Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the American Eagle Outfitters Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Judy Meehan. Ms. you, Thank Meehan.

begin. You may

Judy Meehan

everyone. afternoon, Good

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

differ we call, expectations that information may to our factors actually represents company's current I Before beliefs. risk remind will The we realized upon that begin are based forward-looking certain based today's or included results filings. make SEC statements. need on you materially These statements the in

update The a a revise accompanying press company call GAAP undertakes future as no both obligation financial new please certain basis. of release, law. forward-looking to events as this are publicly note whether by in otherwise, presented during on except or and required and statements, the information, metrics adjusted or any non-GAAP result Also, that

GAAP attached our release, available results adjusted are in results of at website corporate is tables the Investor which in www.aeo-inc.com to Relations Reconciliations the section. earnings the posted the to on

can presentation. fourth also the quarter find investor you Here,

turn will I Jay. over call now, And to the

Jay Schottenstein

Good joining afternoon. XXXX today. a year, Thanks with questions. external us dynamic numerous was for

results with lapped a rates, in face we macro retail we environment. environment promotional highly outstanding As supply chain difficult rising a interest higher and inflation, XXXX, continued disruption,

capital of and I and the second contributed am This profitability swift reduce flow Early the actions during aggressive proud recovery expenses spending. year. took of significant how we to and our levels, teams cash year. executed throughout half to on, the free in inventory a cut

at billion. the fourth revenue periods and highest record quarter the posted both billion our in also second We at $X.X $X year on

our balance million last convertible healthier results debt income end of of quarter year We our and the sheet to all exchange was adjusted liquidity. and operating strengthened fourth a exceeded and position financial with Our outstanding above neared year. expectations $XX improved

margin done has the SKUs proud American rationalize team the years to improve stores. several brand. profitability, work I'm AE over the Eagle close the incredibly to unproductive low of last Moving and

point, As AE fourth XX% for a adjusted to quarter profit operating up proof was XXXX.

has strong by energizing assortments Jen a styles brand. while brand, great to I'm and is delivering the forward capitalize customers trends, profitability. healthy and refresh better are AE embracing to encouraged to made continued on look how I our new progress. via strides

has and adjusted income powerful up Aerie the fourth Aerie's The revenue XX% into success underscores of wear growth over extension in multi-year demonstrated exciting OFFLINE, of strength quarter with rapid our XXXX. active platform. brand operating

and more we cannot as be have I about future. more the customers, more potential We significant excited and reach

Our international business performed well in XXXX.

continue will a expand sales to strategy to and our We fuel business. markets optimize profits, license pursuing key company-owned and multiyear

first XXXX, build world. undertaken I was better report, highlighting we over publish ESG a pleased In actions to of have to decades two our

As tremendous noted embedded made report, our and is water our responsibility across ESG to goals company progress in in we and with brands deeply the continue culture interline strategy. corporate submissions. and have reduce our

focus profitability. we As will our and disciplined markets, we on brands stay and grow

of our agility Inventory chain and and supply the a management focus, chase will key use to we remains strength demand.

reduce program have we expenses, to launched a projects. and further formal ROI high efficiencies Additionally, prioritize gain

been remain. business. years, time opportunities highly yet now set is several over we progress that past good the in environment operating volatile made our Given year, the we've the we Last

operating margin to range. strive of the break we As out single-digit mid

about from Yet remain to customers prospective long-term Quiet past pressured been optimistic the demand the and we Platform, this see interest On continue year. opportunity. has

go-forward strengthen our review, will Michael we to plans profitability. adjusting are As

environment Although the XXXX entered remains we macro better position. uncertain,

I see no of shortage opportunities this company. for

capabilities. in strengthened we drive growth and bottom industry-leading an confident our our discipline find and have operating harness and processes will models focus the power I'm of line. We efficiencies brands with to and

quarterly and dividend. shareholders our to cash returning reinstate to our committed very to are We are pleased

call With to I'll turn that, over the Jen.

Jen Foyle

good Jay, Thanks, and everyone. afternoon,

past coaster their further back year in us resilience, In another loyalty core demographic. a we many the where In and ways favorites fan this the on customers year. dynamic a XXXX status roller few grew customer as our was displayed tested and discretionary our our Over of maintaining Aerie within battle has relationships. environment, macro years, strengthening spending, American Eagle pulled file,

brand achieving in highest our Even second we building innovation across our down inventory over a to customers up year's results controlled healthy controlling quarter promotional in new XX% With X% focus promotions fourth high, our on was at levels, environment, yet stores last highlighting highly to to exciting our record competitive This quarter exceeded fourth brought expectations. equity. and brands back and markdowns, AUR. XXXX,

stores Aerie especially given the revenue milestone unprecedented new reached a as this operating XXXX, nearly awareness. profit in close I expand with to continued XXXX revenue Since billion am volatility. XXX%. accomplishment, in has up doubled to pleased at with $X.X macro

our expectations. achieved Core we in and For to also sweater up came showed yet positive the Aerie fleece. growth, fourth history our in quarter, apparel below growth see continued season the in brand's well, while good best continuing

