Q4 2023 American Eagle Outfitters Inc Earnings Call

Profitable growth strategy and three year financial targets.

The call will include prepared remarks from Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Foyle, President Executive Creative director for AE, and Aerie, and Mike Matthias Chief Financial Officer.

This will be followed by a question and answer session. We expect to conclude the call at approximately one o'clock.

Before we begin I would like to refer you to our safe Harbor statement and additional disclosures around non-GAAP results posted on screen.

<unk> of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at Www Dot Dash, Inc. Dot com in the Investor Relations section.

Following today's call this.

This is also where you will find the replay and our fourth quarter investor and powering profitable growth strategy presentation.

Now I will turn the call over to Jay to kick it off with a quick review of key highlights of our fourth quarter and fiscal 2023 results.

<unk>.

Good morning, Thanks for joining us.

Earlier today, we unveiled our new long term strategy and financial roadmap.

Our focus is simple.

Powering profitable growth.

We are excited to share the details of our plan with you for first let me begin with a quick overview of last year.

I'll start with a huge thanks to our teams for their perseverance and commitment throughout 2023.

Im, especially proud of the strength, we delivered in the second half of the year as we began to implement actions from our profit improvement project.

Building on momentum in the third quarter, we achieved record fourth quarter revenue.

And adjusted operating income reached the highest in over a decade.

With strong execution, we nicely exceeded expectations, even after raising guidance in early January.

While Mike will provide greater details during the fourth quarter, we took a non-GAAP charge as we look to strengthen overall profitability.

Our 2023 revenue reached a record $5 3 billion.

And we registered $375 million of adjusted operating income.

With the exception of 2021 this was our highest adjusted operating income results since 2012.

We generated strong cash flow and we ended the year in a very healthy financial position cash.

Cash and investments more than doubled from last year.

Reaching $454 million at year end.

We exited 2023 with clean inventory.

Well positioned for our go forward plans.

Reflecting an improved financial performance and a healthy balance sheet in December we announced a 25% increase in our quarterly cash dividend and of February we authorized 30 million shares for repurchase.

This underscores our confidence in the strength of the business and our commitment to returning cash to shareholders.

We enter 2024, well position with industry, leading brands, a solid balance sheet and best in class operations.

Our profit improvement initiatives are taking hold and we expect to deliver nice revenue and profit growth in 2024, which Mike will detail shortly.

We remain steadfast in operating the business with balance staying agile and flexible to capitalize on demand opportunities, while optimizing profitability for the foreseeable future.

With that I will pass it over to Jan for some brief merchandize and marketing highlights of the fourth quarter.

Thanks, Jay and good morning, everyone I'm very proud of our fourth quarter performance, we saw sequential improvement across brands and channels and we achieved record revenue for both AE and aerie.

Merchandise margins were strong driven by inventory discipline and favorable product costs.

It is on demand opportunities, while optimizing profitability for the foreseeable future.

We brought excitement with newness, including a fresh take on some tried and true classics.

Collections were on trend, including an amazing array of gifting options that did very well over the holiday season.

With that I will pass it over to Jan for some brief merchandize and marketing highlights of the fourth quarter.

As I will review in today's strategy presentation. We saw early results from a number of new brand initiatives strong product engaging marketing and an unparalleled shopping experience is delivering customer growth in fact at over $22 million, our total customer count expanded across brands, reaching and all.

Jan: Thanks, Jay and good morning, everyone I'm very proud of our fourth quarter performance, we saw sequential improvement across brands and channels and we achieved record revenue for both AE and aerie.

Merchandise margins were strong driven by inventory discipline and favorable product costs.

Jan: We brought excitement with newness, including a fresh take on some tried and true classics.

Hi.

So brand highlights.

American Eagle revenue grew 11% fueled by a 6% increase in comps the extra week contributed approximately four points to brand revenue.

Jan: Collections were on trend, including an amazing array of gifting options that did very well over the holiday season.

