Q2 2023 American Eagle Outfitters Inc Earnings Call
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Greetings and welcome to the H E O second quarter 2023 earnings conference call at.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference.
Press Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Judy Meehan. Thank.
Thank you Ms. Meehan you may begin.
Speaker 1: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer.
Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer.
Speaker 1: Jen Boyle, President, Executive Creative Director for AE and ARRI, Michael Rimpel, Chief Operating Officer, and Mike Mathias, Chief Financial Officer.
Jen Foyle President's executive creative director for AE and Aerie.
<unk> <unk>, Chief operating officer, and Mike Matthias Chief Financial Officer.
Speaker 1: Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or any of these statements being posted.
Before we begin todays call I need to remind you that we will make certain forward looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings.
Speaker 1: Results actually realized may differ materially based on risk factors included in our
Speaker 1: The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by my own bank accounts.
The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.
[inaudible] So, now onto a few highlights of the quarter.
Speaker 1: Additionally, you can find the second quarter investor presentation posted on our corporate website at www.aeo-inc.com in the investor relations section. And now I will turn the call over to Jay.
Additionally, you can find the second quarter Investor presentation posted on our corporate website at Www Dot E O Dash, Inc. Dot com in the Investor Relations section.
And now I will turn the call over to Jay.
Good afternoon, and thanks for joining us today I am pleased to report second quarter revenue and operating profit.
Speaker 2: I am pleased to report 2nd quarter revenue and operating profit that exceeded.
They exceeded our expectations, reflecting stronger demand and improved profit flow through.
Speaker 2: reflecting stronger demand and improved profit.
Speaker 2: Business picked up in June across brands and channels with strength sustaining into July as our early back to school collections rolled out.
Business picked up in June across brands and channels with strength sustaining into July as our early back to school collections rolled out the teams executed well during the period.
Speaker 2: teams execute it well during the period. We make quick product adjustments.
Hey, quick product adjustments chase in terms of band profitably, while also maintaining healthy inventories and controlling promotions.
Speaker 2: Chasing to ban properly, well also maintaining healthy imitories and controlling promotes.
Speaker 2: Record revenue of $1.2 billion was up slightly to last year. Well, operating income at $65 million increased significantly to last year. We generally.
Record revenue of $1 $2 billion was up slightly to last year, while operating income of $65 million increased significantly.
Last year.
We generated strong cash flow.
Speaker 2: ending the quarter with a healthy balance sheet and cash of $175 million up $77 million dollars to last.
Ending the quarter with a healthy balance sheet and cash of $175 million up $77 million for last year.
Speaker 2: As previously discussed, we expect this past several months reviewing our cost structure to find areas where we can't be more efficient as we continue to grow.
As previously discussed we have spent the past several months reviewing our cost structure to find areas, where we can be more efficient as we continue to grow we.
Speaker 2: We have identified opportunities to improve profitability over the next 12 to 20.
We have identified opportunities to improve profitability over the next 12 to 24 months.
Speaker 2: began to take action on these items in the second quarter and the starting of the results which Mike will review. Now, until I...
We began to take action on these items in the second quarter and are starting to see results, which Mike will review.
Now onto a few highlights of the quarter.
Speaker 2: American E.L. continues his leadership in casual wear, and that's evident in recent performance where the man has been strong, particularly during peak shopping periods.
American Eagle continues its leadership in casual wear.
It's evident in recent performance where demand has been strong, particularly during peak shopping periods.
Speaker 2: We have seen encouraging results across genders as new products or entities.
We are seeing encouraging results across genders as new products are introduced expansions like AE 77, our premium capsule and 24 seven our entry into men's activewear are injecting new energy and expanding our reach.
Speaker 2: expansions like AE77, our premium capsule and 24-7, our entry into men's active wear, are ingest the new energy and expanding our roots.
Speaker 2: As the teams will discuss, we're excited about the launch of the new store design to update and modernize the shopping experience.
As it seems will discuss we are excited about the launch of the new store design to update and modernize the shopping experience.
Speaker 2: The online channel is also big and has new features, which is driving better overall.
Online channels also big enhanced with new features which is driving better overall metrics.
Speaker 2: Area Chief, you had another record revenue quarter. It was strong.
We achieved yet another record revenue quarter with strong profit.
Speaker 2: As Janine will leave you, we saw incredible demand across our core pearl collection and our active work extension could take.
Jan will review, we saw incredible demand across our core apparel collection and are active with Accenture continues to be on fire.
Speaker 2: We are also saying we knew the momentum and the end of it where we've been reduced new collection.
We are also seeing renewed momentum and intimate where we've introduced new collections.
Speaker 2: You see a very bright future for the area and offline brand. Where we are just beginning to see the real potential.
See a very bright future for the area in offline brand, where we are just beginning to see the real potential.
Jay Schottenstein: American Eagle continues the leadership and casual wear, and that's evident in recent performance where the man has been strong, particularly during peak shopping periods. We have seen encouraging results across genders as new products are introduced. Expansions like AE77 are premium capsule and 24 seven are entry into men's active wear are ingesting new energy and expanding our reach.
Speaker 2: I'd also like to comment on our Todd Snyder brand where he had been seeing strong growth.
I'd also like to comment on our Todd Snyder brand, where we had been seeing strong growth.
Speaker 2: Over the past year, we have selectedly expanded into high fashion methods.
Over the past year, we have selectively expanding into high fashion metros, bringing todd's modern creations and upscale experience with new customers.
Speaker 2: bringing Todd's modern creations and upskill experience to new customers. They expect to reach over $100 million in revenue this year.
Expect to reach over $100 million in revenue this year I cannot be more excited for what's ahead.
Speaker 2: Entering the third quarter, it's been encouraging to see sustained strength across our entire Grand Plurfolio.
Entering the third quarter, it's been encouraging to see sustained strength across our entire brand portfolio.
Jay Schottenstein: As the teams will discuss, we're excited about the launch of the new store design to update and modernize the shopping experience. The online channels also big enhanced with new features, which is driving better overall metrics. Area achieved yet another record revenue quarter was strong profit. As Jen will review, we saw incredible demand across our core pearl collection and our active wear extension continues to be on fire. We are also saying the new momentum and elements where we've introduced new collections. I see a very bright future for the area and offline brand, where we are just beginning to see the real potential.
Speaker 2: As we continue to fuel this momentum with strong merchandise and innovative marketing, we will stay focused on delivering efficiencies across the business and improve profit flow through. Before I turn the call over to Jen, I want to touch on the leadership transition.
As we continue to fuel this momentum with strong merchandise and innovative marketing.
Let's stay focused on delivering efficiencies across the business and improve profit flow through.
Before I turn the call over to Jim I wanted to touch on the leadership transition.
Alex last month.
Note that Michael <unk>, our Chief operating officer.
Speaker 2: has made the decision to leave the company at the end of the fiscal year.
Made the decision to leave the company at the end of the fiscal year.
Speaker 2: So I'm personally sad to see him go. I want to thank Michael Persen credible leadership and partnership over the last 23 years. Michael has been a tremendous asset to the company. Investing in technology and infrastructure.
I am personally sad to see him go I wanted to thank Michael for his incredible leadership and partnership over the last 23 years, Michael has been a tremendous asset to the company investing in technology and infrastructure to.
To create our world class operations.
Jay Schottenstein: I'd also like to comment on our Todd Snyder brand, where we have been seeing strong growth over the past year, we have selectively expanded into high fashion metrics, bringing Todd's modern creations and upscale experience to new customers. They expect to reach over $100 million in revenue this year. I cannot be more excited for what's ahead. Entering the third quarter, it's been encouraging to see sustained strength across our entire brand portfolio. As we continue to fuel this momentum with strong merchandise and innovative marketing, we will stay focused on delivering efficiencies across the business and improve profit flow through.
Speaker 2: The DVEO is a strong foundation to build on from here, including excellent teams to help support a successful transition. With that, I'll turn the call over to Jeff.
With a strong foundation to build on from here, including excellent teams to help support our successful transition with that I'll turn the call over to Jeff.
Thanks, Jay and good afternoon, everyone I am pleased with how the second quarter shaped up including a significant improvement in operating profit across brands.
Speaker 3: I am pleased with how the second quarter shaped up, including a significant improvement in operating process across brands. As Jay noted,
As Jay noted June was an inflection point.
Speaker 3: As this improved, as we brought in new fashion, and July was our best month, with both AE and Air...
Business improved as we brought in new fashion and July was our best month with both AE and Aerie Comping positively.
Speaker 3: You were able to chase into high demand items at a strong market.
We were able to chase into high demand items at a strong margin.
Speaker 3: with inventory at appropriate levels, promotions and end-of-season clearance were down dramatically to last year.
With inventory at appropriate level promotions and end of season clearance were down dramatically to last year.
Jay Schottenstein: Before I turn the call over to Jen, I want to touch on the leadership transition and now it's last month. As noted, Michael and Powell are chief operating officer has made the decision to leave the company at the end of the fiscal year. Well, I'm personally sad to see him go. I want to thank Michael person credible leadership and partnership over the last 23 years. Michael has been a tremendous asset to the company, investing in technology and instruction to create our world class operations. The needs AEO with a strong foundation to build on from here, including excellent teams to help support a successful transition.
Our second quarter AUR was the second highest in history.
Speaker 3: Customer KPIs remain solid with growth in our total customer file as well as our loyalty customer base.
Or kpis remained solid with growth in our total customer file as well as our loyalty customer base.
Aerie continues to expand its reach with the customer file growing to another all time high this quarter.
Speaker 3: with the customer file growing to another all time high this quarter. Turning to the brand, Aerie Revenue was up to last year, led by New Store Growth. With the exception of swimwear and-
Turning to the brand's air revenue was up to last year led by new store growth.
With the exception of swimwear and intimates comps are very solid across categories with most major businesses up in the double digits.
Speaker 3: As we move past peak swim season, come strength and further, as we introduce new merchandise, turning positive in July , and accelerated into the third...
As we move past peak swim season comp strengthened further as we introduce new merchandise turning positive in July and accelerated into the third quarter.
Jennifer Foyle: With that, I'll turn the call over to Jen. Thanks Jay and good afternoon everyone. I am pleased with how the second quarter shaped up, including a significant improvement in operating profit across brand. As Jay noted, June was an inflection point. Business improved as we brought in new fashion and July was our best month with both AE and airy copying positively. We were able to chase into high demand items at a strong margin.
Speaker 3: Deceptions in new styles in our core parallel collection has been incredible, especially in fleece, bottoms and tops.
Reception to new styles in our core apparel collection has been incredible, especially in fleece bottoms and tops.
Speaker 3: active wear extension off line by airy also had a stand out quarter across top sports broads.
Our activewear extension offline by Arie also had a standout quarter across top sports bras active short and fashion items.
Speaker 3: I am also pleased to note that our intimate business turn positive would be a rival of updated collections.
I'm also pleased to note that our intimates business turn positive with the arrival of updated collection.
Jennifer Foyle: With inventory at appropriate levels, promotions and end of season clearance were down dramatically to last. This year, our second quarter AUR was the second highest in history. Customer KPIs remained solid with growth in our total customer file as well as our loyalty customer base. We saw it across categories with most major businesses up in the double digits. As we move past peak swim seasons, constraints and further as we introduce new merchandise, turning positive in July and accelerated into the third corner.
As discussed on previous calls we have been focused on leading with greater innovation and operating more match that.
Speaker 3: We have been focused on leading with greater innovation and offering more match facts.
Speaker 3: are newly launched smoothie styles and extended body tube collections.
Our newly launched smoothies styles and extended body shoe collection have been a tremendous success.
Speaker 3: Coupled with refresh marketing, I am pleased to see the Intimus attract new customers and drive higher
With refreshed marketing I am pleased to see the intimate attract new customers and drive higher sales.
Speaker 3: Building brand awareness and amplifying our products for unique marketing is a priority.
Building brand awareness and amplifying our products are unique marketing as a priority.
Speaker 3: Through our Hidden Gems campaign, we are bringing to light a more mature point of view with an intimate response. We are emphasizing high quality, beautiful designs while maintaining the playful spirit that makes aery...
Sure a hidden gems campaign, we are bringing to life, our more mature point of view within intimates as Paul.
We are emphasizing high quality beautiful duck designs, while maintaining the playful spirit that makes are distinctive.
Speaker 3: This is a 360 degree campaign, including partnerships with the dating app Bumble, celebrity influencers, active social campaigns, and live-
This is a 360 degree campaign, including partnerships with the dating App Bumble celebrity Influencers active social campaigns and live events.
Jennifer Foyle: Receptions in new styles in our core apparel collection has been incredible, especially in fleece, bottoms and tops. Active wear extension, offline by airy, also had a standout quarter across tops, sports broad active shorts and fashion items. I am also pleased to note that our intimate business turn positive would be arrival of updated collections. As discussed on previous calls, we have been focused on leading with greater innovation and offering more match facts.
Speaker 3: Now turning to American Eagle. Revenue was down to last year, yet with a significant improvement in profitability.
Now turning to American Eagle revenue was down to last year, yet with a significant improvement in profitability here too. We were pleased to see trends improved sequentially throughout the quarter with AE exiting July with positive comps.
Speaker 3: Here too, we were pleased to see trends improved sequentially throughout the quarter with AEX sitting July with positive cons, which has sustained into the third quarter
Which has sustained into the third quarter as well.
Women's tops had another quarter of growth with continued improvement in comp trends across denim and non denim bottoms as well.
Speaker 3: continued improvement in contrast across denim and non denim bottoms as well. Men also.
Men's also saw improvement in bottoms driven by Pan over.
Speaker 3: The past several quarters with brand margins restored to healthier levels, we are now focusing on
Jennifer Foyle: Our newly launched smoothie styles and extended body suit collections have been a tremendous success coupled with refresh marketing. I am pleased to see the intimate attract new customers and drive higher sales. Building brand awareness and amplifying our product through unique marketing is a priority. Through our hidden gems campaign, we are bringing to light a more mature point of view within intimate to spawn. We are emphasizing high quality, beautiful designs while maintaining the playful spirit that makes airy distinctive. This is a 360 degree campaign, including partnerships with the dating app bumble, celebrity influencers, active social campaigns and live events.