Aerie, continue powerful extension, of new customer driver wear be by standout our and acquisitions, to and fashion performance styles. OFFLINE nice by performer, are across Leggings a remained led active momentum we a Our franchise. seeing Leggings

awareness a our look units and than was XXXX, include great we forward intimates bit more plans to build in to expected. engagement. softer Intimates launching as And

we leveraging Aerie, gifting holiday the on scale success. Aerie strong to campaign marketing want marketing are In creative excitement. touch points to our a was quarter, centered we As I continue fourth drive

life experiences. this launched Additionally a including digital campaign Find Your we with to throwback new spring, a real fashion, Wonder YXK and

in Turning our to fourth the expectations. Eagle. quarter exceeded Demand American

a fashion move forward reception in I evolve such excitement and we wide nice the engaging new silhouettes and as trends renewed seeing new our year. legs fashion and as with knit cargo, on assortment are to tops. we to through fleece capitalizing trends, As we look

These back we better driving health disrupted margins. on Over pulling selectively stores. brand, the focused assortment, promotions changes years, AE value the are been the our have past several and the improving intently on unproductive closing of tightening

As on focus we our growth. exploring actively profitability, opportunities are drive also to we maintain

focused On our been that forward XX/X, look category. we encouraging, note, the we limited scaling sub year. active very men's and has to on brand fast-growing launched the new assortment wear initial to collection this reception in January, AE Early later a

The early as women's with forward sustainable very Last relaunched AEXX the capital assortment month, has a AE be encouraging, in within spans with will for also bricks-and-mortar and the select premium choices and I now, we brand. success. predominantly to on the been denim available both Introduced men's limited building presence look stores. reception online and

we file the retained that more note to in customer reactivated grew pleased customers. I'm AE's and quarter fourth as

collaborated AE the of Summer I our sold Earl, cast organic Turned Alex post one month, a continuing front, spring. with Last favorite marketing silhouette, collection influencers. of TikTok's viral Drape, Buzz the by around fastest-growing after an launching Z edition The a newest Pretty, denim out. into is fully On limited went that Gen we show, Dreamy

is have in a across customers launched media. start, exclusive We new Spring with collaboration drawing crew, great also off an Banks reception to with Outer good which the social

of to our Entering emerging across the In growth of one drive fact, one Instagram trends a post is while remains provide time. show our brands. our recent in wear the post uncertain the XXXX, became continue on casual Innovation by avenues strength. number all new macro to stars

you. high into on quality will our customers. lean Thank We excitement trend and styles deliver newness and continue to to

tremendous this are to year. very season, every for the making AE I teams always, what's and remain excited progress, As effort past With about their come. Aerie and we to

Thank Michael. you. now call turn And the I'll over to

Michael Rempell

good and afternoon everyone. Jen Thanks,

through for extremely past how retail noted, I'm challenges. technologies, volatile we've Navigating which our years our and the added the We've operations Jay are been spending been very by highlighted not speed. of the experience. new few have As of to easy, responded period and our consumer this has shift driving agility in benefits proud and capabilities use operational and yet industry, customer with both increased significantly to

a to landscape, improvements continue we will profitability. as capabilities into As lean we these we productivity for dynamic through stronger even strive and manage

returning year store quarter X% numerous incredible flat Since and customers macro in-person spend reflected the for ongoing leadership. responsibility opportunity had our considerable XXXX. shopping. up I've largely notable time locations Store to and to volatility. the last channel that It's was fall, performance last to stores with Fourth revenue are taking to visit

a We And team. technologies drive and a been how just powerful productivity. to well with and impressed world-class field leverage we very tools I've have fleet customer and truly store the service

and For actually year-to-year satisfaction example, had the surveyed. for am Survey, quarter, largest for were ACSI pleased I this to that tied note the Retailer Number any Specialty Satisfaction Customer the company of improvement in we One customer

providing and shopping better new a XX%. times system Our checkout reducing by average point-of-sale is experience

on to sales per selling to as this efficiency improvement expect further we gains. We drive focus hour

across an later our will we that share and to excited year. very AI-based capability start innovative out RFID also technology this rolling I'm stores

sales into placement test accuracy. very efficiencies pilot unlock and inventory providing moving at over highly we Our about labor proved and successful, holiday visibility the productivity can availability opportunities, XX% improvements this forward. I'm inventory enthused

As and market. relocating I to we to store stores full Spring of collection updating month, from ensure location we moved to best AE focused we on most location. and our in off-line stores consolidated and the second last are quarter, introduced productive modernizing footprint Last Aerie floor Street our certain are also this We Broadway indicated our in SoHo the our Manhattan.

new outlets. functionality smaller, lower we store Eagle American and And stores. of which design, on emerging a We and a a are also testing heat in be fresh handful will modern to off-mall aesthetics testing the locations, neighborhood both stores take mid-summer, introducing are cost

how changes, As of are channel facets optimize to operate. we introduce these the dissecting all we store we

and we revealing further our is productivity opportunities, model. store within focus labor As profitability, particularly sharpen this on our