Jan: As I will review in today's strategy presentation. We saw early results from a number of new brand initiatives strong product engaging marketing and an unparalleled shopping experience is delivering customer growth in fact at over $22 million, our total customer count expanded across brands, reaching and all.

<unk> was broad based across jeans pants tops sweaters and outerwear.

Womens outperform men's yet both saw meaningful sequential improvement the AE brand operating margin expanded 100 basis points to 17%.

As we have turned our attention to driving growth at AE, we're placing a renewed emphasis on top sellers and expanding availability across the store base or.

Jan: Time high now.

Jan: Now some brand highlights American.

Jan: American Eagle revenue grew 11% fueled by a 6% increase in comps the extra week contributed approximately four points to brand revenue.

Our new store design is showing nice results, providing a positive lift to comps.

Jan: <unk> was broad based across jeans pants tops sweaters and outerwear.

I'll talk more about these initiatives. Later however, we are incredibly pleased with the early results. They provide a strong proof point of our strategy to deliver profitable growth, which we are excited to share with you later today.

Jan: Womens outperform men's yet both saw meaningful sequential improvement the AE brand operating margin expanded 100 basis points to 17%.

Now turning to Aerie revenue grew 16% with comps increasing 13% locking in yet another record fourth quarter. The extra week contributed approximately four points to brand revenue growth was led by soft apparel and are flourishing offline activewear business, both of which posted.

Jan: As we have turned our attention to driving growth at AE, we are placing a renewed emphasis on top sellers and expanding availability across the store base.

Jan: Our new store design is showing nice results, providing a positive lift to comps.

Jan: More about these initiatives. Later however, we are incredibly pleased with the early results. They provide a strong proof point of our strategy to deliver profitable growth, which we are excited to share with you later today.

Double digit growth.

<unk> operating margin of 16, 2% hit an all time fourth quarter high. This is a 400 basis point expansion to last year as the brand continued to scale.

Jan: Now turning to Aerie revenue grew 16% with comps increasing 13% locking in yet another record fourth quarter. The extra week contributed approximately four points to brand revenue growth was led by soft apparel and are flourishing offline activewear business, both of which pose.

We also saw improved markup and lower markdowns, new stores are providing a tailwind to comp growth as they enter the comp base and are boosting margins as they ramp up through the maturity curve.

All in all we had a very successful holiday season, and fourth quarter across our brands I'd like to thank our amazing teams for their hard work talent and commitment we made tremendous progress throughout the year and I look ahead, I'm very optimistic as we build on positive momentum.

Jan: Did double digit growth.

Jan: <unk> operating margin of 16, 2% hit an all time fourth quarter high. This is a 400 basis point expansion to last year as the brand continued to scale.

I look forward to sharing our go forward plans and a little bit and now I'll turn the call over to Mike to review the rest of our financial results. Thanks, Jen and good morning, everyone.

Jan: We also saw improved markup and lower markdowns, new stores are providing a tailwind to comp growth as they enter the comp base and are boosting margins as they ramp up through the maturity curve.

As noted in our press release and earlier in the call fourth quarter 2023 results are presented for the 14 weeks ending February three 2024 compared to the 13 weeks ending January 28 2023.

All in all we had a very successful holiday season, and fourth quarter across our brands I'd like to thank our amazing teams for their hard work talent and commitment we made tremendous progress throughout the year and I look ahead, I am very optimistic as we build on positive momentum.

Comparable sales metrics are presented for the 14 weeks ending February three 2024 compared to the 2014 weeks ending February four 2023.

Jan: I look forward to sharing our go forward plans and a little bit and now I'll turn the call over to Mike to review the rest of our financial results.

We're very pleased with how we performed during the second half of the year when our profit improvement work began to take hold we.

Mike: Thanks, Jen and good morning, everyone.

We saw a sequential acceleration in revenue growth across brands with an exciting returned to growth for American Eagle.