Over the past several quarters with brand margins restored to healthier levels, we are now focusing on growth.
Speaker 3: As Jay noticed, we are pleased with the expansion of newer collections like AE 77 and 247 and will continue to build on our
As Jay noted we are pleased with the expansion of Newark collections like $8 77, and 24, seven and we will continue to build on our learnings.
Speaker 3: I'm also very excited about the launch of our new AES Store design with modern aesthetics that celebrate our strong heritage in denim casual
I'm also very excited about the launch of our new AE store design with modern aesthetics that celebrate our strong heritage in denim and casual wear.
Speaker 3: and we've seen strong results so far and look forward to updating additional locations. On the marketing front.
We've seen strong results, so far and look forward to updating additional locations.
On the marketing front <unk> collaborated with the summer I think pretty a gen Z favorites with a live shopping experience on Amazon The campaign and collections were strong success and we continue to chase items.
Speaker 3: a Gen Z favorite with a live shopping experience on Amazon.
Speaker 3: campaigning collections were a strong success and we continue to chase I
Jennifer Foyle: Now turning to American evil. Revenue was down to last year, yet with a significant improvement in profitability. Here too, we were pleased to see trends improved sequentially throughout the quarter with AE exiting July with positive comp, which has sustained into the third quarter as well. Women's tops have another quarter of growth with continued improvement in comp trends across denim and non denim bottoms as well. Men's also some improvement in bottoms driven by pants.
Speaker 3: Looking ahead, I am really excited by the trends I am seeing in cash.
Looking ahead I am really excited by the trends I am seeing in casual wear emerging new trends provide exciting opportunities to fuel growth and I believe we will be well positioned for upcoming season.
Speaker 3: emerging new trends provide exciting opportunities to fuel growth and I believe we will be well positioned for up
Speaker 3: As we said, the business has shown material improvement this summer. Across brands, recent trends have been stronger with greater consistency and performance.
As we said the business has shown material improvement this summer across brands recent trends have been stronger with greater consistency in performance.
Speaker 3: We are continuing to build on the areas with high demand while keeping a sharp eye on the consumer environment and planning a
We are continuing to build on the areas with high demand, while keeping a sharp eye on the consumer environment and planning appropriately.
Jennifer Foyle: Over the past several quarters, with brand margins restored to healthier levels, we are now focusing on growth. As Jay noticed, we are pleased with the expansion of newer collections like AE77 and 2477 and will continue to build on our learning. I am also very excited about the launch of our new AE Store design with modern aesthetics that celebrate our strong heritage in denim and casual wear. We've seen strong results so far and look forward to updating additional locations.
Speaker 3: Before I turn the call over to Michael, I wanna say thank you to my incredible AE and ARI team for seeing folks in the community.
I turn the call over to Michael I wanted to say, thank you to my incredible AE and aerie team for staying focused and delivering this quarter. We are energized and I look forward to updating you on our performance next quarter. Thank you and now I'll turn the call over to Michael.
Speaker 3: We are energized and I look forward to updating you on our performance next quarter. Thank you and now I'll turn the call over to Michael.
Thanks, Jen and good afternoon, everyone I am very pleased with how the teams are executing against our initiatives and delivering stronger results.
Speaker 3: I am very pleased with how the teams are executing against our initiatives and delivering stronger
Speaker 3: We are leveraging flexibility in our supply chain to chase high demand.
We are leveraging flexibility in our supply chain to chase high demand items across channels, we're making improvements in seeing a real difference in key performance metrics, which I believe will enhance the customer experience and support sales growth.
Speaker 3: across channels where making improvements and seeing a real difference and keep performance met.
Jennifer Foyle: On the marketing front, AE collaborated with the Summarizer and Pretty, a Gen Z favorite with a live-shopping experience on Amazon. The campaign and collections were a strong success and we continue to chase items. Looking ahead, I am really excited by the trends I am seeing in cash. International Wear, emerging new trends provide exciting opportunities to fuel growth and I believe we will be well positioned for upcoming seasons. As we said, the business has shown material improvement this summer across brands, recent trends have been stronger with greater consistency and performance. We are continuing to build on the areas with high demand while keeping a sharp eye on the consumer environment and planning appropriately.
Speaker 3: I believe will enhance the customer experience and support sales.
Speaker 3: For the quarter, store revenue increased 4% as customers continue to return to imperson-
For the quarter store revenue increased 4% as customers continued to return to in person shopping.
Speaker 3: It's encouraging to see demand improve over the course of the quarter as our new floorstarter
Encouraging to see demand improve over the course of the quarter as our new floor set hit stores I'm also very pleased with the progress we're making on our store payroll model, which is creating efficiencies and allowing us to leverage expense.
Speaker 3: I'm also very pleased with the progress we're making on our store payroll model, which is creating efficiencies and allowing us...
Speaker 3: upgrading our fleet and store operations remains a top-rare. Our new store design was introduced.
Upgrading our fleet and store operations remains a top priority.
Our new store design was introduced in three locations.
Speaker 3: Oakbrook in Chicago, Palafate in New York, and Polaris.
Work in Chicago, Palisades in New York, and Polaris in Columbus in Oak Brook, we coupled the remodel with our relocation to a better area of the mall and while it's early days. The combination of these actions has driven a nice lift to store sale.
Speaker 3: In Oakbrook, we coupled the remodel with a relocation to a better area.
Jennifer Foyle: Before I turn the call over to Michael, I want to say thank you to my incredible A.E, and Erie teams for staying focused and delivering this quarter. We are energized and I look forward to updating you on our performance next quarter.
Speaker 3: And while it's early days, the combination of these actions has driven a nice lift.
Speaker 3: This is a great example of this 360 degree approach where...
This is a great example of the 360 degree approach we are taking to improve store productivity. While also ensuring our brands are showcased in the best way possible.
Michael Rempell: Thank you and now I'll turn the call over to Michael. Thanks Jan and good afternoon everyone. I am very pleased with how the teams are executing against our initiatives and delivering stronger results. We are leveraging flexibility in our supply chain to chase high demand items across channels where making improvements and seeing a real difference in key performance metrics, which I believe will enhance the customer experience and support sales growth for the quarter store revenue increased 4% as customers continue to return to in person shopping.
Speaker 3: to improve store productivity while also ensuring our brands are showcased in the best way.
Speaker 3: We also rolled out a new AI-based technology to optimize size profiling and in
We also rolled out a new AI based technology to optimize size profiling and inventory replenishment.
Speaker 3: Early results are showing quicker and more accurate placement with improved
Early results are showing quicker and more accurate placement with improved in stock levels.
Speaker 3: This is allowing us to better service demand with lower inventory.
This is allowing us to better service demand with lower inventory across the network.
Speaker 3: Turning to digital, revenue declined 7% in the quarters. Demand continues to normalize from elevated builds during the pandemic.
Turning to digital revenue declined 7% in the quarter as demand continued to normalize from elevated builds during the pandemic yet.
Michael Rempell: It is encouraging to see demand improve over the course of the quarter as our new floor sets hit stores. I am also very pleased with the progress we are making on our store payroll model, which is creating efficiencies and allowing us to leverage expense.
Speaker 3: Yet here too, we are very pleased to see the business accelerate months to months.
Here too we are very pleased to see the business accelerate month to months and turned positive in August .
Speaker 3: New leadership has brought a fresh set of eyes to how we can continue to elevate our online.
New leadership has brought a fresh set of eyes to how we can continue to elevate our online shopping experience.
Michael Rempell: Upgrading our fleet and store operations remains a top rare. Our new store design was introduced in three locations. Oakbrook in Chicago, Palisades in New York and Polaris in Columbus. In Oakbrook, we coupled the remodel with a relocation to a better area than mall. And while it's early days, the combination of these actions has driven a nice lift to store sales. This is a great example of the 360 degree approach we are taking to improve store productivity while also ensuring our brands are showcased in the best way possible.
Speaker 3: We have put new processes in place to test learning scale ideas with greater
We have put new processes in place to test learn and scale ideas with greater precision and speed.
Speaker 3: This new rhythm and the culture of experimentation is creating and exciting avenues for us to improve our KPF.
New rhythm and the culture of experimentation is creating an exciting avenues for us to improve our kpis.
Speaker 3: As an example, updated messaging and more strategic customer engagement are leading to
As an example updated messaging and more strategic customer engagement are leading to higher conversion rates.
Speaker 3: We are just scratching the surface and I see plenty of opportunity for more improvement as we build on our-
We are just scratching the surface nic's plenty of opportunity for more improvement as we build on our learnings.
Speaker 3: We are also taking action to create a more seamless customer experience across channels as we further in
We are also taking action to create a more seamless customer experience across channels as we further integrate our store and digital operations. This quarter, we enhanced our buy online pickup in store offering providing increased visibility to customers and optimizing order fulfillment. The initial read has been very positive we have doubled.
Michael Rempell: We also rolled out a new AI based technology to optimize size profiling and inventory replenishment. Early results are showing quicker and more accurate placement with improved in stock levels. This is allowing us to better service demand with lower inventory across the network.
Speaker 3: This quarter we enhanced our buy-in line pick-up and store off.
Speaker 3: providing increased visibility to customers and optimizing order fulfillment. The initial read has been.
Our pickup penetration, which is generating savings on shipping costs and creating additional sale.
Speaker 3: which is generating saving on shipping costs and creating a
Michael Rempell: Turning to digital, revenue declined 7% in the quarter as demand continued to normalize from elevated builds during the pandemic. Yet here too, we are very pleased to see the business accelerate months a month and turn positive in August. New leadership has brought a fresh set of eyes to how we can continue to elevate our online shop experience. We have put new processes in place to test, learn and scale ideas with greater precision and speed.
Speaker 3: All together, this is allowing us to better leverage our store flee and our associates to provide a great
Altogether, this is allowing us to better leverage our store fleet and our associates to provide a great cross channel customer experience.
Speaker 3: Our network of distribution centers and in-market nodes continues to drive efficiencies in our
Our network of distribution centers and in market nodes continues to drive efficiencies in our fulfillment model second quarter delivery costs were down year over year and leveraged as a percent of digital revenue in fact, we achieved multi year lows in both our both our cost per shipment and the number of shipments required in <unk>.
Speaker 3: Second quarter delivery costs were down year over year and leveraged as a percent of digits.
Speaker 3: In fact, we achieved multi-year lows in both our cost per shipment and the number of shipments required to fulfill an order, all while delivering products faster to our customers.
Michael Rempell: This new rhythm and the culture of experimentation is creating and exciting avenues for us to improve our KPIs. As an example, updated messaging and more strategic customer engagement are leading to higher conversion rates. We are just scratching the surface and I see plenty of opportunity for more improvement as we build on our learning.
Phil in order.
All while delivering product faster to our customers.
On the inbound side, we continue to see a favorable environment, we expect product costs and freight to continue to be a tailwind in the second half of 2023.
Speaker 3: We expect product costs and freight to continue to be a tailwind in the second
Speaker 3: Additionally, we are leveraging shorter lead times to stay nim-
Additionally, we are leveraging shorter lead times to stay nimble unchanged.
Michael Rempell: We are also taking action to create a more seamless customer experience across channels as we further integrate our store and digital apps. Corporation. This quarter, we enhanced our buy-on-line pick-ups and store offering, providing increased visibility to customers and optimizing order fulfillment. The initial read has been very positive. We've doubled our pickup penetration, which is generating savings on shipping costs and creating additional sell. All together, this is allowing us to better leverage our store fleet and our associates to provide a great cross-channel customer experience.
Speaker 3: Before I turn the call over to Mike, I want to thank Jay for his kind words and my
Before I turn the call over to Mike I want to thank Jay for his kind words of my decision to leave the company.
Speaker 3: It's hard to move on from a place that has been my second home for the last 23 years, especially one where I...
It's hard to move on from a place that has been my second home for the last 23 years, especially one where I've made so many lifelong friendships.
Speaker 3: The only thing that makes it easier is knowing that I'm leaving the company and very
The only thing that makes it easier knowing that I am leaving the company in very capable hands.
Speaker 3: It has truly been a privilege to work with such a high caliber and talented team over the years. Thank you for your support, your hard work, and your camaraderie. We will work closely together to ensure a smooth transition in the coming months. AEO has a bright future ahead. I know...
It has truly been a privilege to work with such a high caliber and talented team over the years.
Thank you for your support your hard work and your camaraderie.
We will work closely together to ensure a smooth transition in the coming months.
Michael Rempell: Our network of distribution centers and in-market nodes continues to drive efficiencies in our fulfillment model. Second quarter delivery costs were down year-over-year and leveraged as a percent of digital revenue. In fact, we achieved multi-year lows in both our cost per shipment and the number of shipments required to fulfill an order, all while delivering product faster to our customers. On the inbound side, we continue to see a favorable environment. We expect product costs and freight to continue to be a tailwind in the second half of 2023. Additionally, we are leveraging shorter lead times to stay nimble and chase.
<unk> has a bright future ahead I know there is no better team to take this company to the next level.
And with that I'm going to turn this call over to Mike.
Thanks, Michael Good afternoon, everyone.
Speaker 4: We are pleased with our second quarter results, which reflected early progress on our journey to improve long-term profits.
We are pleased with our second quarter results, which reflected early progress on our journey to improve long term profitability.
Speaker 4: By this slow start, we saw a real inflection point with the arrival of new merchandise
Despite a slow start we saw a real inflection point with the arrival of new merchandise over the summer.
Speaker 4: We remain nimble, manage markdowns effectively, and levers our ability to chase into demand prop.
We remain nimble managed markdowns effectively and leverage our ability to chase into demand profitably.
Speaker 4: initiation of our profit improvement program. We also saw some early benefits, which I'll touch on.
With the initiation of our profit improvement program. We also saw some early benefits, which I'll touch on shortly.
Speaker 4: Overall we managed the quarter well and we're able to nicely exceed our outlook provided back.
We're all we manage the quarter, well and were able to nicely exceed our outlook provided back in may.
