we start in And should Jay was some benefit, through. going have season. seeing costs. platforms that saying, product spring builds, grow benefit work we're fabric a in as as to season markup transportation we'll in builds, But it markup and huge as obviously, with the costs. that throughout benefit Nice we're spring season

Jay Schottenstein

thing. just I Michael, add to one want Hey

by about And I same very not who the their I And retailers their going not what too. responsible a based and think paying we're be cotton wrong, tariffs, it's goods not way, it. be We play in, doing on. careful punished where that are not shipping field. talk the to who America, follow We're You manufacture should I advantages we certain level our rules. very by being there get of what's cotton. for we following rules, And in should fairness they're in the think sourcing retailers careful think we goods. expect where use, our competition the it to playing And

who And be and companies, play companies with U.S. that wake up I American think country, period. the to follow fair level this the get a American and in companies think make away the it. the come playing it’s should analysts not Congress and rules violate other for to I writing should that by offer rules

Jen Foyle

Yes. -- want tough, clear well start I prior have Jay. Dana, on was my sure said, to just with that be was American do that I a answer. make Eagle. follow Well, That's let's to I there.

a one American Eagle brand, have launch men's in We new in specifically spring delivery. for the the

excited going early early ensure it and with that do what we're and what reads integrity going pretty to to we're have great. it. about had not overdrive to been we're we're results about So new excited to about seeing. But we're on pretty business. we're launch, We've caution the a And certainly,

seeing, denim but wider of a And so been new silhouettes. the to, to seeing businesses flexible, is softer trend Regarding but cargo, getting strongly up as that far denim, and believe cords, as we're bottoms. what more denim rationalizing heritage we're and a slightly silhouettes, be it's our ride look, allowing as into us it's we've with we in bottom stay. those we SKUs, is shift to our here denim, And into brand, some definitely out

well, we excited that really newness Dana, mentioned, of Jay of denim American we're we at an that always in everything Eagle, will proud brand we're do certainly be, American As as about. the category. helm we're and and And have there

You'll spring. see that in early

couple Aerie, that have other They're in any offline. know, also our is, we're we're OFFLINE. categories, our you that no We're years For fleece mean, on incredible It certainly and Aerie, I innovation we're price we and going legging out that fairly just just it's value focused But equation with new like for us. proud a there. is seeing offer business not a other old. we I'm there. It's other categories. like so in as of getting -- no softness

to deliver innovative apart they're marketing excited I in newness. really the in the and So, about it We're And so our Again, think but constant sets so that campaigns new a evolution. Aerie, fun. it. and really category ways looking at it business talk about mall. us it's and We market

and the an I I said I hope what out approved Aerie in to brands again forward. feels stand both bras. we're more gosh, there I just sets an like there's go is mall just and the oversight. invading and my you just mean know to do for fun seeing on end, Intimate lot the come like brand. and spring what each -- the is early new at oh for So, in going continually We're I a -- certainly I'm we it not our I in in stand

delight as well we because hopefully please can and that's up what customers So our we're to.

Dana Telsey

Thank you. luck Dana. the in Thank season. holiday of you Best

Operator

you. Thank

Adrienne is question from Barclays. next Our Yih with

Adrienne Yih

sound enthusiasm, best the sounded your just you Jen, go back it’s in while. -- to to you a

to like as But So chain I'm is as that. test it the and back reorder about where you're to sounds excited a really level able well chase. supply

and leaving up read So Can do was don't you in if that transit? as you not Can it us, that you're unavailable XQ, up of in remind for I to you at see in inventory. -- because the on table able high Mike you remind in very I guess going to was facto, that double-digit, think how into it spring the we or inventory are are get people Michael utility. order my I to was you to transit. your all us much XX% just de for can't QX go what was excess and of Because versus comp, numbers XX% worried XX% opinion, inventory. end want season, front It the sale. be down then my you And is, portion and wasn't question again then And and on QX. buying demand?

that Thank just I of sure to it want make that part you. messaging -- So is clear.