Mike: As noted in our press release and earlier in the call fourth quarter 2023 results are presented for the 14 weeks ending February three 2024 compared to the 13 weeks ending January 28 2023.

This came hand in hand, with a significant improvement in profit flow through.

We saw a 320 basis point improvement in our second half adjusted gross margin over last year.

Mike: Comparable sales metrics are presented for the 14 weeks ending February three 2024 compared to the 14 weeks ending February four 2023.

As we'll discuss shortly.

Early results from these initiatives gives us tremendous confidence in our go forward plans.

Fourth quarter revenue $1 7 billion marked a new company record rising 12% to last year.

Mike: We're very pleased with how we performed during the second half of the year when our profit improvement work began to take hold.

The 50, <unk> week contributed $57 million or approximately four points to growth.

Mike: Saw a sequential acceleration in revenue growth across brands with an exciting returned to growth for American Eagle.

The adjusted operating margin increased 200 basis points to eight 4%.

Mike: This came hand in hand, with a significant improvement in profit flow through where we saw a 320 basis point improvement in our second half adjusted gross margin over last year.

Compared to last year, adjusted gross profit dollars increased 23% to $626 million and the gross margin rate expanded 340 basis points to 37, 3%.

Mike: As we'll discuss shortly the early results from these initiatives gives us tremendous confidence in our go forward plans.

<unk> margins improved reflecting strong demand lower costs and a number of benefits from our profit improvement initiative.

Mike: Fourth quarter revenue $1 7 billion marked a new company record rising 12% to last year.

Inventory discipline drove lower markdowns and <unk> expenses also leveraged.

Mike: Third week contributed $57 million or approximately four points to growth.

This was led by rent delivery distribution and warehousing costs with a partial offset from higher incentives as we lap zero accruals last year.

Mike: The adjusted operating margin increased 200 basis points to eight 4%.

Mike: Compared to last year, adjusted gross profit dollars increased 23% to $626 million and a gross margin rate expanded 340 basis points to 37, 3%.

SG&A expense of $427 million was up 22% to last year.

Consistent with strong business trends roughly half of the increase was driven by incentive expense.

Mike: Merchandise margins improved reflecting strong demand lower costs and a number of benefits from our profit improvement initiative.

Core payroll also increased driven by higher wages and additional hours associated with the 50 <unk> week.

As a rate to revenue store payroll was flat to last year depreciation.

Mike: Inventory discipline drove lower markdowns and Botw expenses also leveraged.

Depreciation was down slightly year over year, leveraging 50 basis points.

Mike: This was led by rent delivery distribution and warehousing costs with a partial offset from higher incentives as we lap zero accruals last year.

As we will discuss today with incentives now in our base and ongoing focus on cost efficiencies.

Well positioned to leverage our expense base moving forward.

Mike: SG&A expense of $427 million was up 22% to last year.

Adjusted EPS for the fourth quarter of <unk> 61 per share was up 65% to last year.

Mike: Consistent with strong business trends roughly half of the increase was driven by incentive expense store payroll also increased driven by higher wages and additional hours associated with the 50 <unk> week.

<unk> ending inventory at cost was up 9% year over year with units up 11%.

As Jay noted inventory levels remain healthy and we ended the year with a strong balance sheet.

Mike: As a rate to revenue store payroll was flat to last year depreciation.

Mike: Depreciation was down slightly year over year, leveraging 50 basis points.

Capex totaled 39 million, bringing full year spend to $174 million in line with our guidance.

Mike: As we will discuss today with incentives now in our base and an ongoing focus on cost efficiencies, we are well positioned to leverage our expense base moving forward.

We've entered 2024, well positioned with a clear path to value creation from here.

As I will discuss throughout today, our profit improvement initiatives remains a top priority.

Mike: Adjusted EPS for the fourth quarter of <unk> 61 per share was up 65% to last year.

As part of this work in the fourth quarter, we took a number of additional steps to streamline business priorities and strengthen the organization.