Michael Rempell: Before I turn the call over to Mike, I want to thank Jay for his kind words and my decision to leave the company. It's hard to move on from a place that has been my second home for the last 23 years, especially one where I've made so many lifelong friendships. The only thing that makes it easier is knowing that I'm leaving the company in very capable hands. It has truly been a privilege to work with such a high caliber and talented team over the years.
Speaker 4: The validated revenue of 1.2 billion was up slightly to the second quarter of last.
Consolidated revenue of $1 2 billion was up slightly to the second quarter of last year.
Speaker 4: Important to note that we cycle to approximately $20 million in revenue from last year's excess end of season set loss, which impacted second quarter revenue.
It is important to note that we cycled approximately $22 million in revenue from last year's excess end of season sell off which impacted second quarter revenue growth across brands and channels.
Speaker 4: Upgrading income came in at $65 million for the quarter, reflecting a strong recovery year every year, and a 5.4% off.
Operating income came in at $65 million for the quarter, reflecting a strong recovery year over year and a five 4% operating margin.
Michael Rempell: Thank you for your support, your hard work, and your camaraderie. We will work closely together to ensure a smooth transition in the coming months. AEO has a bright future ahead. I know there's no better team to take this company to the next level.
Speaker 4: Compared to last year, gross profit dollars increase 83 million or 22% to 450.
Compared to last year gross profit dollars increased $83 million or 22% to $453 million with the gross margin rate up 680 basis points to 37, 7%.
Speaker 4: The gross margin rate up 680 basis points to 37.7%. The majority of
The majority of the improvement was driven by better merchandize margins inventory discipline drove lower markdowns as we maintain our focus on healthy promotions.
Michael Rempell: And with that, I'm going to turn this call over to Mike. Thanks, Michael.
Speaker 4: The inventory discipline drove lower mark downs as we maintain our focus on health.
Michael Rempell: Good afternoon, everyone. We are pleased with our second quarter results, which reflected early progress on our journey to improve long-term profitability. Despite its close start, we saw a real inflection point with the arrival of new merchandise over the summer. We remain nimble, manage markdowns effectively, and leverage our ability to case into demand profitably. With the initiation of our profit improvement program, we also saw some early benefits, which I'll touch on shortly.
Speaker 4: Additionally, we lap 25 million of freight headwinds and 30 million of incremental markdowns related to end of season failup.
Additionally, we will have $25 million of freight headwinds and 30 million of incremental markdowns related to end of season sale off last year.
Speaker 4: So that will discuss shortly. We made a structural change to our end of season clearance process this quarter, which we expect to positively...
As I will discuss shortly we made a structural change to our end of season clearance process. This quarter, which we expect to positively impact gross margin over the next year.
As Michael noted lower delivery and distribution expenses also provide a tailwind to gross margin this quarter as we drove efficiencies across our outbound network.
Speaker 4: As Michael noted, lower delivery and distribution expenses also provided tailwinds to gross margin this quarter as we drove efficiencies across our out.
Michael Rempell: Overall, we managed the quarter well, and were able to nicely exceed our outlook provided back in May. The consolidated revenue of 1.2 billion was up slightly to the second quarter of last year. It's important to note that we cycle to approximately $20 million in revenue from last year's excess end of season fell off, which impacted second quarter revenue growth across brands and channels. Operating income came in at $65 million for the quarter, reflecting a strong recovery year over year, and a 5.4% operating margin.
Speaker 4: S-T-N-A expense of $332 million was up 8% to last.
SG&A expense of $332 million was up 8% to last year, we continue to drive efficiencies in our store labor model, providing a partial offset to incentive accruals compared to zero last year higher costs from store growth and other corporate expense.
Speaker 4: Continue to drive efficiencies in our store labor model, providing a partial offset to incentive a cruells compared to zero last year, higher costs from store growth and other corporate expense. The pressure.
Appreciation was up year over year and in line with guidance provided last quarter.
Speaker 4: PS with 25 cents per share and our deluded stick share count was 190
EPS was <unk> 25 per share and our diluted share count was $196 million.
Turning to our brands following the low in May we were pleased to see trends for both Aerie and American Eagle improved sequentially through the quarter.
Speaker 4: Turning to our brands, following the low in May, we've reported to see trends for both ARI and American Eagle, and prove sequentially through the quarter. ARI revenue increased.
Michael Rempell: Compared to last year, gross profit dollars increased $83 million or 22% to $453 million, with the gross margin rate up to 680 basis points to 37.7%. The majority of the improvement was given by better merchandise margins. The inventory discipline drove lower markdowns as we maintained our focus on healthy promotions. Additionally, we lapped 25 million of freight headwinds and 30 million of incremental markdowns related to end of season fell off last year.
<unk> revenue increased 2% in the second quarter comparable sales were flat in areas operating margin of 15, 1% expanded approximately 12 points to last year, driven by improved markup and lower markdowns.
Speaker 4: And areas operating margin of 15.1%, expanded approximately 12 points to last year, driven by improved markup and lower markdowns. American E.
American Eagle revenue declined 1% with comps down 2% as.
Speaker 4: 80s operating margin of 16.8% expanded nearly three
<unk> operating margin of 16, 8% expanded nearly three points to last year.
Speaker 4: The solidated ending inventory cost was down 7% compared to last year with units down 11%. .
Consolidated ending inventory at cost was down 7% compared to last year with units down 11% inventory.
Michael Rempell: As I will discuss shortly, we made a structural change to our end of season clearance process this quarter, which we expect to positively impact gross margin over the next year. As Michael noted, lower delivery and distribution expenses also provided tailwinds to gross margin this quarter as we drove efficiencies across our outbound network. SNA expense of $332 million was up 8% to last year. We continue to drive efficiencies in our store labor model, providing a partial offset to incentive a cruelled compared to zero last year, higher costs from store growth and other corporate expense.
Inventory levels remain healthy and control it across geographies as we continue to maintain buying discipline and chase demand.
Speaker 4: Generated strong cash below and ended the quarter of $175 million.
We generated strong cash flow and ended the quarter with $175 million in cash we continue to have healthy access to additional liquidity through our revolver with current local liquidity over $800 million.
Speaker 4: You need to have healthy access to additional liquidity through our revolver with current liquidity over eight.
Speaker 4: Capital expenditures totaled 46 million and we continue to expect full year capex to be in the range of 150 to 170
Capital expenditures totaled $46 million and we continue to expect full year capex to be in the range of $150 million to $175 million.
Michael Rempell: The appreciation was up year over year and in line with guidance provided last quarter. EPS was 25 cents per share and our deluded share count was 196 million. Turning to our brands, following the low in May, we were pleased to see trends for both Ari and American Eagle improved sequentially through the quarter. Ari revenue increased 2% in the second quarter. Comparable sales were flat and Ari's operating margin of 15.1%, expanded approximately 12 points to last year, driven by improved markup and lower markdowns.
Speaker 4: plan for our consolidated store count in 2023 remains roughly flat to last
Our plan for our consolidated store count in 2023 remains roughly flat to last year, reflecting approximately 25, new aerie store openings offset by approximately 25 net closures for the AE brand.
Speaker 4: reflecting approximately 25 new area store openings set by approximately 25 net close.
Speaker 4: Before I move on to our outlook, I'd like to provide an update on the positive progress being made on our profits.
Before I move on to our outlook I'd like to provide an update on the positive progress being made on our profit improvement initiatives.
Speaker 4: highly motivated cross-functional teams making structural changes to our operating model to capture permanent efficiencies. As I've discussed,
We are highly motivated cross functional teams, making structural changes to our operating model to capture permanent efficiencies.
As discussed on previous calls, we're working across all areas of the P&L.
Speaker 4: roughly 70% of our costs spread across product, markdowns, rent, warehousing, and inbound and outbound delivery. Our initial actions are positively...
Michael Rempell: American Eagle revenue declined 1% with calm down 2%. Ari's operating margin of 16.8% expanded nearly 3 points to last year. Consolidated ending inventory costs was down 7% compared to last year with units down 11%. Inventory levels remain healthy and controlled across geographies as we continue to maintain buying discipline and chase demand. We generated strong cash below and ended the quarter of $175 million in cash. We continued our healthy access to additional liquidity through our revolver with current liquidity over 800 million.
With roughly 70% of our cost spread across product markdowns rent warehousing and inbound and outbound delivery. Our initial actions are positively impacting our gross margin.
Michael pointed out the benefits, we're seeing in distribution and warehousing.
Speaker 4: In addition to this, in the second quarter, we optimize our clearance strategy.
In addition to this in the second quarter, we optimize our clearance strategy, which we expect to drive approximately $50 million in benefits to gross margin on an annualized basis.
Speaker 4: Everything bewussted in the first part of this segment and so he got constable 1200
Speaker 4: Another area of near term focus is a structural change to optimize our low-the-program with a focus on driving more profitable sales. We're also working on longer-term benefits in SGNA across all areas. We will keep...
Another area of near term focus is a structural change to optimize our loyalty program with a focus on driving more profitable sales.
We're also working on longer term benefits in SG&A across all areas we.
Michael Rempell: Capital expenditures totaled 46 million and we continue to expect full year cap X to be in the range of 150 to 175 million. Our plan for our consolidated store count in 2023 remains roughly flat to last year, reflecting approximately 25 new Ari store openings offset by approximately 25 net closures for the AE brand.
We will keep you updated on what this could contribute to long term profitability as we solidify those work streams.
Moving onto our outlook quarter to date product acceptance and overall demand has been very encouraging.
Speaker 4: Moving on to our outlook, quarter date product acceptance and overall demand has been varying.
Speaker 4: Trends to the back to school shopping period have been strong with AE positive and ARI delivering a double digit comp quarter to date. Yep.
So the back to school shopping period have been strong with AE positive and are delivering a double digit comp quarter to date.
Michael Rempell: Before I move on to our outlook, I'd like to provide an update on the positive progress being made on our profit improvement initiative. We have highly motivated cross functional teams making structural changes to our operating model to capture permanent efficiencies. As I've discussed on previous calls, we're working across all areas of the P&O with roughly 70% of our costs spread across product, markdowns, rent, warehousing and inbound and outbound delivery. Our initial actions are positively impacting our gross margin.
Yes. It was significant business still ahead, we're maintaining a cautious view.
For the year, we're raising our outlook to reflect better than expected business performance in the second quarter. In addition to improved demand and continued profit recovery in the back half of the year.
Speaker 4: We're raising our outlook to reflect better than expected business performance in the second quarter in addition to improve demand and continue to profit.
Speaker 4: We expect total revenue to be up low single digits and operating income in the range of 325 to 350 million. We expect gross margin expansion, reflecting improved freedom product costs.
We expect total revenue to be up low single digits and operating income in the range of $325 million to $350 million.
We expect gross margin expansion, reflecting improved freight and product cost.
Our markdowns and approximately $25 million in savings tied to early profit improvement initiatives.
Michael Rempell: Michael pointed out the benefits we're seeing in distribution and warehousing. In addition to this, in the second quarter, we optimize our clearance strategy, which we expect to drive approximately 50 million in benefits to gross margin on an annualized basis. Another area of near term focus is a structural change to optimize our loyalty program with a focus on driving more profitable sales. We're also working on longer term benefits in SGNA across all areas.
Speaker 4: Based on improvements in trend and profitability, we are accruing a baseline of incentives this year. As a result, we expect four-year SGNA to be up in the low double digits with a second.
Based on improvements in trend in profitability, we are accruing a baseline of incentives this year.
As a result, we expect full year SG&A to be up in the low double digits with the second half up in the mid teens.
We expect the 50 <unk> week to contribute a point to full year topline growth.
Speaker 4: Respect third quarter total revenue to be up in the low single digit and operating income in the range of 115 to 125 million.
We expect third quarter total revenue to be up in the low single digits and operating income in the range of $115 million to $125 million.
Michael Rempell: We will keep you updated on what this could contribute to long-term profitability as we solidify those work streams. Moving on to our outlook, quarter-day product acceptance and overall demand has been very encouraging. Trends through the back-to-school shopping period have been strong with AE positive and airy delivering a double-digit quarter-day.
With that I'll open it up for questions.
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Michael Rempell: Yet with significant business still ahead, we're maintaining a cautious view. For the year, we're raising our outlook to reflect better than expected business performance in the second quarter in addition to improved demand, and continued profit recovery in the back half of the year. We expect total revenue to be up low single digits and operating income in the range of 325 to 350 million. We expect gross margin expansion, reflecting improved freight and product costs, lower mark downs, and approximately 25 million in savings tied to early profit improvement initiatives.
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Michael Rempell: Based on improvements in trend and profitability, we are accruing a baseline of incentives this year. As a result, we expect full-year SGNA to be up and in the low double digits with a second half up in the mid teams. We expect a 53rd week to contribute a point to fool your top line growth.
Thank you. Our first question comes from the line of Jay sole with UBS. Please proceed with your question.
Speaker 5: Great, thank you so much. My question is about the Inemies business. Jay mentioned that there's some new momentum in Inemies. Jen, I think you mentioned that Inemies turn positive with the updated collections. And you said, I think, like I said, areas up double digits, third quarter so far. You just maybe help us understand like how much more might come you're seeing in Inemies. Maybe elaborate on those comments. Give us an idea of where you see that business going. Can you sustain that momentum? And is that how big of a contributor is that to the improvement in the area comp that you've seen so far in Q3 versus Q2?
Great. Thank you. So much my question is about the intimates business, Jay mentioned that Theres, some new momentum in intimates Jen I think you mentioned that it's turned positive with the updated collections and you said I think Mike said areas up double digits third quarter so far.
Michael Rempell: We expect third quarter total revenue to be up in the low single digits and operating income in the range of 115 to 125 million.
Just maybe help us understand how much momentum youre seeing it as I mentioned, if you elaborate on those comments give us an idea of where you see that business going can you sustain that momentum and is that how big of a contributor is that to the improvement in the aerie comp that you've seen so far in Q3 versus Q2.
Michael Rempell: With that, I'll open it up for questions. Thank you.
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Unknown Executive: Thank you.