Jen Foyle

position. depending evaluating plan constantly to inventory We're sales the on our our sales inventory certainly higher and than our is positioning that relationship ensuring positioned

taking going about, I So but that's mean, our It's up we've more chain. XX% we're what about supply that. brands. And and roughly, of here, of And to definitely the as top, to. practice And flexible off right goods up faster we're roughly I able we're just advantage say maybe what the open. a been we we're leveraging leave Michael I'm We're that's certainly both now. swiftly. for get to, way best said, And more would

these, that more what would of even And some with forward. see we efficient technologies, new inventory, inventory. can far I of go on with So, our as just as the what like we for and holiday more our you'll same -- we to seeing the say the released believe you're get

hope So, I that question. your answers

Operator

Our from next Kimberly with Greenberger Morgan question Stanley. is

Kimberly Greenberger

trends Jen, what on business. I wanted on seeing you're the to follow-up in

is what how frame seeing If And ebbs flows are you're last you XXXX? year? consumers this informing if your preferences, Thanks. consumer of how for and those could compared to, gravitating year, buying and just are to that changing the sort any

Jen Foyle

Sure.

I this past. before think, my I've said in

price in our and with that For both conjunction value equation, is and comfort up our no I like brands, think we're quality other. to soft

-- earlier demographics, on So, out those been our day, of core the that dresses, some there's into has want was at you're going year, do But categories. they some and there shift conversations end where I this hearing out of there the comfort.

think comfort going We is brand is for stand And We're seeing both what for haven't intensive. can represent. are do businesses. important American fit just brands there upticks not fleece. -- in that's any They the away. seen Both a thing shift I most casual they

and bra Aerie denim, our important. in our categories in AE, So so categories bottoms it's

Aerie, They from want for. Aerie, customers we're they the to in these their clothing want but we're that go are We where the focus industry, in on platform, I fits said. customers comfort, look Our what is, deliver the think love the every from new -- Aerie love more apart. and shifting best going We're community. of and they we're good our just on because I we think to they categories in the about customer part what stand that's stand demanding to like be covers to underneath bottoms we still intimates based I our we're we I to And I Eagle. American forward, business, a of for And continue expects us. us thing going mean, like stand literally, some there. day. want business that from more adding. And We're in categories like the

Operator

Our from is Dan next question Stroller.

Dan Stroller

Thank Just you. it opportunity guess, it think in think if Was was I remarks, pre-COVID. not, up is the grants? you brought prepared -- exist? And I the AUR at where that where quantified versus may and

Mike Mathias

remarks, now. We right but healthy We didn't it yes, in for both have both cover is don't it But AUR up levels in for is you pre-pandemic brands. and the up specifics brands. -- prepared

Judy Meehan

take can question. one think more I Paul, Okay. we

Operator

Thank you.

Jonna with Cowen. question from will come Kim next Our

Jonna Kim

on costs. one marketing Just question

customer Curious costs your managing how what seeing are some as for you you're moment much. costs next your plans at are and year? so for to We elevated acquisition. the Thank

Mike Mathias

marketing spend. costs. Yes, you're definitely correct. different Yes. sort a lot you. We've advertising of advertising of terms headwinds Thank in within of There's parts moving our and got

where company, that expense not to but to the acquisition So, we can redirect retention. and sure costs, incur for incrementally that prioritizing those then we we spend need offset customer for make are spend

a to month-to-month into in of they to the that. looking incurring what opportunities next definitely terms are spend work at retention basis made. then perspective are levels rate similar preseason It's the we're year. So generate kind have as believe focus hard acquisition that's we teams investments at kind on planning where of incrementally And conversation uncovering. similar sales week-to-week, of But and we to the an expense, without can need from we of

Jay Schottenstein

that discipline right. maintaining strong focused flow, on note, cash and improving intently Mike and All has and And around said, are inventory, we’re as profitability capital expenditures. expenses on we

emerge resilient, our we forward I progress. and a note, safe happy everyone continued you will operations macro Buckeyes. current holiday a healthy, wish our confident a look the go updating and are personal are season. on brands from on stronger. I to Our And I'm

Operator

concludes today's conference. This

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

American Eagle Outfitters (AEO) 22 Nov 222022 Q3 Earnings call transcript