Mike: <unk> ending inventory at cost was up 9% year over year with units up 11%.

This included restructuring the Companys distribution network international operations and associated corporate overhead.

Mike: As Jay noted inventory levels remain healthy and we ended the year with a strong balance sheet.

Mike: Capex totaled 39 million, bringing full year spend to $174 million in line with our guidance.

We recorded a 131 million impairment and restructuring charge in the fourth quarter of which $119 million was noncash.

Mike: We've entered 2024, well positioned with a clear path to value creation from here.

This will result in approximately $20 million in annualized savings beginning in 2024.

Mike: As I will discuss throughout today, our profit improvement initiative remains a top priority.

Now onto guidance for the year, we are guiding operating income of $445 million to $465 million.

Mike: As part of this work in the fourth quarter, we took a number of additional steps to streamline business priorities and strengthening the organization.

This reflects revenue growth in the range of 2% to 4%, including an approximately one point negative impact from one less selling week.

Mike: This included restructuring the Companys distribution network international operations and associated corporate overhead.

As we control expenses, we expect to drive SG&A leverage based on the current plan full year SG&A dollars will be flat at the low end of our revenue outlook.

Mike: We recorded a $131 million impairment and restructuring charge in the fourth quarter of which $119 million was noncash.

As a result of restructuring actions taken in the fourth quarter, we expect D&A of approximately $220 million for the full year.

Mike: This will result in approximately $20 million in annualized savings beginning in 2024.

Mike: Now onto guidance for the year, we are guiding operating income of $445 million to $465 million.

Our tax rate assumption for the year is in the high Twenty's and at this time, we are projecting a weighted average share count in the high 100 <unk>.

Mike: This reflects revenue growth in the range of 2% to 4%, including an approximately one point negative impact from one less selling week.

Now I want to provide a little more color on 2024 is a few important factors will impact the cadence of the year.

Mike: As we control expenses, we expect to drive SG&A leverage based on the current plan full year SG&A dollars will be flat at the low end of our revenue outlook.

With easier year over year comparisons were guiding comp sales growth to be stronger than the first half and positive mid single digits for.

Mike: As a result of restructuring actions taken in the fourth quarter, we expect DNA of approximately $220 million for the full year.

For the second half, we're currently estimating comp growth in the low single digits.

In addition, given the retail calendar shift and one less selling week in the fourth quarter, we expect total.

Mike: Our tax rate assumption for the year is in the high <unk> and at this time, we are projecting a weighted average share count in the high 100 <unk>.

Revenue and profit growth to be skewed to the first half of the year.

Now specifically by quarter in the first quarter, we expect to pick up approximately $15 million in revenue as we capture a higher volume spring week.

Mike: Now I want to provide a little more color on 2024 as a few important factors will impact the cadence of the year.

In the second quarter, we will gain approximately $55 million as we pick up a week of back to school, which are some of our busiest weeks of the year.

Mike: With easier year over year comparisons were guiding comp sales growth to be stronger than the first half and positive mid single digits for.

In the third quarter, we will see a net shift of about $45 million in revenue out of the quarter.

Mike: For the second half, we're currently estimating comp growth in the low single digits.

Mike: In addition, given the retail calendar shift and one less selling week in the fourth quarter, we expect total revenue and profit growth to be skewed to the first half of the year.

And lastly in the fourth quarter, we expect an $85 million impact as a result of one less selling week. In addition to the calendar shift. These revenue shifts are important as you model out the year by quarter.

Mike: Now specifically by quarter in the first quarter, we expect to pick up approximately $15 million in revenue as we capture a higher volume spring week.

Now as we look at the first quarter, we were pleased to see business momentum continue.

For the quarter were expecting operating income to be in the range of $65 million to $70 million on revenue growth in the mid single digits.

Mike: In the second quarter, we will gain approximately $55 million as we pick up a week of back to school, which are some of our busiest weeks of the year.

We expect SG&A to grow in line with sales in the first quarter and begin leveraging in the second quarter as we continue to build on our profit improvement initiatives.