COVID, Digital a of down representing shift XXXX, a healthy up brand and was compared yet revenue total it As to and continues of XX% builds to was revenue XX% from channel channel, to XXXX. highly profitable. revenue unnatural be X% result is digital

experience his forward to new say commerce, are David hiring This to new Digital in we happy contributions. our Chief quarter, David Officer. Zhang vast looking welcoming successful digital I'm team, and as the to brings we're building talent

we to three in chain After to levels more stable a inbound unprecedented years pre-pandemic product supply volatility of and much Now entering the essentially XXXX Lead chain. turning back the times environment. supply have on inflation are normalized. side, costs are and

and season macro, cautiously fall demand, a of year, planning As the chasing through buy down still using manage star significant to are our advantage, uncertain we remains and portion spring an we last for the are open. into

side, client to for and cost the with fourth capacity, On down provide our much in costs in delivery Digital speed combined investment savings. brands, to platforms continues were flexibility year. needed the last our outbound quarter

in order. per making order, fulfillment reducing which costs number cost and in delivery resulted a are the progress lower of We per shipments

although slower a customers new due tougher noted, acquiring third-party last year, been Jay to grown to has significantly anticipated Quiet's As macro. revenue has than

with align better XXXX, on are to For trends. we focused growth expenses reducing

platform continue We will the to Quiet's benefits leverage for all both drive Quiet customers. for streamline in capabilities investments and to look and third-party of brands to our

I'm now over the And going call Mike. to Thanks. to turn

Mike Mathias

Michael. afternoon, everyone. Thanks, Good

response to reset As flow us enabled Jay and and changes in in in to capital mentioned, our of half inventory, cash a improvement we the to which in the reduced plans. profit We deliver second actions meaningful year. and took environment, expenditures, expenses aggressive the early

in Margins million second the half. $XXX rebounded, we and million first in $XX compared generated adjusted half to income of operating the

We positive free and our flow to position a balance also returned further cash sheet. strengthened

billion margins. consolidated quarter $X.X record of results and X expectations, of record last X% demand included reflecting stronger to income and million. year's exceeded year's Consolidated was declined our improved from Quiet results $XXX to year growth Fourth and last billion revenue point results was $X operating second revenue of adjusted Full Platforms. only

up Brand in X%, result holiday of coming highest revenue mid in company for January. single-digit a second with outlook the momentum down pre-pandemic This ahead decline. fourth revenue continuing XXXX, our was consolidated history in Compared the to of sales quarter includes our was positive XX%.

$XX income XX excluding XXXX. was up and charge. basis margin reflected to impairment than Quiet $XX was loss, $X anticipated. Demand last and million X.X% a points points Adjusted basis and Platforms year a of a lower restructuring million to million operating XX produced

into continuing and platforms expenses required to ahead this of due more of of this XX.X% of leverage markdowns Michael The planned we've growth control reflect adjusted to rate as healthy margin reviewed, plans XX% measured lower stronger versus year. gross pace As at we improving promotions. year, challenges and demand XX% our inventory fourth quarter was range macro with a profitability aimed position to in expected our to reset the

Lower Compared compensation partial points. with positive offset increased lower rent. higher $XXX to up markdowns. profit distribution a higher with were had costs by on gross warehousing and margin rate a dollars and costs freight million and year, higher gross from offset a Merchandise XXX product last and also to X% higher, margins delivery basis reflecting costs margins, impact

XX Platforms significantly Despite a on to that as basis reflecting had equity operating markdown scale. focus driving environment, to levels were multi-year an highly Quiet business impact growth. point continues our and improving relative brand promotional XXXX, healthier profitable

to ongoing our year SG&A last the focus expenses. on quarter, in controlling approximately flat were dollars reflecting fourth

efficiencies Jay was our to As to $X.XX culture and we're assessment year. structure, cost progress on report the and a additional I'll entire innovation the savings share. across currently undertaking discipline. per strengthening investment EPS Adjusted noted, focus course look company-wide for on our of over

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

fourth a XX.X% following driven of stores. a Aerie increase increased Shifting by recovery quarter adjusted declined from margin X%, reflected the The of revenue XX% brands, X%, year. year. to sales the last new significant last Comparable operating

multi-year profit a story. growth remains strong and Aerie

past maturity curve, along ramp anticipate returning we this comparisons positive new As and comps territory the move up we to tough stores year.

declined revenue improvement last Demand following and XX% was the comps third a year. from down reflected were Eagle quarter. expectations an X% X%, sequential and of American our increase ahead

particularly health the the of in I'm a significant XXXX. improvement since see to pleased brand

same of X% expanded was compared XX% margin basis up to profit the operating to the operating points XXXX, revenue fourth was XX%. adjusted and quarter XXX brand While over down period

Aerie where X% inventory with delivery, last to cost US spring AE X%. was compared continues down well by supply consolidated up last digits. the chain the Canada to across year, into product units driven and and double earning Mexico we're year, in with increase expansion is normalize. Inventories the Consolidated current reflect to up earlier-than-expected experiencing growth inventory and the

million. the the from which at of $XXX significantly year. million down the quarter $XXX totaled start liquidity in plan We year, ended $XX the for expenditures full with million cash million total in quarter and Capital the and our is of $XXX

annual and approximately XX on $XXX of AE several years, Aerie $XXX the past million cash net at focus million approximately XXXX. to free we're next plan closures the CapEx we investments open strengthening we year, We XX As on reducing flow the over to capitalize made in range new with stores. to stores

reflect dynamic multi-year in environment, the performance, the despite highly I pleased fourth quarter the our operating in a I'm health on improvement business. As of by

We long growth see drive to continue to profit and the opportunity improvement over term.