Speaker 6: sure um you know what i like about the intimate businesses i mean when we just think about our brand awareness j ari still you know the intimate business is roughly an eighty billion dollar industry out there and um ari still has only like fifty percent brand awareness so we're still getting this brand out there and
Sure.
What I like about the intimates business is I mean, when we just think about a brand awareness J Aron still the intimates business is roughly an $80 billion industry out there and.
<unk> still has only like 50% brand awareness. So we're still getting this brand out there and becoming famous for intimates. So.
Speaker 6: becoming famous for intimate. So there's a lot of runway here, Jay. Look, there was a downtrending cycle in intimates and I think the team did an incredible job mitigating any risk there. But as we looked ahead and I mentioned on prior calls, Jay, that we were really up to really innovating in that category and showing up with what she wants now. And I think the team did an excellent job relaunching smoothies.
There is a lot of runway here Jay.
It was down there was a down trending cycle.
Cycle in intimates and I think the teams did an incredible job mitigating any risks there, but as we look ahead and I mentioned I mentioned on prior calls Jay.
Jay Sole: Our first question comes from the line of J Seoul with UBS. Please proceed with your question. Great. Thank you so much. My question is about the elements business. Jay mentioned that there's some new momentum and elements. Jen, I think you mentioned that elements turn positive with the updated collections. And you said, I think like said areas of double digits third quarter so far. You just maybe help us understand how much momentum you're seeing in events, maybe elaborate on those comments.
That we were really up to really innovating in that category and showing up with what she wants now and I think the team did an excellent job re launching smoothies.
Speaker 6: and tying it in with an amazing campaign. We just, oh, it was incredible, Jay, we were down in the meat packing district. We took over the district, we had girls bringing in their bras and trying on our bras and oh, it was just the momentum I saw there.
And tying it in with an amazing campaign, we just it was incredible J, we were down in the Meatpacking District, we took over the district, we had girls, bringing in their brands and trying on our brands and it was just the momentum I saw there. So what I can tell you is our head designer that's our expertise we are double downing there.
Speaker 6: So what I can tell you is our head designer, that's her expertise, we're double downing there and Aries maintained market share. In fact, gained some share in some specific categories, tucked in the intimate business. So, you know, we're gonna keep at this, Jay. And now that I mentioned, we saw excitement in other categories too. Apparel, fleas.
Jay Sole: Give us an idea of where you see that business going. Can you sustain that momentum? And is that how big of a contributor is that to the improvement in the area comp that you've seen so far in Q3 versus Q2?
<unk> and Aries maintained market share in fact gained some share in some specific.
Categories tucked in the intimates business so.
Jennifer Foyle: Sure. You know, when I like about the intimate businesses, I mean, when we just think about our brand awareness, Jay, Erie still, you know, the intimate business is roughly an 80 billion dollar industry out there. And Erie still has only like 50 percent brand awareness. So we're still getting this brand out there and becoming famous for intimate. So there's a lot of runway here, Jay. Look, it was down, you know, there was a downtrending cycle and intimates.
We're going to keep at this Jay and then as I mentioned, Lisa excitement and other categories to apparel fleece.
Speaker 6: Offline is not flowing down Jay the new store design for offline and the new stores We're seeing nice momentum and malls where we co-exist area and offline That's really exciting and you know as we Anniversary these new store openings in both brands. We're starting to see that you know halo effect happen in that momentum Coming to fruition. So I love I love having airy back. So let's hope these next weeks in the quarter deliver what we intend to and more to come
Your line is not slowing down Jay.
New store design for offline in the new stores, we're seeing nice momentum in malls, where we coexist area and offline that's really exciting and you know as we anniversary. These new store openings in both brands. We are starting to see that halo effect happened and that momentum coming to fruition. So I love I love, having aerie back so.
Jennifer Foyle: And I think the team said an incredible job mitigating any risk there. But as we looked ahead and I mentioned on prior calls, Jay, that we were really up to really innovating in that category and showing up with what she wants now. And I think the team said an excellent job, relaunching smoothies and tying it in with an amazing campaign. We just, oh, it was incredible, Jay, we were down in the meat packing district.
Let's hope these next weeks in the quarter deliver what we intend to and more to come.
Yes.
Sounds great. Thank you so much.
Thank you. Our next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.
Speaker 7: Great. Thank you very much. Congratulations, and Michael. Thanks for all the hard work you've done over the year. So really appreciate that good luck. Thank you.
Great. Thank you very much congratulations and Michael Thanks for all the hard work you've done over the years. So really appreciate that good luck.
Jennifer Foyle: We took over the district, we had girls bringing in their bras and trying on our bras. And, oh, it was just the momentum I saw there. So what I can tell you is our head designer, that's her expertise. We're double downing there. And Erie's maintained market share. In fact, gained some share in some specific categories tucked in the intimate business. So, you know, we're going to keep at this, Jay. And as I mentioned, we saw excitement in other categories too.
Thank you.
Youre very welcome.
John I wanted to stick on the theme that things seem to be rebounding. It does seem like the teen space generally.
Speaker 7: that seems to be rebounding. It does seem like the teen space generally seems to be having a little bit of a moment sort of a recapture moment, native of a recovery moment. What are the driving...
To be having a little bit of a moment sort of a recapture moment Navy recovery moment.
What are the driving forces that youre seeing and sort of back to school I know you've kind of own the bottom space because he can talk a little bit about kind of long standing trend and then Mike on the SG&A dollar growth just wondering it would seem that.
Speaker 7: and sort of back to school. I know you kind of own the bottom space. So you can talk a little bit about, you know, kind of long.
Jennifer Foyle: Apparel fleece offline is not flowing down, Jay, the new store design for offline and the new stores. We're seeing nice momentum and malls where we coexist, area and offline. That's really exciting. And, you know, as we anniversary these new store openings in both brands, we're starting to see that, you know, halo effect happen in that momentum coming to fruition. So, I love having Erie back. So, let's hope these next weeks in the quarter deliver what we intend to and more to come. Sounds great. Thank you so much. Thank you.
Speaker 7: and then Mike on the Estonate Dollar Group. Just wondering, it would seem that you're more incentive, like I guess, on the EBITDA thing.
Youre more incentive like I guess on the EBIT side of things versus the top line because it looks like you're pointing to a lot more on the EBIT. So it gets a little bit of color on kind of the the incentive comp going up so much I think prior guidance was.
Speaker 7: the top line because it looks like you're flowing through a lot more on the e-bit. So just a little bit of color on kind of the the incentive comp going up so much and I think prior guide into a load emits single digit and that's load double. So some color there. Thanks so much.
Low to mid single digit and now its low double.
Color there thanks, so much.
Yeah.
Speaker 6: Yeah, sure. Look, I think we've been at this, you know, for three years now rebuilding American Eagle. Michael mentioned we have new store designs. We have new concept.
Yes sure.
I think we've been at this for three years now rebuilding American Eagle and Michael mentioned, we have new store designs, we have new concepts.
Adrienne Yih: Our next question comes from the line of Adrienne Yih with Farglase. Please proceed with your question. Great. Thank you very much. Congratulations and Michael. Thanks for all the hard work you've done over the years. I really appreciate that. Good luck. Thank you. You're welcome.
Speaker 6: And quite frankly, out of the gate in Q1, we've been chasing women. Women's has gotten better quarter over quarter. As we landed this back to school assortment, it really came together between the marketing and the assortment. We really leaned in there and it's paying off. I really like what I'm seeing. I don't know if you got a chance.
And quite frankly out of the gate in Q1, we've been chasing womens womens has gotten better quarter over quarter as we landed this back to school assortment. It really came together between the marketing and the assortment.
We really leaned in there and it's paying off I really like what I'm seeing I don't know if you got a chance also to see that marketing campaign. This summer I turned pretty it was incredible it was a great success story and I think it was a great launch pad as we headed into back to school I'm. Good.
Jennifer Foyle: Ken, I want to stick on the theme that things seem to be rebounding. It does seem like the teen space generally seems to be having a little bit of a moment, sort of a recapture moment, maybe a recovery moment. What are the driving forces that you're seeing in sort of back to school? I know you kind of own the bottom space, so you can talk a little bit about, you know, kind of long standing trends.
Speaker 6: Also to see that marketing campaign the summer I turned pretty it was incredible it was a great success story and I think it was a great launch pad as we headed into back to school. Getting into the back to school season as you know we do dominate in bottoms the teams did a great job. Manoeuvring the fits not only between you know denim but also non denim bottoms. We really double down there and we're definitely in position to continue to see that business grow and as you know.
Into the back to school season, as you know, we do dominate and bottoms. The teams did a great job.
<unk> not only between denim, but also non denim bottoms.
Jennifer Foyle: And then Mike, on the estuary dollar growth, just wondering, it would seem that you're more incentive, I guess, on the EBITS side of things versus the top line because it looks like you're flowing through a lot more on the EBITS. So just a little bit of color on kind of the incentive comp going up so much. I think prior guide into a load amid single digit and now it's low double. So some color there. Thanks so much. Yeah, sure.
We really double down there and we're definitely in position to continue to see that business grow and as you know when this comes back AE is the winner in bottoms.
Speaker 6: When this comes back, AE is the winner in bottoms. Defit the quality, the price value equation. I'm really excited to see this come to fruition. And early on, you know, we've been still seeing where now trends.
Fit the quality the price value equation.
I'm really excited to see this come to fruition in early on we've been still seeing we're now trends. So we're not even into <unk>.
Speaker 6: So we're not even into, you know, as you know, it's 90 degrees out there as we really get into the back half, looking forward to seeing our legs shape and all the, you know, adjustments we made to the categories in both men and women's come to life. The trends that we saw early on, we've come back at, doubled downed on. So looking forward to really capitalizing on this on the back half and just wanted to mention women's top.
As you know, it's 90 degrees out there as we really get into the back half looking forward to seeing our leg shape and all of them.
Jennifer Foyle: Look, I think we've been at this, you know, for three years now, rebuilding American Eagle. Michael mentioned we have new store designs. We have new concepts. And quite frankly, out of the gate in Q1, we've been chasing women's. Women's has gotten better quarter over quarter. As we landed this back to school assortment, it really came together between the marketing and the assortment. We really leaned in there and it's paying off. I really like what I'm seeing.
Adjustments, we made to the categories in both men's and women's come to life. The trends that we saw early on we've come back at double down done so.
So looking forward to really capitalizing on this on the back half and just wanted to mentioned women's tops.
Speaker 6: You know, that came out of the gate, you know, really swinging, beating expectations. So we've been up to chasing there too. Excited what I'm seeing there, just from, you know, owning the key items and then chasing the fashion trends that are working.
That came out of the gate.
Really swinging.
Beating expectations, we've been up to chasing there too excited what I am seeing there just from <unk>.
Jennifer Foyle: I don't know if you've got a chance also to see that marketing campaign the summer I turned pretty. It was incredible. It was a great success story and I think it was a great launch pad as we headed into back to school. I'm getting into the back to school season as you know, we do dominate in bottoms. The teams did a great job maneuvering the fits not only between, you know, denim, but also non denim bottoms.
Owning the key items and then chasing the fashion trends that are working the teams at it every morning I have my conversations what are we doing now.
Speaker 6: The team's at it every morning. I have my conversations. What are we doing now? Love what I'm seeing. I just got through looking at holiday and the adjustments are made. You know, we bring in our first holiday delivery early in October , end of September , and we'll be able to still react then. So, you know, wide legs. Of course, our still training for us has, I'm sure you've heard from other retailers. And we're ready to battle. The new thousand.
Jennifer Foyle: We really doubled down there and we're definitely in position to continue to see that business grow. And as you know, when this comes back, AE is the winner in bottoms. The fit, the quality, the price value equation. I'm really excited to see this come to fruition. And early on, you know, we've been still seeing wear now trends. So we're not even into, you know, as you know, it's 90 degrees out there as we really get into the back half, looking forward to seeing our leg shape and all the, you know, adjustments we made to the categories in both men and women's come to life.
I am seeing I, just got through looking at holiday and the adjustments are made.
Bringing our first.
Our holiday delivery early in October end of September and we will be able to still react and so.
Wide legs of course are still trending for us as I'm sure you've heard from other retailers and.
We're ready to battle.
And then the new styles are great.
Thank you. Thank you.
Thank you. Our next question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.
Speaker 3: Thanks and congrats on the border and the night improve.
Thanks, and congrats on the quarter and nice improvement.
Jennifer Foyle: The trends that we saw early on, we've gone back at, doubled downed on. So looking forward to really capitalizing on this on the back half and just wanted to mention women's tops, you know, that came out of the gate, you know, really swinging, beating expectations. So we've been up to chasing there too. Excited what I'm seeing there just from, you know, owning the key items and then chasing the fashion trends that are working. The teams added every morning. I have my conversations. What are we doing now? Love what I'm seeing.
Speaker 3: So maybe two part question, Jen, maybe relative to a year ago, could you speak to changes in customer behavior that you're seeing across categories, just how you feel about your ability to chase trend this year in the back half, given inventories in the supply chain, relative to a year ago. And then Mike, could you just elaborate on specific areas that you've identified so far supporting the 25 million of savings for this year?
So maybe two part question Jen maybe relative to a year ago could you speak to changes in customer behavior that you're seeing across categories and just how you feel about your ability to chase trends. This year in the back half given inventories in the supply chain relative to a year ago and then.
Mike could you just elaborate on specific areas that you've identified so far supporting that $25 million of savings for this year and then maybe how best to think about the potential magnitude of savings into next year.
Speaker 3: And then maybe, how best to think about the potential magnitude of savings into next year?
Jennifer Foyle: I just got through looking at holiday and the adjustments are made. You know, we bring in our first holiday delivery early in October, end of September, and we'll be able to still react then. So, you know, wide legs, of course, are still trending for us as I'm sure you've heard from other retailers. And we're ready to battle. The New South is great. Thank you, thank you. Thank you.
Speaker 6: I would definitely say Jay that we're in a fashion cycle. And, you know, it's, it's, you know, we've been chasing, like I said, in women's, they're definitely moving a little faster. But, you know, we're always going to take the position, though, that we are in this for the long haul. We want to have steady, you know,
I would definitely say Jay that we're in a fashion cycle.