Mike: In the third quarter, we will see a net shift of about $45 million in revenue out of the quarter.

Mike: And lastly in the fourth quarter, we expect an $85 million impact as a result of one less selling week. In addition to the calendar shift. These revenue shifts are important as you model out the year by quarter.

Now I'll turn the call back to Jay to kick off our strategy discussion.

Thanks, Mike.

Building on our strong 2023 performance.

Mike: Now as we look at the first quarter, we were pleased to see business momentum continue.

Pleased to now introduce our long range strategy and financial plan.

Mike: For the quarter were expecting operating income to be in the range of $65 million to $70 million on revenue growth in the mid single digits.

This is our multi year roadmap for powering consistent <unk>.

<unk> growth.

Mike: We expect SG&A to grow in line with sales in the first quarter and begin leveraging in the second quarter as we continue to build on our profit improvement initiatives.

Our plan is centered on three main pillars.

Amplify our brands execute with financial discipline and optimize our operations.

Mike: Now I'll turn the call back to Jay to kick off our strategy discussion.

This strategy plan is a direct result of our profit improvement project started last year.

Jay: Thanks, Mike.

Jay: Building on our strong 2023 performance I.

We reviewed every area of our business is set.

Jay: I am pleased to now introduce our long range strategy and financial plan.

Up for profitable growth moving forward there.

Jay: This is our multi year roadmap repowering consistent profitable growth.

The early stages of this project helped fuel a significant turnaround in revenue and profit during the second half of 2023, yet we're just getting started.

Jay: Our plan is centered on three main pillars.

Jay: Amplify our brands execute with financial discipline and optimize our operations.

I'll start with a quick look back.

We have a strong history and heritage of building Great brands American Eagle is over $3 billion in revenue areas closing in on $2 billion.

Jay: This strategy plan is a direct result of our profit improvement project started last year.

Jay: We reviewed every area of our business is set.

We provide excellent customer service and have best in class operations.

Jay: Up for profitable growth moving forward.

We've been successful over the past several years driving fairly steady revenue growth. Despite a lot of macro volatility.

Jay: The early stages of this project helped fuel a significant turnaround in revenue and profit during the second half of 2023, Yes. We are just getting started.

However flow through to the bottom line has not been consistent the plan. We are presenting today is designed to address this head on.

Jay: I'll start with a quick look back.

Jay: We have a strong history and heritage of building Great brands American Eagle is over $3 billion in revenue areas closing in on $2 billion.

Building on our strong results in 2023, our target is to generate annual profit growth in the mid to high teens on 3% to 5% top line.

Jay: We provide excellent customer service and have best in class operations.

We are transforming how we operate to deliver steady profit growth we.

Jay: We've been successful over the past several years driving fairly steady revenue growth. Despite a lot of macro volatility.

We have formalized this change with clear responsibility and accountability.

And as Mike will discuss we have instilled a culture of continuous improvement.

Jay: However flow through to the bottom line has not been consistent the plan. We are presenting today is designed to address this head on.

<unk>, we get into the details I'd like to begin with a refresh on who we are today and what I see as our unique competitive strength.

Jay: Building on our strong results in 2023, our target is to generate annual profit growth in the mid to high teens on 3% to 5% top line.

This is what gives me confidence in our strategy and future potential so let's get started.

Jay: We are transforming how we operate to deliver steady profit growth.

AUO has been an incredible journey since its founding and $19 77.

Jay: We have formalized this change with clear responsibility and accountability.

My father, Jerome Schottenstein set out to build a brand with heart and purpose with his priority to offer quality merchandise that was accessible to all from the very beginning we were open minded optimistic and inclusive.

Jay: And as Mike will discuss we have instilled a culture of continuous improvement.

Mike: <unk>, we get into the details I'd like to begin with a refresh on who we are today and what I see as our unique competitive strength.

Over 45 years later these remain the core tenants of our brands and the foundation of our company and culture.