outlook. our to on Moving

greater the continues is supply expense our global strong brands XXXX, and improved the team visibility to and a enter company-wide on as and operating providing agility. has normalize, consumer overall That have still we limited. As discussed, The are spending And inventory healthy. behavior chain into leverage. focus macro we environment costs reduction and said, is

result, a view. cautious a we're taking As

to current trends favorable while we've remains the new a environment choppy. Regarding merchandise, February good in quarter, seen response with the

ahead. Additionally, early in with it's week most quarter still our the important

and of to quarter point, to the first single this be low income for outlook up At our year. digits approximately the for is range in revenue flat for last be to flat to operating

annual the reflects to of of digits $XXX single flat million. range and in up low million growth operating outlook in year, our to the income revenue range $XXX For the

open With up it that, questions. I'll for

Operator

Thank you.

be session. [Operator first question conducting our now with is Please Sole your from proceed you. Thank will question. with a Jay We Instructions] question-and-answer UBS. And

Jay Sole

things Great. so lot first exciting sounds part just Maybe Thank a like fashion. of It terms a you Aerie. in much. of just just question. two happening One, on there's

talked you slide about the it billion still in as deck that think see a $X I brand. you

February long-term you sounds see strong. And has with the opportunity It gave guidance maybe, Mike, about first just talked quarter. then just Aerie? for started you You that continue to on to like

for single-digit flat low to looking You're growth?

Jen Foyle

new of market, gotten going. from seeing as like results are business better. starting definitely hurdle there's to we increasingly our openings, we end we a know, as and mentioned as How the in As some new go you growth already these side because, have we've quarter to start stores the we're up comp these a Mike feel store it, get digital Sure. we -- perspective, some we the And QX, quarters comp Jay. new into Hi, you? --

new think and upside openings like businesses there is hurdle some the mature. store these let as I really that it's we So proof pudding of there those

we're So about that. excited

Jay, Regarding just product not mean, could more be the we side, I excited.

This incredible item fire, many last delivered it's on been coming so year-over-year results because own categories, ours. and our new of the our is We've incredible say OFFLINE. let have hurdling business launch that. me flare. and it, It's We can this QX over one and year. new comp just we being an and it's nobody crossover first best

really one to I That our That about year-over-year means The thing QX. XX% the speaks new opening expansion we're up still year. hold. our want so take awareness, customer awareness, about -- We're Aerie, and in customers. are now. in more XX right We're that We're customer this true, is Don't it's mode. about to to openings brand stores about volume. say starting this introducing store this the XXX forget,

hopefully off brand these all pay as So as awareness. new far stores

From about us. a growth standpoint, for is we're OFFLINE. presenting That over We're it. excited product all

businesses, think owned, for we're standpoint. we're intimates. including we've then going from dominating future, And fleece, the I really competitive double to New down which but really a there on

we hone on and category that feel can that's really innovate. we like So a in

this launch incredible. was SMOOTHEZ Our year

those frames that reinvent In we're business. going fact, have some And really taken for to us. really hold of

more come. So to

you we're going know, innovating you stop As insight. give never a this to I team. little can

Next anniversary. Aerie's XX-year year Aerie is Real

creative see So everyone to can team what's not be is come because stopping. excited the to

Jay Sole

Mike, revenue, it question. off like just has February And then there my been QX, -- But -- sounds I sorry, the got good. for Great. at just -- the for it sounds second think -- cut I on

far about secondly, talk on said how that? about if for sort above margin you're looking low QX in margin, Can quarter-to-date choppy, of just feel down you gross your single-digits. up gross up below or then so year-over-year? do trend or you You is to And flat

Mike Mathias

Hi, Yes. Jay. Thanks.

Just confirm applies guidance. cadence QX that the of to our revenue to

we rest quarter-to-date, minus X% that February. brand trend out that X% of the continued quarter. brand outcome that That January So through letting a the month, ICR, at point, about talked actually through negative continued the revenue. of at December then and were us to we But some has that coming trend point. for message fourth saw did And in uptick we we

single-digit February the up it, result consistency this has January, is which guidance. combined had us giving low confidence flat to So in some to here

we're looking range, to then yes, similar to single-digit guidance last of that gross margin And margin, gross or flat year our income low of but a to for -- not for last similar improvement. some range revenue year implies on

I in still in freight we looking expecting through think some obviously, freight again. from quarter we're freight at the that QX other last that recaptured some headwinds and to some first air come the year headwinds, of

definitely our of gross improvement a to guide. assumed that So margin improvement -- within income year in some similar last bit

Jay Sole

Yes, okay. helpful. Thank That’s very you.

Operator

Matthew with proceed from The Please JPMorgan. your Boss next question. is question with

Matthew Boss

Great. the selling on and Thanks. Eagle Maybe you you're brand if American also Aerie? spring trends both Jen, seeing early maybe elaborate touched categories? we could on that across

Jen Foyle

As comps it's see answer, How last both in nice starting Sure. quarter-over-quarter in to are Matt. getting I Hi, QX. my mentioned on you? brands. better We're

AE, reflect encouragement about American on, it's early it's to I'm that that. for on lot a teams. like I'd of I say but have So from to there's minute. Eagle Look, a the excited February,

been rightsizing really First work business. the team we've here. I'm we've really very of And up of a done. that all, they've proud to assembled world-class

protecting so a And customer during we've our bottom to as you up healthy a also line, building see. while allowed base. But it base, to can do these profitable us been tough times,