And it's.
<unk>.
It's we've been chasing like I said in womens.
They are definitely moving a little faster but.
We're always going to take the position that we're in this for the long haul we wanted to have steady.
Speaker 6: definitely profitable growth and That's what we're up to so you know looking at this you know from a five-year perspective a ten-year perspective How do we do this year over year? I think we proved so doing that in airy right? The many consecutive quarters of you know high double-digit growth
Definitely profitable growth and that's what we're up to so looking at this from a five year perspective, a tenure perspective, how do we do this year over year I think we proved so doing that in aerie right.
Matthew Boss: Our next question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question. Thanks and congrats on the quarter and the nice improvement.
There are many consecutive quarters of high double digit growth.
Jennifer Foyle: So, maybe two part question. Jen, maybe relative to a year ago, could you speak to changes in customer behavior that you're seeing across categories, just how you feel about your ability to chase trends this year in the back half, given inventories in the supply chain relative to a year ago, and then Mike, could you just elaborate on specific areas that you've identified so far supporting the 25 million of savings for this year, and then maybe how best to think about the potential magnitude of savings into next year.
Speaker 6: You know, getting through COVID and some of the changes in the past couple years, certainly, that's changed the customer behavior in both brands.
Getting through Covid and some of the changes in the past couple of years, certainly that's changed the customer behavior in both brands.
But we've been up to just looking at this as you can see with our results right. The profits in our net earnings are certainly.
Speaker 6: are certainly, you know, from all the hard labor and the work we've been up to. And I think now we're really up to growth in both brands. I think we've repositioned American Eagle. As I mentioned, we have new store designs. We have marketing tactics that we're really leaning into. We're showing up differently with our marketing. I think better and bigger and better and we're winning there. And I think the same for ARI. And I think just really looking at both brands and making sure we have disciplines as, you know, what each brand stands for in the DNA behind each brand.
But from all the hard labor and the work we've been up to and I think now.
Really up to growth in both brands I think.
We've repositioned American Eagle as I mentioned, we have new store designs, we have marketing tactics that we're really leaning into we're showing up differently with our marketing I think better and bigger and better and we're winning there.
Jennifer Foyle: I would definitely say, Jay, that we're in a fashion cycle. And, you know, it's, it's, you know, we've been chasing, like I said, in women's, they're definitely moving a little faster, but, you know, we're always going to take the position, though, that we are in this for the long haul. We want to have steady, you know, definitely profitable growth. And that's what we're up to. So, you know, looking at this, you know, from a five year perspective, a 10 year perspective, how do we do this year over year?
And I think the same for Aerie and I think just really looking at both brands and making sure we have disciplines as what each brand stands for and the DNA behind each brand and making sure that we can get that incremental activity from our customer is what we've been up to and I think we're starting to see the early benefits from all the work the team.
Speaker 6: really looking at both brands and making sure we have disciplines as you know what each brand stands for in the DNA behind each brand and making sure that we can get that incremental activity from our customer is what we've been up to. And I think we're starting to see the early benefits from all the work the team's been doing. So
<unk> been doing so.
Speaker 6: That's really it, Jay. I really, we have a lot of weeks in front of us to pull out this year, but I think we're set up for success.
That's really a J I really we have a lot of weeks in front of us to pull out.
Jennifer Foyle: I think we proved so doing that in area, right? The many consecutive quarters of, you know, high double digit growth, you know, getting through COVID and some of the changes in the past couple of years, certainly, that's changed the customer behavior in both brands. But, you know, we've been up to just looking at this, you know, as you can see with our results, right? The profits and our net earnings are certainly, you know, from all the hard labor and the work we've been up to.
Year, but I think.
We're set up for success.
Okay.
Thank you. Our next question comes from the line of Paul <unk> with Citi. Please proceed with your question.
Hey, Thanks, guys.
Curious.
Speaker 2: You can talk about the project's giving plan.
You can you can talk about the profit improvement plan.
Speaker 2: And as you go through and do all that work, are you finding opportunities on the S-GNA lines specifically?
Jennifer Foyle: And I think now we're really up to growth in both brands. I think we've repositioned American Eagle. As I mentioned, we have new store designs, we have marketing tactics that we're really leaning into. We're showing up differently with our marketing. I think better and bigger and better and we're winning there. And I think the same for Erie. And I think just really looking at both brands and making sure we have disciplines as, you know, what each brand stands for in the DNA behind each brand and making sure that we can get that incremental activity from our customer is what we've been up to.
And as you go through and do all that work we are finding opportunities on the SG&A line specifically.
Speaker 2: where is it mostly coming from, called the build and if you are fine and there's cut us you may, you also discover in place where you may be to the under invested which makes itself.
Is it mostly coming from cost of goods.
If you are finding ways to cut SG&A or you also discovering places where you maybe have underinvested, which makes it tough to savings to flow through to the bottom line and I guess, just big picture when you through all the profit improvements.
Speaker 2: to savings, to flow through to the bottom line. And I got just a big picture when you through all the profit improvements.
Speaker 2: and you know, cooling incentives, competen and appropriate rates. What do you consider the right base level to expand dollars for this business? Thanks.
Cooling incentive comp at an appropriate rate what do you consider the right level of expense dollars for this business.
Jennifer Foyle: And I think we're starting to see the early benefits from all the work the team's been doing. So, that's really it, Jay. I really, you know, we have a lot of weeks in front of us to pull out this, you know, a year, but I think we're set up for success. Thank you.
Mike are you having phone trouble.
Yes.
Speaker 8: You know, Paul Mike's having some difficulty with his line now. We'll, we'll.
Paul Mike's having some some difficulty with is with his line now.
Paul Lejuez: Our next question comes from the line of Paul Legwiz with city. Please proceed with your question. Okay, thanks guys.
Well, maybe I'll move on to next question and then come back.
Sure.
Unknown Executive: Um, curious if you can, you can talk about the project is in plan. And as you go through and do all that work, are you finding opportunities on the question? Yes, you may want specifically where is it mostly coming from cost of goods and if you are finding the cut us you may are you also discovering clearly maybe some under invested which makes it tough to savings to to flow through to the bottom line.
Our next question comes from the line of John Kim with TD Cowen. Please proceed with your question.
Speaker 9: Thank you for taking my question. You're seeing nice growth in terms of digital penetration. Can you just remind us in terms of where the margins are on the digital versus stores and where that can go over time? Thank you so much.
Thanks for taking my question, you're seeing nice growth in terms of digital penetration can you just remind us in terms of where the margins are on the digital versus stores and where that can go over time. Thank you so much.
Speaker 8: Sure, this is Michael, I'll take that. You know, the way we look at it, our digital margins are pretty comparable to our store margins.
Sure. This is Michael I'll take that.
Unknown Executive: And I guess just big picture when you through all the profit improvements, you know, cooling incentives, comp at an appropriate rate, what do you consider the right base level of expense dollars for this. Mike, are you having phone trouble? Yes? You know, Paul, Mike's having some difficulty with his line now.
The way the way we look at it our digital margins are pretty comparable to our store margins.
Speaker 8: What I would tell you is we've been able to start to see that nudge even higher as we've been focused on some of the delivery initiatives recently. So as I mentioned in the preparatory remarks, we've been able to drive down and reduce the cost of
What I, what I would tell you is we've been able to.
Start to see that nudge even higher.
As we have been focused on some of the delivery initiatives recently so.
As I mentioned in the prepared remarks, we've been able to drive down.
And reduce the cost of delivery.
Speaker 8: both in absolute dollars in cost per shipment, in number of shipments per order, well delivering to the customers faster. And that is starting to drive incremental leverage in the direct channel. So we're certainly excited to see that. And we think there's more work and more opportunity in front of us.
Both in absolute dollars in cost per shipment.
A number of shipments per order.
While delivering to the customers faster and and that is starting to drive incremental leverage in the direct channel. So we're certainly.
Unknown Executive: We'll maybe move on to the next question, then come back. Our next question comes from the line of Jonah Kim with TD Cowan. Please proceed with your question. Thanks for taking my question. You're seeing nice growth in terms of digital penetration. Can you just remind us in terms of where the margins are on the digital versus stores and where that can go over time? Thank you so much.
Excited to see that and we think theres more work and more opportunity in front of us.
Speaker 8: One of the big levers that I talked about in the remarks was the fact that in many parts of retail and grocery and hard goods, people have been able to leverage their stores as pickup points in a pretty robust way to make a difference in their business.
One of the big levers that I talked about in the remarks was the fact that.
In many parts of retail and grocery and hard goods.
People have been able to leverage their stores as pickup points in a pretty robust way to make a difference in their business.
Michael Rempell: Sure, this is Michael. I'll take that. You know, the way we look at it, our digital margins are pretty comparable to our store margins. What I would tell you is we've been able to start to see that nudge even higher as we've been focused on some of the delivery initiatives recently. So, as I mentioned in the preparatory marks, we've been able to drive down and reduce the cost of delivery, both in absolute dollars in cost per shipment, in number of shipments per order, well, delivering to the customers faster.
Speaker 8: It's historically been a very small part of our business, but with some changes that the team made, focusing on inventory availability and some of the system changes, we were able to double that in the quarter. And we see a good runway to continue to grow that. That provides a ton of leverage for us, because it actually eliminates delivery.
It's historically been a very small part of our business, but with some changes that the team made focusing on inventory availability and some of the system changes.
We were able to double that in the quarter and we see a good runway to continue to grow that.
That provides a ton of leverage for us because it actually eliminates delivery.
Speaker 8: as a cost and allows us to upsell customers as they come in the store. We're currently seeing about a 10% attachment rate to those digital sales and we think we can get that number even higher.
Is it cost and.
And allows us to upsell customers as they come in the store. We're currently seeing about a 10% attachment rate.
To those digital sales and we think we can get that number even higher so.
Speaker 8: So, yeah, so historically margins for e-commerce and stores are pretty comparable. We've been able to drive the e-commerce margins up.
So yeah, so historically margins for ecommerce and stores were pretty comparable we've been able to drive the e-commerce margins up in recent quarters, and we see opportunity as we go forward.
Michael Rempell: And that is starting to drive incremental leverage in the direct channel. So, we're certainly excited to see that. And we think there's more work and more opportunity in front of us. One of the big levers that I talked about in the remarks was the fact that in many parts of retail and grocery and hard goods, people have been able to leverage their stores as pickup points in a pretty robust way to make a difference in their business.
Speaker 8: in recent quarters and we see opportunities we go forward to raise those even higher.
To raise that was even higher.
Got it thank you.
Thank you.
Our next question comes from the line of Corey Carlo with Jefferies. Please proceed with your question.
Speaker 10: Great. Thanks so much for taking my question. I was wondering if you could talk a little bit about the new store design that you have, and it sounds like it's early days, but... I'm sure you're right. I'm sure you could talk a little bit about the new store design that you have, and it sounds like it's early days, but...
Great. Thanks, so much for taking my question.
I was wondering if you could talk a little bit about the new store design that you have and it sounds like it's early days, but it does also seem like youre.
Michael Rempell: It's historically been a very small part of our business, but with some changes that the team made, focusing on inventory availability and some of the system changes, we were able to double that in the quarter. And we see a good runway to continue to grow that. That provides a ton of leverage for us because it actually eliminates delivery as a cost and allows us to upsell customers as they come in the store.
Speaker 10: when to think some pretty promising results from that. So, because we're going to be talking a little bit about what you're doing differently in this new store design.
Witnessing some pretty promising results from that so could you maybe talk a little bit about what youre doing differently.
In this new store design.
Speaker 6: Sure. First and foremost, Michael mentioned that we're in three malls, as he stated, Polaris, Palisades, and Oak Brook.
Yeah.
Sure.
First and foremost.
Mike Michael mentioned that we're in three malls.
He stated Polaris.
Palisades and Oak Brook.
Speaker 6: Illinois. So they're all semi different formats, but
Michael Rempell: We're currently seeing about a 10% attachment rate to those digital sales and we think we can get that number even higher. So yeah, historically margins for e-commerce and stores are pretty comparable. We've been able to drive the e-commerce margins up in recent quarters and we see opportunity as we go forward to raise those even higher. Thank you.
Illinois so.
They are all semi different formats, but it's very focused on.
Speaker 6: It's very focused on more of a modern design, approachable design, the opening, just the entrance alone is very inviting. I was really pleased to see when I went to Palisades to see all three brands in the mall. I mean, just our store designs really...
More of a modern design approachable design the.
The opening just the entrance alone is very inviting.
I was really pleased to see when I went to palace at Palisades to see all three brands in the mall I mean.
Our store design is really.
Speaker 6: Incredibly inviting they're bright. We definitely needed
Our like incredibly inviting their bright we definitely needed a new concept for American Eagle and with time, we've been working fast and furiously on this design.
Speaker 6: A new concept for American Eagle. It was time we've been working fast and furiously on this design.
Corey Tarlowe: Our next question comes from the line of Corey Carlo with Jeffrey. Please proceed with your question. Great. Thanks so much for taking my question. I was wondering if you could talk a little bit about the new store design that you have and it sounds like I think it's early days, but it does also seem like you're witnessing some pretty promising results from that. So, could you maybe talk a little bit about what you're doing differently in this new store design?
Speaker 6: and we're calling it lived in. And I really like what I'm seeing. The results are definitely at this stage. You know, it's only been a few weeks now, but about well above average.
And we're calling it lived in and I really like what I'm seeing the results are definitely.
At this stage, it's only been a few weeks now but above well above average.
Speaker 6: and we really feel excited about it. So we're in the middle of some of these new strategy sessions with some of the new learnings between, not only between the store design, but AE77, AE247, which is our men's active concept. Early reads there are very encouraging.
And we really feel excited about it so we're in the middle of some of these new strategy sessions with some of the new learnings between not only between the store design, but 877 $824 seven which is our men's active concept early reads there are very encouraging.