Mike: This is what gives me confidence in our strategy and future potential so let's get started.

Our success has been underpinned by the stink and undeniable set of competitive advantages.

Mike: AUO has been on an incredible journey since its founding and $19 77.

These are strengths that had been fortified over decades.

Mike: My father, Jerome Schottenstein set out to build a brand with heart and purpose with his priority to offer quality merchandise that was accessible to all from the very beginning we were open minded optimistic and inclusive over 45 years. Later these remain the core tenants of our brands and the foundation.

Set us apart and have enabled us to endure through both good and difficult times as we move on to the next chapter of our growth we will lean into these strengths to drive further success.

Our brands are the very heart and soul of HBO and.

Mike: <unk> of our company and culture.

American Eagle and Aerie have incredible brand equity amplifying their strong foundation is at the center of our future growth plans.

Mike: Our success has been underpinned by distinct and undeniable set of competitive advantages.

Mike: These are strengths that had been fortified over decades.

We are especially excited about the offline by Aerie Activewear sub brand is expanding rapidly and we see a big growth opportunity here.

Mike: Set us apart and have enabled us to endure through both good and difficult times as we move on to the next chapter of our growth we will lean into these strengths to drive further success.

We also have two emerging brands in the luxury space, Todd Snyder and premium menswear brand, which we acquired in 2015.

Our brands are the very heart and soul of <unk> and.

An unsubscribe, a unique women's brand offering consciously make clothing and accessories launched in 2021.

Mike: American Eagle and Aerie have incredible brand equity amplifying their strong foundation is at the center of our future growth plans.

Our commitment to quality as a significant competitive advantage. We are not fast fashion. We saw merchandise is built to last and when.

Mike: We are especially excited about the offline by Aerie Activewear sub brand. It is expanding rapidly and we see a big growth opportunity here. We also have two emerging brands in the luxury space, Todd Snyder and premium menswear brand, which we acquired in 2015.

We ensure our finishes and fits our best in class and that our customers feel comfortable confident and on trend.

We believe that price is what you pay quality is what youll remember.

Mike: An unsubscribe the unique women's brand offering consciously make clothing and accessories launched in 2021.

Innovation is woven within everything we do.

We have a long history of creating superpower categories. They reinforce brand loyalty and drive repeat purchases are franchise categories are the cornerstone of our business and give us the authority and credibility with customers to build more today.

Our commitment to quality is a significant competitive advantage. We are not fast fashion. We saw merchandise is built to last week.

Mike: We ensure our finishes and fits our best in class and that our customers feel comfortable confident and on trend.

Today Youll hear more on this fee and the opportunities we see across brands to grow into adjacent categories. Some new businesses and some that are being reignited.

Mike: We believe that prices what you pay quality is what youll remember.

Mike: Innovation is woven within everything we do.

We have invested in best in class operating capabilities.

Mike: We have a long history of creating superpower categories. They reinforce brand loyalty and drive repeat purchases are franchise categories are the cornerstone of our business and give us the authority and credibility with customers to build more to.

We have an extensive and diversified global supply chain network.

Our strong partnerships ensure we can chase cost effectively and with speed.

We have modernized our distribution network with edge fulfillment, which has delivered significant benefits to our business over the past two years.

Mike: Today, you will hear more on this fee and the opportunities we see across brands to grow into adjacent categories. Some new businesses and some that are being reignited.

We have a powerful and profitable store fleet and a significant $1 $8 billion digital platform.

Mike: We have invested in best in class operating capabilities.

Together this is a winning set of capabilities that enable us to operate with strength and agility.

Mike: We have an extensive and diversified global supply chain network or.

Mike: Our strong partnerships ensure we can chase cost effectively and with speed.

Top talent is a differentiator. This team is highly experienced in the retail industry with a broad range of expertise passion at <unk> to build the best brands in retail and operational excellence is second to none.