I the in can side. Eagle that's American important articulate think thing I right the most now

best came to in only promotional our our brand a the lot customers We're to in We were and had customers past once, getting brands. that of customers. up they the

here. Eagle, starting So think really American with we're I

think looking sided the business, opportunities. I and right for we're now growth we've

assortments, turn another we're into the balance. the to we're So XX. women's, the see and to early really getting I me But balance that on, of right and about Matt, it we new a let that a is here launched think step starting back want I XX/X, nice line, to just highlight take say

trends had think And bottoms. there teams I happening out really nice did a there to job been some after, a see other just softer, saw and starting we're little but as outfitting. adjusting and and well Denim the as results nice we the going

life. Now we're great seeing to come tops

has exciting tops so Our around business turned women's, which to is in see.

perfect to men's, to athletic off. And I as reads higher-priced of company slower a service We of denim. Men, the We customer? really a like is our on customer own new a But little well we're to surprise, new have and that early denim not as worked a learning, then reads business. XX/X in it's We in And spectacular. back wanted believed just bit going take some line. that it. been a premium We in little as XX is early why business a

can have two out the vehicles see say all and and our So our on it's as chase back on women's side. new nice is, get and Eagle well the for we -- American just into logistics that scale platform pretty to and round goods business potential test as we of and we're here, that ability can these company growth get our because how business I to pleased that goods

look, some the future. momentum really really even end nice February, And enough is apparel it's swim, coming of a up the after going talk to the intimates what out seen I of side. Aerie, about we've some can't then nice but we're February, results starting early to but in little for read there. And

Matthew Boss

down then maybe, just to year full just your could the recapture operating potential consider the guidance, if offsets Mike, thinking IMU And bucket rate break expense versus relative assumptions we on markdown front? margin to embedded you as maybe we're Great. help

Mike Mathias

Sure, Matt.

assuming recapture. I think we're definitely cost freight

here to start We'll in it see So we saw QX. in QX.

for ensure levels should agility now. year. to us inventory supply in that mode. will us for and year assumption are improving. full here product the -- allow includes our open is significant allow leaving we chain back We're guide that that know We're are to our the chase so the to buy, costs -- appropriate So the Speed to

associated recapture cleaning not QX cost repeating took So with half first charge inventory. and we both the in that up freight then

in some assumptions. did categories. The and other expense looking to incentive annual assumption offset just costs level just annual our incur not typical of expense would some some what's growth, that embedded wage XXXX offset, out then be some That's that then we growth we're in

Matthew Boss

luck. of Best Great.

Mike Mathias

Thanks, Matt.

Operator

question our Paul Lejuez from And Citibank. you. question. Thank proceed is with Please your next with

Paul Lejuez

Hey, you're I'm and terms if of new you thanks the previous of guys. performance seeing Aerie from what stores curious most that year, ramp? about in talk years this recent is compare could to the new store

size And are business that then Aerie counting OFFLINE you business? if the versus XXXX also what of within curious could the And growth Thanks. terms size Aerie? business in rest for the on do of just that you of us for to

Mike Mathias

Yes, Paul, the with productivity. start Aerie new store I can

I gate. the out we're stores the actually of really new think pleased with

we seen think, to this And think, of what to that's back which ties I payback we're the spring, last we’ve to -- to on we've expectations, gate, year, And communication as to investments. as and forma they're in guidance see half it those quarter. out the or described stores. our three are the others pro continuing the typical really what achieving recent I around return two of described, here year

a new actually performance So having positive I stores. impact of think the on that's these

is traffic healthy Store in general.

right know, now As little stores more than business a we digital. coming through

but pressure, under is traffic digital the are healthy. really stores So

to that And of the take contributing the you of piece that So if it's question? OFFLINE area I business, side don't want to performance. Jen, know

Jen Foyle

fell for about that. Just minute. the might have a missed I line sorry, off I --

by we are encouraged early Absolutely. meaning the OFFLINE, results? So

Mike Mathias

No.

The Just Jen. the size -- the Jen. size business, contribution of

Jen Foyle

feels at Let say Aerie me rate. a like in just early days, very growing we're it rapid

We are business. learning about the

this new still have is encouraged interesting, inside I in inside in letter inside testing new because we're we that businesses me every It's formats of thing still a learn OFFLINE, Aerie portion say store why, customer stores, leverage. a scale. Aerie don't learning out we the from We Aerie really can and build are can -- there's have some only in What store of mall we or a I'm different but a having business about or the is we or Aerie why? very we're we OFFLINE the that we stores, as do can't not, of feeling asking more day, why have stores. to whether that I new that looking the that the our can So store the select by so of intimates Aerie an get or why business, category, tells really pretty this business excited

come, And starting it's only -- I trust just the if of in is And think into us the those not mean business pandemic equal performance it's run every are OFFLINE rate, new extreme lifestyle, some the great. I up, to of And if of Look, did getting XX% we year-over-year look Aerie's they're at testing to to day. side the about not growth the Aerie. during And categories about what's more even it to we really great our the but double-digit pandemic. faster, quarter-over-quarter I prior the set it's years, business business. and way we still years

that really again, So opportunities. up opens new

Michael Rempell

is what said want earlier. Rempell. Paul, this I And just Jen to stress Michael

tells the And for each the stores last supports Aerie important seen is over really here at conversation, comp two hypothesis and it's in Those to in improvement from quarter our is sequential and comp. all also digital trajectory history going new going to stores comping. as bring our customers multiyear a the grow start and but into our the data comp they us, brand is years. quarter think opened that what Aerie of it start what the stores mature, even XXX we does they're and we've I that the store start which of to all come, which they're second really They're just going QX. not

are history, for growth. mirror is deals us give And the a very stores at COVID, So long-term to during are that done of brand. quarters which early into these at you for signs, last these very that is we're going positive few what stores you as doing if going get business time anniversarying them, multi-years to got to advantageous we the stores, at and look look obviously, these

right So encouraging we're the now business. seeing very Aerie in it's what

Paul Lejuez

Good luck. guys. Thanks

Mike Mathias

Paul. Thanks,

Operator

you. from our your question with with Barclays. Thank Yih Please is next Adrienne proceed And question.