Corey Tarlowe: Sure. First and foremost, Michael mentioned that we're in three malls as he stated, Polaris, Palisades, and Oakbrook in Illinois. So they're all semi different formats, but it's very focused on more of a modern design, approachable design, the opening, just the entrance alone is very inviting. I was really pleased to see when I went to Palisades to see all three brands in the mall. I mean, just our store designs really are like incredibly inviting.
Speaker 6: to the point where we're launching some of the product that was tested in fewer stores to all stores. We're up to a lot over here.
To the point, where we're launching some of the product that was tested in fewer stores to all stores were up to a lot over here.
Speaker 6: Also, just to add on Soho, our store there now has all brands consolidated into it, including AE77. And we just did our first pass at a remodel there. It'll be in full swing headed into November , but just I love what I'm seeing early on. The teams, we only set forth on this initiative about two months ago. This shows you how swiftly our teams work.
So just to add on Soho our store, they're now has all brands consolidated into it included including a 77.
And we just did our first pass at a remodel there.
It'll be in full swing headed into November , but just I love what I'm seeing early on the teams we only set forth on this initiative about two months ago. This shows you how swiftly our teams work.
Speaker 6: and they've already put together an entire concept around the store. It looks beautiful. I'm going to go revisit it after this call and I invite everyone to go see it. It's
And they've already put together entire concept around the store it looks beautiful I'm going to go revisit it after this call and I invite everyone to go see it.
Corey Tarlowe: They're bright. We definitely needed a new concept for American Eagle. It was time we've been working fast and furiously on this design. And we're calling it lived in. And I really like what I'm seeing the results are definitely at this stage. You know, it's only been a few weeks now, but well above average. And we really feel excited about it. So we're in the middle of some of these new strategy sessions with some of the new learnings between not only between the store design, but AE77, AE247, which is our men's active concept.
Speaker 6: We're calling it the Gateway. It has all of our house of brands and it's the entrance into Soho. So I think it's a it's just really an exciting concept and there's more to come here. So
We're calling it the gateway it has all of our house of brands and it's the entrance into Soho. So I think it's just really an exciting concept and.
There's more to come here, so like I said I am encouraged by the early reads in some cases, Michael mentioned, we reduced square footage, but went into the 50 yard line and we are seeing.
Speaker 6: Like I said, I'm encouraged by the early reads. In some cases, Michael mentioned we reduced square footage but went into the 50 yard line and we're seeing
Speaker 6: We're seeing better sales in smaller square footage. So that's always a good recipe. So more to come. And again, we're going to start to incorporate this new design into our strategies going forward.
And we're seeing better sales in smaller square footage. So that's always a good recipe so more to come.
Corey Tarlowe: Early reads there are very encouraging to the point where we're launching some of the product that was tested in fewer stores to all stores. We're up to a lot over here. Also, just to add on Soho, our store there now has all brands consolidated into it, including, including AE77. And we just did our first pass at a remodel there. It'll be in full swing headed into November, but just I love what I'm seeing early on.
And again, we're going to start to incorporate.
This new design into our strategies going forward.
That's great. Thanks, and then I was just wondering if you could talk a little bit about what youre seeing in denim. Thanks, so much.
Speaker 10: And then I was just wondering if you could talk a little bit about what you're seeing in denim. Thanks.
Speaker 6: Denim is our, Denim is everything we do. It's amazing what this AE team accomplishes. Just when I look at competition, our price points, our quality, our washes, our ability to chase and ebb and flow, a very complex business, as you know, size and density ownership.
Denim is our.
Denim is.
Everything we do.
It's amazing what this AE team accomplishes, just when I look at competition or price points or quality.
Corey Tarlowe: The teams we only set forth on this initiative about two months ago. This shows you how swiftly our teams work. And they've already put together an entire concept around the store. It looks beautiful. I'm going to go revisit it after this call. And I invite everyone to go see it. We're calling it the gateway. It has all of our house of brands. And it's the entrance into Soho. So I think it's a, it's just really an exciting concept.
Our washes, our ability to chase, an ebb and flow.
Very complex business as you know size intensity ownership.
Speaker 6: but still, you know, allowing us to be fluid in our assortments because fashion is definitely changing in that category. We're seeing fashion mixes go, you know.
But still allowing us to be fluid in our assortments because fashion is definitely changing in that category.
We're seeing fashion mixes go.
Speaker 6: higher than we've ever seen, and we're creating testing strategy so that we can ed bin flow faster than we've ever had. I just got through all the testing for spring for next year, and we're really able to impact receipts. Definitely wider, silhouettes, as I mentioned earlier, in both men and women.
Higher than we've ever seen and we're creating testing strategy. So that we can ebb and flow faster than we've ever had.
Corey Tarlowe: And there's more to come here. So, like I said, I'm encouraged by the early reads. In some cases, Michael mentioned, we reduced square footage, but went into the 50 yard line. And we're seeing we're seeing better sales in smaller square footage. So that's always a good recipe. So more to come. And again, we're going to start to incorporate this new design into our strategies going forward.
Got through all the testing for for spring.
Jennifer Foyle: That's great. Thanks.
For next year.
We're really able to impact receipts definitely wider silhouettes as I mentioned earlier in both mens and womens.
Speaker 6: men's, the scene, and the inflection point in fashion. And we're pretty excited about the future.
Men's is seeing an inflection point in fashion and we're pretty excited about the future.
Yes.
Speaker 6: So, I think we're ready to compete. And it's not just denim bottoms. It's denim as a holistic category. Really exciting things happening out there. And we're starting to show up if you go onto our homepage right now, you'll see. And we're gonna continue to drive this business home.
So great.
I think we're ready to compete and it's not just denim bottoms. It's it's denim as a holistic category really exciting things happening out there.
Jennifer Foyle: And then we're just wondering if you could talk a little bit about what you're seeing in denim. Thanks so much. Yeah, denim is our denim is everything we do. It's amazing what this AE team accomplishes, you know, just when I look at competition, our price points, our quality, our washes, our ability to chase and ebb and flow. A very complex business, as you know, size and density ownership, but still, you know, allowing us to be fluid in our assortments because fashion is definitely changing in that category.
We're starting to show up if you go onto our homepage right now Youll see.
And we're going to continue to drive this business.
Speaker 4: Yeah, it's Mike and hopefully everyone can hear me now. Let me start for those technical difficulties. Let me double back and answer, I think, Adrian, Matt and Carl had questions on SG&A and is where we are on our prop.
Hey, it's Mike and hopefully everyone can hear me now let me start sorry for those technical difficulties, let me double back and answer I think Adrian that call.
Paul had questions on SG&A, and just where we are on a profit initiatives.
Speaker 4: So if you go back to our Q1 guidance at that point, and we'll first age your in yes, we are in centered on.
So if you go back to our Q1 guidance at that point.
And well first Adrian Yes, we are intended on EBIT not revenue.
Jennifer Foyle: We're seeing fashion mixes go higher than we've ever seen. And we're creating testing strategy so that we can have been flow faster than we've ever had. I just got through all the testing for spring for next year. And we're, you know, we're really able to impact receipts. Definitely wider, you know, silhouettes, as I mentioned earlier, in both men's and women's, men's and see an inflection point in fashion. And we're pretty excited about the future.
Speaker 4: If you go back to our Q1 guidance, we were not assuming an incentive accrual in the year at that
And if you go back to our Q1 guidance, we're not assuming an incentive accrual in the year at that point.
Speaker 4: With the 30% increase in our guidance range now, we are. We process thresholds for accruing incentives. And based on that timing, it'll be.
With a 30% increase in our guidance range now we are we cross that threshold for accruing incentives and based on that timing it'll be back half weighted which is the guide you're getting with mid teen SG&A growth for the back half.
Speaker 4: the guide you're getting with mid-deen SNA growth to the back end.
Speaker 4: So on an annual basis then we're talking about low double digit FGNA called 10-11%.
So on an annual basis, then we're talking about low double digit SG&A kind of 11%.
Speaker 4: being projected. And with that though, our initiatives on the profit side are very much focused.
We're being projected.
And with that though we are initiatives initially or initiatives on the profit side are very much focused on.
Jennifer Foyle: So I think we're ready to compete and it's not just denim bottoms, it's denim as a holistic category. Really exciting things happening out there and we're starting to show up. If you go onto our homepage right now, you'll see and we're going to continue to drive this business home.
Speaker 4: Gross margin in immediacy. We've seen some benefit in Q2. Our guidance includes some significant benefit in the back half.
Margin and immediately we've seen some benefit in Q2, our guidance includes some significant benefit in the back half.
But we do have work streams across really every area of the P&L.
Speaker 4: work continues. If you think about the
So work.
Work continues.
If you think about.
Michael Rempell: Yeah, it's Mike and hopefully everyone can hear me now.
Speaker 4: The off-ex has up and gross margin. We actually saw a reduction to those operating expenses in the second quarter. So even with FDNA, I'll hide single in the first quarter. Our off-ex was only up.
The Opex Thats up in gross margin, we actually saw a reduction to those operating expenses in the second quarter.
Michael Rempell: Let me start for those technical difficulties. Let me double back and answer. I think Adrienne Matt and Paul had questions on SG&A and is where we are on our profit initiatives. So if you go back to our Q1 guidance at that point and we'll first aid you and yes, we are and sent it on ebit not revenue. And if you go back to our Q1 guidance, we are not assuming an incentive accrual in the year at that point.
So even with SG&A.
High single in the first quarter, our Opex was only up mid single.
Speaker 4: And if you would normalize for the baseline of incentives, we're not talking about our total object for the second quarter, it was actually down.
And if you normalize for the baseline of incentives were not talking about our total opex for the second quarter. It was actually down to last year.
Speaker 4: But the back cover for the on an annual basis then we're talking about double low double digit S.G.A. growth
For the back half sort of on an annual basis, then we're talking about double.
Low double digit SG&A growth.
Michael Rempell: With the 30% increase in our guidance range now, we are we process thresholds for accruing incentives. And based on that timing, it will be back it's back half weighted, which is the guide you're getting with mid team SG&A growth for the back out. So on an annual basis, then we're talking about low double digit SG&A called 10 11% for being projected. And with that, though, we, you know, our initiatives initially our initiatives on the profit side are very much focused on gross margin and immediacy.
Speaker 4: Those operating expenses in gross margin that span design and merchandising compensation, rent, delivery, distribution costs.
Those operating expenses and gross margin that spanned design and merchandising compensation rents delivery distribution costs.
Speaker 4: Those expenses are projected to be relatively flat.
Those those expenses are projected to be relatively flat for the year.
Speaker 4: So with the SNA and the low double digit range, OpEx is only up about, call it height.
So with the SG&A in the low double digit range Opex is only up about.
Call It high single.
Speaker 4: I would normalize year to year on that baseline of incentives or a total apex would be up mid.
And if I would normalize year to year on that baseline of incentives our total opex would be up mid single.
Speaker 4: From there, like I said, we've got initiatives across every area of the P&L. We believe there's more annual benefit coming through those gross margin expense.
Michael Rempell: We've seen some benefit in Q2 our guidance includes some significant benefit in the back half. But we do have work streams across really every area of the PNL. So we can work continues. If you think about the the effects that's up in gross margin, we actually saw a reduction to those operating expenses in the second quarter. So even with SG&A up high single in the first quarter, our op X was only up mid single.
From there like I said, we've got initiatives across every area of the P&L, We believe theres more annual benefit coming through those gross margin expenses.
Speaker 4: We've got work streams as we're calling them against 80% of our S-E-N-A spend right now across really all the big buckets make up that $1.
We've got work streams, as we're calling them against 80% of our SG&A spend right now across really all of the big buckets makeup.
<unk>.
Speaker 4: We've got a lot of positive momentum happening there, but the SGNAP takes a little longer to get at. We've got contractual obligations. We've got RFPs out. We're bidding and expense categories. We're looking at consolidating vendors for things.
We've got a lot of positive momentum happening there, but the SG&A piece takes a little longer to get out we've got contractual obligations.
<unk> out we're bidding expense categories.
Michael Rempell: And if you would normalize for the baseline of incentives, we're not talking about our total op X for the second quarter was actually down to last year. For the back out for the on an annual basis, then we're talking about double low double digit SG&A growth. Those operating expenses in gross margin that span design and merchandising compensation rent delivery distribution costs those expenses are projected to be relatively flat for the year.
Looking at consolidating vendors for things.
Across services across maintenance, we've got an org design and labor model changes that we're testing into that we want to implement things into 2024.
Speaker 4: We've got a work design and labor model changes that we're testing into that we look want to implement things into 2024. So there's a lot of work, positive work happening across our teams right now. We'll have more updates in November and the end of the year on the progress on the S-P-N-A front. But we're really pleased with how all the off-ex progress we've made down through Ghost Margin at this point that's coming through our results.
So there's a lot of work positive work happening across our teams right now we'll have more updates in November and the end of the year on the progress on the SG&A front, but we're really pleased with how all the Opex progress we've made down through gross margin at this point, that's coming through our results.
Speaker 4: You kind of look at the gross margin guidance that we're implying for the year. It's other than 2021 It would be the highest back to like 2012 or even 2008 2009 period
If you kind of look at the gross margin guidance that we're implying for the year.
Michael Rempell: So with those SG&A in the low double digit range op X is only up about how high single. And if I would normalize year to year on that baseline of incentives are a total op X would be up mid single. From there, like I said, we've got initiatives across area every area at the PNL. We believe there's more annual benefit coming through those gross margin expenses. We've got work streams as we're calling them against 80% of our SG&A spend right now across really all the big buckets make up that those dollars.
Other than 2021, it would be the highest back to like 2012, or even 2008 2009 periods. So we're seeing a lot of benefits come through there with more with more to come through SG&A.
Speaker 4: We're seeing a lot of benefits come through there with more to come through SGNA. We'll provide more updates on coming calls.
We'll provide more updates on coming calls.
Yeah.
Thank you. Our next question comes from the line of Janet Joseph Wildenberg with J J K Research Associates. Please proceed with your question.
Speaker 11: Hi everybody, and congratulations on the progress. My QIJU just gave out a lot of different numbers on SGNA, which is including intensive comp and all of that. I guess what I'd like to understand is, you know, the SGNA outweigh for the second half different than we all expected and versus your prior guidance.