Mike: We have modernized our distribution network with edge fulfillment, which has delivered significant benefits to our business over the past two years.

Mike: We have a powerful and profitable store fleet and a significant $1 $8 billion digital platform.

We have two new members of our leadership team Sarah Valerie joined US in October, bringing strong backgrounds with years of retail experience. They have hit the ground running introducing new ideas and ways of working.

Mike: Together this is a winning set of capabilities that enable us to operate with strength and agility.

Were also supported by a deep bench of strong talent at all levels across the organization.

Mike: Top talent is a differentiator. This team is highly experienced in the retail industry with a broad range of expertise that passion at <unk> to build the best brands in retail and operational excellence is second to none.

With these competitive strengths, we have a solid foundation, we are built to last and well positioned for success as.

As we embark on this next chapter I cannot be more excited about our future.

Mike: We have two new members of our leadership team Sarah Valerie joined US in October, bringing strong backgrounds with years of retail experience. They have hit the ground running introducing new ideas and ways of working.

With that I'll turn it over to agenda walk you through our growth strategy for American Eagle and Aerie.

Thanks, Jay we have an amazing portfolio of brands and we've made great strides over the past several years as I will share with you today, we continue to see incredible opportunities to amplify our potential and fuel the next chapter of growth.

Mike: Were also supported by a deep bench of strong talent at all levels across the organization.

Mike: With these competitive strengths we have.

Mike: Have a solid foundation, we are built to last and well positioned for success as.

Let's start with American Eagle.

As I said at the last Investor meeting in 2021, when I first took responsibility for American Eagle I Love. This brand I love its strong platform and everything AE stands for true today as it was then.

As we embark on this next chapter I cannot be more excited about our future.

Mike: With that I'll turn it over to agenda walk you through our growth strategy for American Eagle and Aerie.

Agenda: Thanks, Jay we have an amazing portfolio of brands and we've made great strides over the past several years as I will share with you today, we continue to see incredible opportunities to amplify our potential and fuel the next chapter of growth.

Jay his father, Jerome and Roger Mark fields, built something very special.

Brand with heart that has always embraced individuality and diversity.

It is truly stood the test of time American Eagle is the largest most consistent youth brand dressing generations of customers.

Jay: Let's start with American Eagle.

Speaker Change: As I said at the last Investor meeting in 2021, when I first took responsibility for American Eagle I Love. This brand I love its strong platform and everything AE stands for true today as it was then.

And today I am going to tell you why I'm more excited than ever about our future American Eagle is perfectly positioned for growth.

But first I'd like to show you a short video that captures the essence of AE and what we stand for.

Speaker Change: Jay his father, Jerome and Roger Mark field built something very special.

[music].

Speaker Change: Brand with heart that has always embraced individuality and diversity.

Speaker Change: It is truly stood the test of time American Eagle is the largest most consistent youth brand dressing generations of customers.

Speaker Change: And today I'm going to tell you why I'm more excited than ever about our future American Eagle is perfectly positioned for growth.

Yeah.

Oh.

Okay.

All right.

Speaker Change: But first I'd like to show you a short video that captures the essence of AE and what we stand for.

Great.

Thanks.

Okay.

Okay.

Sure.

Speaker Change: [music].

Thank you.

Okay.

Yes.

Okay.

Thank you.

Okay.

Thank you.

Okay.

Sure.

Okay.

Speaker Change: Sure.

Okay.

Speaker Change: Oh.

Okay.

Speaker Change: Okay.

Okay.

Speaker Change: <unk>.

Speaker Change: Okay.

Yes.

Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Yes.

Okay.

Speaker Change: Sure.

Speaker Change: Yes.

This proposal was unusually down for everything and anything I Trust them I don't know I would like to have people in my life, but I Trust you can just feel the love that we have for each of the.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

That's a really magical thing.

Okay.

Sure.

Yes.

In addition to its strong brand positioning American Eagle is also a financial powerhouse.