Adrienne Yih

Great. you. Thank end to Jen, quarter, everybody. I'll start Nice you. the with

of seem there's impacting It about price kind conversations, been the tight in level other wallet does talk kind is a like customer. your that of necessarily So there, of paying not and consumer, that, sensitivity.

In you're back on promos. fact, pulling

So I'm the sure it's wondering -- just product.

foremost. so that XXXX? the versus that are But how So And of AURs loyalty? you that's way. by much. How Thanks promo much create and first are And doing to stores versus much look the higher great, engage differently what then retail? and initial the

Jen Foyle

Thank you.

Our AURs get loyalty more the Mike about differently, in focused on bit been best the customers, right, But, for first they're highly up. -- of the our what doing health it's a beginning on because we've file, loyalty on again, quarter, total but we our of files you. or are year specific are again, little But regarding our all, vendors. can

brands, come we They want more to the our customers. back and those most of

So that's and why see on more. we're you'll just loyalty our incredibly program, focused

that some how even build and program better. can Now, we really we stronger findings have and great

as rate. reinventing, all, after we've see been I'd brand at that to as our base Aerie growing newness. mentioned, say you that of I Adrienne, incredible like year-over-year doesn't going inventing, customer I that, mentioned And -- an as first is like, can quit,

In fact, a it's I stage, this just customers XX over chart, like, quadrupling the at believe looked at base. I million

and both AE Like, do and done learning Adrienne. building into getting as it in this building new markets in that Aerie brand It's I and community, we incredible brands, that is mentioned, get a customers to about about and I'll awareness, what those in minute. we've grassroots and

you customers. reach experience tentacles store that's amazing customer winning using said not us, associates those right? And have they're no experience, and edge our even our our for other, we're Michael and an and quit. it's and like store to ambassadors those it the heard Like, results, and to have place and our team done a best, that we going But team, a Sunny

So, Aerie that's story. the

XX/X, I'd launch the to of our okay? not In We're we're rebirthing AE, but to And opportunities let's doing forward. as kicked sort back with AE new so, mentioned, now. brand, new I what off go January to, forget sort in seeing like we up say of pulling we're of

two stats take years, greater Some on and into the saying brand. of new are saying this. we AE I'm so January this, hold over Gen-Z are I seeing recently, February, mean more past the the a

collab number did a there. collabs. Outer teen the sold The out. We're product going Banks. one Banks. It's the out We Outer Like, show just with to do

going doing so are been great, They're We into mastered us. to We've staying this we've get they're our Adrienne, with and us. brand living that. is what with customer

that the we've had And to the every seeing the up trends, liking new went getting reminds watches We viral we're TikTok, a of seeing. me It the on the into what with the seeing and American just her customer number jean fire. Eagle, this out American mean, we're done. work Now is, one just Earle, what we're Eagle, all this I legging there, girl old Aerie. of is Alix days TikToker in -- jean on crossover that

are that chasing We jean.

get play, can you organic media, authentic. more important we our most organic and that about what brand, love is, most, social if I is stand thing customers our for, what brands it -- XXX% to all stand which into means we're organic for. what of your winners organic and That's customers And the

we And real, get AE buzz, doing. customers can is those that's authentic. get what and if of is can we that we're more Aerie

positive So tons signs. of

back-to-school. left We have collabs, you're and going right, to see

have things We ahead new exciting kind have and going really and great base AE launch in this we're another some just now to move use of coming, to collab. We forward.

Adrienne Yih

ahead. helpful. Go is That super

Mike Mathias

pandemic, build where increases that seen to question which have the talked our give answer brand promotions, jeans program changes offers ticket pay loyalty in you of up strategy. targeted eliminated of equity to not some back. of second XX% combination that's we think, And box is our where over versus a AUR, terms we part the still plan willing your controlled We away not up we and being don't through back on about pandemic, historically set are structural price can in going just And XXXX. we see to, plans I giving more customers the on in free promotions the targeted that Adrienne, it. and for continued And the during that full to to resistance AUR that

Adrienne Yih

super comprehensive of luck. much. Thank helpful. Best Super you very and

Mike Mathias

Adrienne. Thanks,

Operator

Please with Thank you. Morgan question Alex And our proceed your Stanley. is Straton with next from question.