Hi, Hi, everybody.
Congratulations on the progress.
Michael Rempell: We've got a lot of positive momentum happening there, but but the SG&A piece takes a little longer to get at. We've got contractual obligations. We've got RFPs out. We're bidding expense categories. We're looking at consolidating vendors for things across services across maintenance. We've got a work design and labor model changes that we're testing into that we look want to implement things into 2024.
Mike can you just.
Gave up came on a lot of different numbers on SG&A, excluding incentive comp and all of that I guess, what I'd like to understand is.
The SG&A outlook for the second half different than we all expected and versus your prior guidance.
Speaker 11: So what I'd like to understand is as we look into fiscal 24
So what I'd like to understand is as we look into fiscal 'twenty four.
Michael Rempell: So there's a lot of work positive work happening across our teams right now with more updates in November and the end of the year on the progress on the SG&A front. So we're really pleased with how all the op X progress we've made down through gross margin at this point that's coming through our results. You can kind of look at the gross margin guidance that we're applying for the year. Other than 2021, it would be the highest back to like 2012 or even 2008, 2009 periods. So we're seeing a lot of benefits come through there with more with more to come through SGNA.
Speaker 11: Should we expect that on a total basis, there's opportunity for meaningful SG&A reduction, or is the intensive COB?
Should we expect that on a total basis.
Opportunity for meaningful SG&A reduction or is the incentive comp.
Speaker 11: going to continue to push the S-GNA level higher or other factors like areas that store well out.
Im going to continue to push.
The SG&A levels higher or other factors like Mike <unk>.
Our store rollout.
Speaker 11: like you to flush that out a little bit for. And Jen, I think you'll drive into the soons that comes to cellarate from current trends. Perhaps you could talk about what's driving that. Maybe climate levels would be lower year over year or other factors that are influencing the third quarter outlook versus current trends. Thank you so much. Had you had month of experience.aha.
I'd like you to flesh that out a little bit for us and Jen I think your guidance assumes that comps decelerate from current trends, perhaps you could talk about what's driving that maybe clearance levels would be lower year over year or.
Michael Rempell: We'll provide more updates on coming calls.
Michael Rempell: Thank you.
Janet Kloppenburg: Our next question comes from the line of Janet Joseph Kloppenburg with JJK Research Associates. Please proceed. Let's do with your question.
Other factors.
That <unk>.
Janet Kloppenburg: Hi, hi, everybody. Congratulations on the progress. Mike, you just gave out a lot of different numbers on SGNA, excluding intensive comp and all of that. I guess what I'd like to understand is, you know, the SGNA Outlookers that can have different than we all expected and versus your prior guidance. So what I'd like to understand is, as we look into fiscal 24, should we expect that on a total basis, there's opportunity for meaningful SGNA reduction or is the intensive comp going to continue to push the SGNA level higher or other factors like areas store well out.
<unk> third quarter outlook versus <unk>. Thank you so much.
Janet Kloppenburg: I'd like you to flesh that out a little bit for. And Jen, I think your guidance assumes that comes to scholarly current trends. Perhaps you could talk about what's driving that maybe climate levels would be lower year over year or other factors that are influencing the third quarter outlook versus current trends. Thank you so much. Hi, Jen, let me, let me just simplify. I know I said a lot earlier, but so with SGNA guidance being upload double digits for the year, which is focused on this year's viewpoint, about about 40% of the dollar growth is related to intense.
Hi, Jan let me let me so let me just simplify it I noticed that a lot earlier.
Speaker 4: So with that's DNA guidance being up low double digits for the year which is focused on this year's pure point. About about 40% of the dollar growth is related to incentives. Again, not again, no approval last year. Yeah.
So with SG&A guidance being up low double digits for the year, let's just focus on this year to your point.
About 40% of the dollar growth is related to incentives.
Again, not against no accrual last year the expectations for next year would be no that we're really kind of looking at a baseline of accrual this year and that we would look to probably anniversary something similar next year. So it wouldn't be any additional pressure on 'twenty four.
Speaker 4: looking at a baseline of cruel this year and that we would look to probably anniversary something similar next year. So it wouldn't be any additional pressure on 20.
Speaker 4: based on what we know today and from here then we are looking at
Based on what we know today and from here then we are looking at.
Speaker 4: progress and have a roadmap in place where we believe we can provide some significant leverage next.
<unk> progress and outlook.
Back in place, where we believe we can provide some significant leverage next year, knowing that we wouldn't have that headwind or that sort of apples to oranges compare for incentives.
Speaker 4: Knowing that we wouldn't have that headwind or that sort of apples that orange is compare for incentives. And again, 80% of...
And again, 80% of our SG&A is kind of under a microscope right now with a lot of work happening cross functionally between our finance teams supply chain.
Speaker 4: I've under a microscope right now with a lot of work happening cross-functionally between our finance team, supply chain, IT, merchandising and planning. Got a lot of great momentum happening across.
Merchandising and planning <unk> got a lot of great momentum happening across our entire expense base, we're seeing some benefits in our new guidance. This year, but we expect even more on an annual basis. So between next year and even into 'twenty five.
Speaker 4: entire expense space for seeing some benefits in our new guidance this year, but we expect even more on annual basis so between next year and even into 25.
Speaker 4: So more more to come, but we would expect off X leverage off of all this work and leveraging even incentive. our dog.
So more and more to come but we would expect opex leverage off of all of this work and leveraging even incentives.
Speaker 4: at this point next year. Thank you, Mike.
At this point next year.
Thank you Mike.
And Janet.
Speaker 6: Yeah, in Aerie, I'll start with Aerie, you know, I mentioned that we're really encouraged. Actually, in both brands, just by the early reads for back to school, Aerie was really just...
Yeah in Aerie, and we'll start with Aerie I mentioned that we're really encouraged actually in both brands just by the early reads for back to school area was really just our.
Janet Kloppenburg: Again, not again, no approval last year. The expectations for next year would be no that we're really kind of looking at a baseline of cool this year, and then we would look to probably anniversary something similar next year. So it wouldn't be any additional pressure on 24 based on what we know today. And from here, then we are looking at progress and outline and have a roadmap in place where we believe we can provide some significant leverage next year.
Speaker 6: you know our ability to double down coming off the swim you know with all the work we've done around intimate and um... just our fleas and offline categories uh...
Our ability to double down coming off of swim.
With all the work we've done around intimates and.
Our fleece and offline categories, Janet it's incredible what we're seeing so and like I said, the halo effect of going up against these non comp stores and going comp in.
Speaker 6: incredible what we're seeing. So, and like I said, the halo effect.
Speaker 6: of going up against these non-com stores and going comp and
Speaker 6: And just our customer acquisition is healthy. Our total file is definitely up. We've seen incredible acquisition. Again, in both brands, AES really has seen some incredible growth in customer acquisition. So they like what they're seeing. So that's encouraging. Basically, it's intimate and what Aerie stands for. Honestly, it's firing on all cylinders right now. So I can't say it's one business over the other. Some are definitely stronger than others. We saw where now categories.
And just our customer acquisition is healthy our total file is definitely we've seen incredible acquisition again in both brands.
Janet Kloppenburg: Knowing that we wouldn't have that headwind or that sort of apples that orange is compare for incentives. And again, 80% of our SGNA is kind of under a microscope right now with a lot of work happening cross functionally between our finance team. And supply chain IT merchandising and planning got a lot of great momentum happening across our entire expense base for seeing some benefits in our new guidance this year, but we expect even more on annual basis so between next year and even into 25. So more more to come, but we would expect topics leverage off of all this work and leveraging even incentives at this point next year. Thank you, Mike. And Janet.
Is it really has seen some incredible growth in customer acquisition. So they like what they're seeing so that's encouraging.
Basically it's intimates and what <unk> stands for honestly, it's firing on all cylinders right now so I can't say, it's one business over the other some are definitely stronger than others. We saw wear now categories.
Speaker 6: still trending as we headed into August and we own them.
Still trending as we headed into August and we owned them.
Speaker 6: So we were there for the customer. And then AE, early on in Q1, we saw nice reads and tops.
So we were.
We were there for the customer and then AE early on in Q1, we saw a nice reads in tops.
Speaker 6: and we were able to chase and we continued to chase women's consecutive views.
And we were able to chase and we continue to chase womens consecutively, sorry, it's got better consecutively quarter over quarter and then as we launched back to school again. The stars are aligned there we were able to remix a little bit more into women's versus men's.
Jennifer Foyle: Yeah, in Erie, I'll start with Erie. You know, I mentioned that we're really encouraged actually in both brands just by the early reads for back to school. Erie was really just, you know, our ability to double down coming off the swim. You know, with all the work we've done around intimits and just our fleece and offline categories. Janet is incredible what we're seeing. So and like I said, the halo effect of going up against these non-com stores and going comp and just our customer acquisition is healthy.
Speaker 6: Sorry, got better consecutively, quarter over quarter. And then as we launched back to school again, the stars were aligned there. We were able to remix a little bit more into women's versus men's and really repositioned men's, focused on holiday for men and really gearing up women's for back to school and it's starting to pay off. So I like the early trends. Several weeks ahead of us.
And really reposition mens focused on back on holiday for mens and really gearing up women's for back to school and it's starting to pay off so I like the early trends we still have.
For weeks ahead of us.
Speaker 6: So we're gonna proceed.
So we're going to proceed.
Speaker 6: fast, but honestly with a lot of intelligence, profit-minded, we don't wanna give up everything we've earned over the past few years of working towards.
Fast.
Honestly with a lot of intelligent profit minded, we don't want to give up everything we've earned over the past few years of working towards these incredible margins that we're delivering and so.
Jennifer Foyle: Our total file is definitely up. We've seen, you know, incredible acquisition. Again, in both brands, AE's really has seen some incredible growth in customer acquisition. So they like what they're seeing. So that's encouraging. Basically it's intimits and you know what Erie stands for. Honestly, it's firing on all cylinders right now. So I can't say it's one business over the other. Some are definitely stronger than others. We saw where now categories still trending as we headed into August and we own them.
Speaker 6: these incredible margins that we're delivering. And so...
Speaker 6: We're ready to go. I hope it continues. We like what we're seeing now.
We're ready to go with I hope it continues.
What we're seeing now.
Speaker 11: But does your guidance assume that it will continue or is there some moderation? Yeah, demanded?s, puts, daggered, and can't.
But does your guidance assume that it will continue or is there some moderation.
Mike can answer that for you.
Speaker 11: Okay, thank you. Thank you. I like. Reverend New guidance.
Okay. Thank you.
Thank you.
Jennifer Foyle: So we were, you know, we were there for the customer. And then AE, early on in Q1, we saw nice reads and tops. And we were able to chase and we continued to chase. Women's consecutive, sorry, got better consecutively quarter over quarter. And then as we launched back to school again, the stars were aligned there. We were able to remix a little bit more into women's versus men's and really repositioned men's focused on the holiday for men and really gearing up women's for back to school.
Revenue guidance, Janet yes, it doesn't it.
Speaker 11: Yeah, doesn't it? I don't know if it embeds the current trend. And I get why we might not want to do that, but I'm just wondering, you know, if you could talk us through it. Now, I thought you could say you're exactly right. It's
Sure.
It Embeds the current trend.
And I get why you might not want to do that but I'm just wondering.
If you could talk us through it.
No you're.
You're exactly right.
A little more cautious than that.
Speaker 4: We've got about 50% about half the quarter into more revenue perspective, seven and a half weeks to go.
You've got about 50% about half of the quarter and from a revenue perspective, seven five weeks to go.
Speaker 4: And it does have a little more of a huge side of the court current quarter to date trend.
And it does have a little more of a ship side of the court current quarter to date trends.
Jennifer Foyle: And it's starting to pay off. So I like the early trends. We still have, you know, several weeks ahead of us. So we're going to proceed fast. But honestly with a lot of intelligence, profit-minded, we don't want to give up everything we've earned over the past few years of working towards these incredible margins that we're delivering. And so we're ready to go. I hope it continues. We like what we're seeing now.
Yes.
Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line of Chris <unk> with Bank of America. Please proceed with your question.
Speaker 3: Thanks guys, good afternoon. So I have a couple questions on the gross margin. Can you confirm if there's any more freight recapture left in your guidance this year? Can you also have quantified a benefit you expect to receive from lower cotton costs? Then as a follow-up, I think you identified 25 million of identified savings so far. Is that only isolating the changes you made to the end of season markdown process? Or is there more embedded in that $25 million number? Thank you.
Thanks, guys. Good afternoon. So a couple of questions on the gross margin can you confirm if there's any more freight recapture left in your guidance. This year and can you also help quantify the benefit you expect to receive from lower cotton costs.
Jennifer Foyle: But does your guidance assume that it will continue or is there some moderation? Mike, can you answer that for you? Okay, thank you. Thank you. I like revenue guidance. Yeah, doesn't it. I don't know what it is. It embeds the current trend and I get why we might not want to do that, but I'm just wondering, you know, if you could talk us through it. No, I thought you hit that you're exactly right.
As a follow up I think 525 million of identified savings. So far is that only isolating. The changes you made to the end of season markdown process or is there more embedded in that $25 million number. Thank you.
Speaker 4: Hey Chris, yes, no, I think we've come up to anniversary. The majority of us break headwinds that we had through the first half of last year.
Hi, Chris Yes, no I think we've pretty much anniversaried the majority of this break.
Headwinds that we had through the first half of last year and your answer on cotton. We are we do see line of sight to not only continued I am you benefit this year, but we've already have plans laid out for majority of first half of next year and we continue to see.
Jennifer Foyle: It's a little more cautious than this. We've got about 50% or about half the quarter in from a revenue perspective, seven and a half weeks to go. And it does have a little more of a shift side of the current quarter of the day. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
Speaker 4: your answer on cotton. We do see line of sites, not only continued IMEU benefits this year, but we've already have plans laid out for majority of first half of next year, and we continue to see mark-up gains in our future plans, including I think just the benefit of from cotton or any other commodity pricing. So our teams are doing a great job there. We see kind of tailwinds on product costs into the beginning of 24th this point. The 25 million just maybe add a little more color there that's really in that number.