Alex Straton

for this you EBIT from happened path so Thanks that's and had Great. or kind what's different are much And the guys to sales $X I taking very teens my obviously, low last year landing last given so. mentioned in year, of know a guys in billion question. you margin. where year, this just

how step targets at those margin the trajectory revenue play numbers all, should think longer-term? a back, or and Thanks. still So are those about we just and in taking

Mike Mathias

Alex. Thanks,

longer-term obviously think We're some talk just on current come the we'll our for navigating and includes targets. environment about that. out I at back guide focused very and point,

across I the think get to firepower $X brands over we've company billion to the in time. our got

release, later, discuss Again, kind double-digit color that we X%. prepared can margin X%, But then as -- still provide it, our maybe Jay guidance think within here us really of our our cost to possible. for And and our keeping we'll year year we on that's in range, just is in provided unlock entire is press more this when a this maybe remarks call The to X% goal. we're mid structure. noted across project we single-digit operating embarking our in

revenue than us growth that the for or able few in way been a in leverage last to we've opportunity history. in continued The our to years different

that in goal. leverage that come project. us structural and revenue exactly operating or us to different So, will way more that to on to pass our geared allow towards that, It's XX% model towards changes a double-digit

Alex Straton

much. so Thanks Great.

Operator

next Marni Our your from Shapiro question. proceed Tracker. Retail is question Instructions] with [Operator Please with

Marni Shapiro

And jean. Jen, I to wear, that jean. great I end congratulations that That whenever year. guys, the jean, I -- Hey, the support on

Jen Foyle

in. Marni, delivery We got new it's the best. just a

Marni Shapiro

some Jay, in by big of Board -- confidence which But wasn't XXXX appreciate which actually and XXXX. the suggests understand not I costs jean. you. still XXXX. and normal the There for are dividend, a have question completely you the level And for the headwinds I to caution any have a reviewing But year a I about you did reinstate company stretch. picture the about comparing That business. the out there is

So numbers share I'm that are can point, us? what the maybe you that's with from curious, yet vantage in you your not seeing

Jay Schottenstein

right We the going see like way. good momentum

we future I like book. XX call we a seen like, even the very best and good was we of this is month. the and We don't I've was like partners month said, feel -- we going are international a know interesting, coming sending partners to though It last been look As optimistic. I've this had our very what from And the very past for got is major years, line our me one -- week in.

So we're big. to I very a our very new get we Jen think going on we XX. This XX/X traction that. developed mean, AE a optimistic. as We -- be think I was good saying, is

Marni Shapiro

So it's shine mostly anyway? where really which product guys is you based,

Jay Schottenstein

and goal the given that about how to each in the Yeah. is separate be looking same It's saying was are, stores time, those looking as And estate locations as markets Rempell sure Michael saying, We're -- and we're best best Mathias and a going private. see little market we real the at at those we to the make in we're our product-product locations take was based markets. we well Mike have different. strategy in

Marni Shapiro

follow-up Jen, jean sense. the Makes ask to if quick a lot And of I AE one just could then, situation.

You've seen. have is chase calling the some product? I'm I've you into not But forum the public that a selling ability not that the what opened can in big up chase store back for out out I'm hits to that in do very had curious, product quickly? you seeing has that reason. And the market very enough I'm

Jen Foyle

Eagle in just absolutely. thing more learned our we've Eagle. it's bit can of years we can And wash. with process little in more so lot a flexible, a and about changed but I've that little sometimes in bit nimble, silhouettes, only it's not really in Yes, American we be be And one jean, American testing a couple a my with wash. not about

about test And market. we really way fit. to Sometimes, dominate we think because can a it's go the of that's new where I and

this is agility are newer to ideas at stage, We that least And American Eagle. news, seeing trends a good in which we're seeing lot with denim, we're at intentional. your was point. there, Marni, improve it and Albeit more offsetting in

We sort this. of forecasted

-- prepared But now we So in It's next incredible spring I in other tops we -- have help things working America sure just Marni, mentioned, quote have we Markfield we're then do, the the to I'm and And will away. Roger actually soften other think T-shirt the making an trend. new job and commentary. for from leveraging and never go was chase. looking jeans are funniest ever I that outstanding did as go where years for with team bottoms be And assortment, could That new they the offset. ago, jeans do we this ideas really to we new I try an and that and job. can have that trends away.

good in and like ability reacting the I nimbleness. we there's news also what what on. look, It's February, to and So saw our We but react to like here. early we're

here. hopefully, QX. the of And come hear So there's to more you'll with at end this enthusiasm me

Marni Shapiro

guys. much so you Thank

Jay Schottenstein

Also that on. excited very too, Jen, have businesses, other you we're

business, growing excited strongly. Snyder very which On And about we're that. Todd is excited our very have We subscribe, we're about.

the things on. going We have positive of a lot

Marni Shapiro

Thanks guys.

Operator

you. Thank

question. Jonna Please TD your Our Cowen. with proceed next -- question is from with Kim

Jonna Kim

question. taking for Thank my you

Just curious about about you're the how long-term. and Quiet Logistics thinking platform

the profitability, Aerie assumption growth, to of stores? And mentioned you revisiting so You your we of that you're do about sort Thank should lap And we revenue the trajectory? you that terms think there? long-term XXXX. the cadence about how growth for in still impact much. new and how What's think of the as the comp the start

Jay Schottenstein

believe everybody. brand fulfill the against specialty And acquisition. it's not need and the about in at model orders We retail efficiencies for capacity the our day, speed. and the end the don't us to able going win compete you win you're that Quiet of a our to valuable order the if to still to You're gave we be Quiet, talking at in logistics,

a We So better second. that. want talk to we're we committed for And about that to -- get want there. a if Michael still get Rempell could to bottom-line like