Mark up gains in our future plans, including I think just a benefit.
From cotton or any other commodity pricing. So our teams are doing a great job. There, we see kind of a tailwind on product costs into the beginning of 'twenty four at this point.
The $25 million, just maybe add a little more color there that that's really a net number we're actually seeing.
Christopher Nardone: Our next question comes from the line of Chris Nardone with Bank of America. Please proceed with your question. Thanks, guys. Good afternoon. I have a couple questions on the gross margin. Can you confirm if there's any more freight recapture left in your guidance this year? And can you also have quantified a benefit you expect to receive from lower cotton costs? Then as a follow up, I think you identified 25 million of identified savings so far. Is that only isolating the changes you made to the end of season markdown process? Or is there more embedded in that 25 million dollar number?
With the incentive accrual.
Speaker 4: There's actually more benefit we're getting through not just the kind of clearance end of season fellow process, but other operating fence is Michael hit on a bunch of them delivery, warehousing costs. Some headway and sorpey rule and a lot more to come, but so there is more benefit embedded in the guidance.
There is actually more benefit we're getting through not just.
Clearance end of season selloff process, but other operating expenses, Michael hit on a bunch of them delivery warehousing costs.
Headway in store payroll and a lot more to come but.
So theres more benefit embedded in the guidance and really that.
Speaker 4: really that the impact and incentive of setting that a little bit.
The impact of incentives offsetting that a little bit.
Got it thank you.
Michael Rempell: Thank you. Hey, Chris. Yes. No, I think we've come up to anniversary. The majority of the freight headwinds that we had through the first half of last year and your answer on cotton. We do see line of sight to not only continued. I am you benefit this year, but we've already have plans laid out for majority of first half of next year and we continue to see markup gains in our future plans, including, I think, just the benefit of come up from cotton or any other commodity pricing.
Thank you. Our next question comes from the line of Alex <unk> with Morgan Stanley . Please proceed with your question.
Speaker 12: great thanks so much for taking the question really to from me one just on the on the gross margin in the quarter did you guys quantify
Great. Thanks, so much for taking the question really two for me one just on the on the gross margin in the quarter did you guys quantify how much of the outperformance you would attribute to the cost savings initiatives and then I just wanted to make sure I understood where theyre, just one or two of the things that you would identify that flowed through this quarter.
Speaker 12: to the cross-saving initiative. And then I just wanted to make sure I understood where there's just one or two of the things you had identified that flow through this quarter, and then there's still more to come there in the back half, just trying to understand all the living.
Michael Rempell: So our team is doing a great job there. We see kind of tailwinds on product costs into the beginning of 24th this point. The 25 million, just maybe add a little more color there. That's really a net number. We're actually seeing, you know, with the incentive accrual. There's actually more benefit we're getting through not just the kind of clearance and the season fellow process, but other operating fence is Michael hit on a bunch of them delivery, warehousing costs, some headway and sorpey rule, and a lot more to come, but so there is more benefit embedded in the guidance and really that the, you know, the impact of incentives about setting that a little bit. Got it.
And then there is still more to come there in the back half just trying to understand all the moving pieces there it sounds like a lot of different initiatives.
Michael Rempell: Thank you.
Speaker 12: And then, secondly, on the full year of God, I...
And then just secondly on the full year guide I wanted to just dig into the components of the raise and how youre kind of thinking about aerie versus a growth in the back half. Thanks, so much.
Speaker 12: just dig into the components of the raise and how you're kind of thinking about area versus AE growth in the back half. Thanks.
Speaker 4: Yeah, so the growth margin in the second quarter we had benefits both from the acceleration are across a bunch of different fronts. The acceleration.
Yeah. So the gross margin in the second quarter, we had benefits both from this acceleration are across a bunch of different fronts the acceleration.
Speaker 4: In the business, really, it started in June through July , like we've just described. Then we did have cost savings initiatives. The change to our deck clearance, sell off.
And the business really it started in June to the bat through through July like we've just described.
Then we did have cost savings initiatives the change towards that clearance sell off.
Speaker 4: and the season goods, how to benefit in the second quarter, it'll have a annual benefit beyond what-
End of season goods had a benefit in the second quarter. It will have a annual benefit beyond what we.
Speaker 4: We're able to book in the second quarter, a capture in the second quarter. And down.
Alex Stratton: Our next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question. Great. Thanks so much for taking the question. Really two from me.
We're able to book in the second quarter of capture in the second quarter.
And.
Speaker 4: You know, we obviously did we recapture the freight headwinds from last year as well as the impact of selling off, you know, extraordinary amount of units or not higher than historical amount of units last year in the second quarter. On the...
We obviously, we did we recapture the freight headwinds from last year as well as the impact of selling off.
Michael Rempell: One just on the growth margin in the quarter. Did you guys quantify how much of the app performance you would attribute to the cost savings initiative. And then I just wanted to make sure I understood where there's just one or two of the things you had identified that flow through this quarter, and then there's still more to come there in the back half. Just trying to understand all the living pieces. There just sounds like a lot of different initiatives.
The extraordinary amount of units are not higher than historical amount of units last year in the second quarter.
In the full year Guide then.
Speaker 4: We do have continued growth, really, the growth margin benefits that we're rolling through this forecast continue to benefit through
We do have continued growth really the gross margin benefits that were rolling through this forecast continued it benefits through.
Speaker 4: You know, the delivery savings we're seeing with a wider network including the capabilities we have with clients, warehouse and costs along side that, the compensation as well as other DC related costs and benefits through just gross margin in general from you know, continued benefits to mark up. And controlling mark downs with very healthy inventory levels. So the guide really reflects.
The delivery savings, we're seeing with our wider network, including the capabilities we have required.
Michael Rempell: And then secondly, on the full year guide, I wanted to just dig into the components of the rays and how you're kind of thinking about area versus AE growth in the back half. Thanks so much. Yeah, so the growth margin in the second quarter, we had benefits both from the acceleration across a bunch of different fronts, the acceleration in the business.
Housing costs, along side that compensation as well as other VC related costs.
And benefits through gross margin in general from.
Continued benefits to markups and can start controlling markdowns with a very healthy inventory levels.
The guide really reflects.
Michael Rempell: Really started in June through July, like we've just described. Then we did have cost savings initiatives, the change to our tech clearance, sell off the end of season goods, had a benefit in the second quarter. It'll have a annual benefit beyond what we were able to book in the second quarter, a capture in the second quarter. And, you know, we obviously did we recapture the freight headlines from last year as well as the impact of selling off.
Low single digit revenue trends.
Are you still there.
This accelerated pace I think it's probably a low double digit trend a flat to positive.
Speaker 4: Probably low double digit trend, AE, flat depositive.
Speaker 4: with the gross margin benefits that we've been able to see through the second quarter, continuing through the back half of this year.
With the gross margin benefits that we've been able to see through the second quarter continuing through the back half of this year.
Thanks, a lot.
Thank you. Our next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question Hey, everybody. Congratulations on all the improvements the stores look great.
Michael Rempell: You know, extraordinary amount of units are not higher than historical amount of units last year in the second quarter. On the full year guide, then we do have continued growth, really, the growth margin benefits that we're rolling through this forecast continue to benefit through the delivery savings we're seeing with a wider network, including the capabilities we have for clients. We're housing costs along with side that the compensation as well as other BC related costs and benefits through just gross margin in general from, you know, continued benefits to mark up and can start controlling markdowns with very healthy inventory levels.
Speaker 13: Hey everybody, congratulations on all the improvements. The stores look great. Down there just wanted to dig in on two quick things. The fashion in the store is particularly on the women's side seems to be moving at a very quick pace.
John I just wanted to dig in on two quick things.
The fashion in stores, particularly on the womens side seems to be moving at.
Very quick pace like a few days on hand, it seems it's turning very quickly. So I'm curious if you could just talk a little bit about the balance of the fascia in your ability to how quickly you will be able to chase back in and do you feel well set.
Speaker 13: a few days on hand it seems. It's turning very quickly. So I'm curious if you could just talk a little bit about the balance of the fashion, your ability to help quickly you will be able to chase back in. And do you feel well set for holidays?
For holiday and that balance.
Speaker 13: And then just on that expense line, I'm assuming the zealot sisters and everything that you guys are doing to capture attention, I'm assuming all of that is embedded in the marketing costs and the forward guidance on the SGNA, is that correct?
And then just on the expense line I'm, assuming the Ziegler sisters and everything that you guys are doing to capture attention I'm, assuming all of that is embedded in the marketing costs and the forward guidance on SG&A is that correct.
Michael Rempell: So the guide really reflects a low single digit revenue trend, Erie still at this accelerated pace, I think it's probably low double digit trend, AE, lots of positives with the gross margin benefits that we've been able to see through the second quarter, continuing through the back after this year. Thanks, Bob. Thank you.
Speaker 6: I can answer that. That is correct. Yes. Yes. And just, you know,
I can answer that that is correct, yes, yes.
And just.
All right.
As I think about.
Just.
Speaker 6: The pace of the, I mean, the turns, right? It's just amazing how women's is turning. And it should turn fat.
The pace of I mean, the turns rate, it's just amazing how women's is turning.
Turning fast.
Speaker 6: We're up to getting at tops and tops turn a lot faster than bottoms. And there's been some channels shifts. The new direct business and this team, what they're able to, we're really seeing a dramatic improvement on that channel. And we're up to making sure that we can maximize that channel and moving our best doors.
Up to getting at tops and tops turn a lot faster than bottoms.
And theres been some channel shifts.
Michael Rempell: Our next question comes from the line of Marnie Shapiro with retail tracker. Please proceed with their questions. Hey, everybody. Congratulations on all the improvements. The stores look great. I just wanted to dig in on two quick things. The fashion in the stores, particularly on the women's side, seems to be moving at a very quick pace, like a few days on hand it seems. It's turning very quickly. So I'm curious if you could just talk a little bit about the balance of the fashion, your ability to help quickly you will be able to chase back in and do you feel well set for holiday in that balance.
The new direct the direct business and this team what Theyre able to we're really seeing a dramatic improvement on that channel.
And we're up to making sure that we can maximize that channel and moving our best stores fast in getting back into goods the team's been added everyday marni.
Speaker 6: fast and getting back into goods. The team's been at it every day, Marnie. I mean, every day we have new learnings. There's another day that goes by that we're not chasing. We definitely beat plan early on, as I mentioned early on, at the end of June , we're starting getting a new receipt. And so we've been chasing that. We exceeded plan. And now we're up to getting back on what we think is our new plan and making sure that we can deliver this number.
Every day, we have new learnings there is not a day that goes by that we're not chasing.
We definitely be plan early on as I mentioned early on it at the end of June when Youre, starting getting getting in new receipts and so we've been chasing that we exceeded plan and now we're up to getting back on what we think is our new plan and making sure that we can deliver this number do you feel the fashion is balanced so for holiday.
Michael Rempell: And then just on that expense line, I'm assuming, you know, the zeigler sisters and everything that you guys are doing to capture attention, I'm assuming all of that is embedded in the marketing costs and the forward guidance on SGNA. Is that correct? I can answer that. That is correct. Yes. And just, you know, as I think about just the pace of the, I mean, the turns, right, it's just amazing how women's is turning and it should turn fast.
Speaker 13: Do you feel the fashion is balanced so for holiday? Was that less of a... Okay, fantastic. I'll take the rest later. I feel good about that. And in men's too, Marnie, you know, we had to reset in men's. And I just saw the holiday delivery and it feels way more balanced. We have outerwear, we have categories that we hadn't been in business in. So we're pretty excited about the offerings that are coming. That's exciting. Thanks so much, guys. Thank you. Thank you.
Okay Fantastic I'll take the rest later I feel good about that and in men's to Marni.
We did add to reset in mens and.
I just saw the holiday delivery and it feels way more balanced we have outerwear, we have categories that we hadn't been in business in so.
So we're pretty excited about the offerings that are coming that's exciting. Thanks. So much guys. Thank you. Thank you.
Michael Rempell: We're up to getting at tops and tops turn a lot faster than bottoms. And there's been some channels shifts. The new direct, the direct business and this team, what they're able to, we're really seeing a dramatic improvement on that channel. And, you know, we're up to making sure that we can maximize that channel and moving our best doors fast and getting back into goods. The team's been at it every day, Martin.
Yeah.
Thank you.
No further questions at this time and I would like to turn the floor back over to Mr. Jay Schottenstein for closing comments.
Speaker 3: I thank you, our brands are strong. And we remain focused on the lucky and additional growth and profit moving forward. Thank you for joining the call and the course updating you on our next.
Alright, thank you.
Our brands are strong.
And we remain focused on unlocking additional growth and profit moving forward. Thank you for joining the call and I look forward to updating you on our next.
Michael Rempell: I mean, every day we have new learnings. There's another day that goes by that we're not chasing. We definitely beat plan early on as I mentioned early on at the end of June, we're starting getting, you know, getting a new receipt. And so we've been chasing that. We exceeded plan and now we're up to getting back on what we think is our new plan and making sure that we can deliver this number.
Speaker 3: report the update to you as far as our progress, progress in the quarter. Thank you.
Sure.
Forward to updating you.
As far as our progress progress next quarter. Thank you.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Yes.
Michael Rempell: Do you feel the fashion is balanced so for holiday? I feel good about that. And in men to money, you know, we had to reset in men and I just saw the holiday delivery and it feels way more balanced. We have outerwear. We have categories that we hadn't been in business in. So we're pretty excited about the offerings that are coming. That's exciting. Thanks so much. Thank you.
Thank you. This concludes today's teleconference.
Jay Schottenstein: There are no further questions at this time, and I would like to turn the floor back over to Mr. Jay Schottenstein for closing comments. Thank you are our brands are strong. And we remain focused on the lucky additional growth and profit moving forward. Thank you for joining the call and the course updating you on our next. Report the update to you as far as our progress progress next quarter. Thank you.
Unknown Executive: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you.