Michael Rempell

separate Yes. Thanks issues. you Jay. I mean the can't two really

last mentioned, Jay is capacity, unique tremendous like brands customers. course, years, business. over for times. faster It pretty reduced cost us our retail. delivery of we've gave our order And delivery Quiet which is per to one couple and consistently the So, provides in of our support

at great It expected grew that and our expectations. ramped almost the said, we did I It was margin business third-party expected. like that just what what growth. but below saw it below But a we hasn't was to XX%,

business we're while it's all, So, someday. on at think not valuable going to the still business very giving we a be up

resetting are going of to out business. that And We plans. our we're expense pull

that lines a And full on service going we're reducing to business. in year basis. eliminate to unprofitable loss We're very committed the

to from that it's a from something is going question? we time, successful a second over XXXX provides again, to And basis, go headwind in year-on-year there benefit still in Was believe a this XXXX. that us. part was something to a profitable So, going be and the business for to

Jonna Kim

just the Yes. comps. Yes, Aerie on

Mike Mathias

Yes.

that of we you if added all think added this I X last -- fourth that anniversary for minus even on the X% gap talked about specifically, couple XX the some QX total John, XX-point think was comp we the revenue over think factors quarter, minus XXX stores the I past that about the we going more we non-comp, as a years, close year. That's further in to the comp year, math of QX the X. openings with is QX anniversary gap up last that even do you those

specific to we So, But in how comp impact for gap range a as XXXX versus the of GAAP of is do as comp positive in early Michael and our is this expect rates, give growth ramp that will perspective, described expectation. first positive the Aerie a you similar just business the growth turn quarter to And and total kind that earlier on a definitely as a total positive to whole. comps will be close -- the going from kind year. metrically,

Jonna Kim

you. Got it. Thank

Operator

you. Thank

question. Please JJK with Research. Our next Kloppenburg proceed Janet question your is from Joseph with

Janet Joseph Kloppenburg

I'll to Jen And to ask nice There softness across intimates to her seems the on Hi, see industry Jen. wanted improvement going it's I be quick. is everybody. the category. what on. the be overview

guidance see Mike, leggings, you. of And a you flattish maybe for more year revenues And given expect [indiscernible] I line on to inventory there. single, we wondering planning to lightings. up And I'm that? to Thank track block promotions our So in basic me should going lot your fasten I'm industry. just gravitating lastly tell low also for on what's customers the could leggings, with more in think, this

Jen Foyle

are Hi, you? Jen. How

Janet Joseph Kloppenburg

Thank good. Hi, you.

Jen Foyle

far Intimates share little down. holding own Yes. been I We're market a little and has but it our as has volatile, as will say. been a up

that business I With the the learning as think new mentioned, I we're things SMOOTHEZ, into launch of gives new the in us gateway ideas.

what really do. honestly, that's to need And we

for talk a again, sort There business a it's the little then I is It nothing. of future. a happening you're and hear really new to cities. two me about of bit almost the going in up is new think challenges lot something that's team it's in but innovation built-up intimates. interesting. the been has And It's tale

I what to we for, now, start first famous the what do right you'll And the being in of to in bralettes of and ideas to really the really really attack business. dominate we're businesses are us things we year, business. new of I think say including we and some we one own in over I these what that would learned we've meant right? one up for like think and right that is So see and our Aerie I some to is What's -- for think momentum want last play pick what

there of are it industry. leggings out to a in the When leggings, black black lot comes yes,

I leggings of leggings, want really And going some after -- OFFLINE team other And Abby in the -- but that parts ideas congratulate business. do in think starting just black see and to business. the we new or in interestingly, I to not more are right. team for You're fashion,

it. You'll really really feeling we're us early them. And marketing start to to about see reads, good

we're from -- I pay, as and starting definitely QX, the building far and both built black they exciting leggings? launch we us the again build quality, We to we and QX launches willing trust will as equity in that think us. we're So because forward, brands separate have a to that on then continue reinvent on competition, -- really that to going in new customer coming that all building AURs, in is the our how seeing do our

think that's continue just to have I comes to legging that's So what work business, we on. -- when it to the

get dress. grow have, way and they And with already -- they'll hopefully, us customers. So we those the that --

So thanks, Janet.

Mike Mathias

expecting be, be even inventory by we and last Hi, the end Janet. that to and really get fourth talked, as the US down further, of AE of to that sit inventories QX, were about up. we projected we at clean single-digits. And We actually, the spring end total which get Canada the elevated We're the quarter, to we actually and had down on is inventory, first against by it today end of was to Aerie time time quarter, we down high as to inventory right? to should the be

of single-digit inventory back to last You'd guide to of year the we we're expect planning inventory QX write us pretty all below that when flat to that's back the and actions for as back to to be down revenue half on significantly low be in get half, just this the year, growth knowing took increase. QX of philosophically really which drove expectations the Then similar to we you what now. positive in And general, growth being sales results below. it'd the saw

Judy Meehan

Okay.

running on time are up We now.

back remarks. over So closing it some turn for Jay I'll to

Jay Schottenstein

position. better in are we XXXX, Entering Okay.

and healthy. brands are operations Our

strive we deliver on you progress our call, Thank results. will inventory. I Given disciplined Thank joining forward macro updating the to next is to uncertainties, expenses for you. our and demand stronger, better we on is cautious, look stay outlook quarter. you and will If

Operator

teleconference. today's concludes This

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

American Eagle Outfitters (AEO) 1 Mar 232022 Q4 Earnings call transcript