In fact, it was the fuel that built aerie with steady growth strong margins and healthy cash flow, enabling us to invest and grow.

Speaker Change: Paul.

Speaker Change: Okay.

And then just because spreads are usually down for everything and anything that trust them I don't know I would like to have people in my life, but I Trust you can just feel the love that we have for each of the asset.

As we reviewed back in 2021, we saw potential for even better profit flow through three years later I could not be more proud of how far we've come.

Speaker Change: That's a really magical thing.

Speaker Change: Okay.

<unk> operating margin has expanded nearly 300 basis points relative to 2019.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: In addition to its strong brand positioning American Eagle is also a financial powerhouse.

With margins restored we're excited to turn our sights to growth once again, while maintaining a firm focus on profitability.

Speaker Change: In fact, it was the fuel that built aerie with steady growth strong margins and healthy cash flow, enabling us to invest and grow.

So here, we are our pillars to power profitable growth at American Eagle.

Speaker Change: As we reviewed back in 2021, we saw potential for even better profit flow through three years later I could not be more proud of how far we've come.

We will continue to lead in jeans, that's what we're known for building brand loyalty and repeat purchases.

Next we have a real opportunity to complete the outfit by offering a broader assortment of tops.

Speaker Change: <unk> operating margin has expanded nearly 300 basis points relative to 2019.

Expanding into Adjacencies, where we know we have a right to play.

With margins restored we're excited to turn our sights to growth once again, while maintaining a firm focus on profitability.

Modernizing our store fleet with a beautiful new store design to elevate the customer experience.

Speaker Change: So here, we are our pillars to power profitable growth at American Eagle.

And lastly, enhancing how we allocate inventory to better support our best ideas.

Speaker Change: We will continue to lead in jeans, that's what we're known for building brand loyalty and repeat purchases.

So let's get started with genes.

We're the number one denim brand for 15% to 25 year olds. The Goto for women of all ages and a preferred shopping destination.

Speaker Change: Next we have a real opportunity to complete the outfit by offering a broader assortment of tops.

We love this for so many reasons first genes are huge driver of new customer acquisition almost half of new customers have genes in their first basket.

Speaker Change: Expanding into Adjacencies, where we know we have a right to play.

Speaker Change: Modernizing our store fleet with a beautiful new store design to elevate the customer experience.

Second brand loyalty within jeans and bottoms overall is very sticky in fact, it's our best retention business across genders.

Speaker Change: And lastly, enhancing how we allocate inventory to better support our best ideas.

Speaker Change: So let's get started with genes.

We're upping our focus on test and scale innovating in new fabrications and ensuring that we're offering the very latest in trends, while balancing our tried and true.

Speaker Change: We are the number one denim brand for 15% to 25 year olds. The Goto for women of all ages and a preferred shopping destination.

The acceleration we saw in the second half of the year is a great proof point womens returned to growth led by unique franchise fabrications like stringent and dreamy dream.

Speaker Change: We love this for so many reasons first genes are huge driver of new customer acquisition almost half of new customers have genes in their first basket.

Speaker Change: Second brand loyalty within jeans and bottoms overall is very sticky in fact, it's our best retention business across genders.

Men's also saw improvement as we deepened our assortment of more relaxed it.

With 60% of our business in bottoms, we have an enormous opportunity to grow <unk> and other categories.

Speaker Change: We're upping our focus on test and scale innovating in new fabrications and ensuring that we're offering the very latest in trends, while balancing our tried and true.

The industry standard is a tops to bottoms ratio of two to one and we are below one to one.

Bridging this gap is not just a revenue opportunity, but also a margin opportunity.

Speaker Change: The acceleration we saw in the second half of the year is a great proof point womens returned to growth led by unique franchise fabrications like stringent and dreamy dream.

Over the past year, our creative teams have been zeroing in on fueling our tops assortment better fabrics better fits more on trend designs and standing behind hero collection, and we are seeing these efforts begin to deliver results.

Speaker Change: Men's also saw improvement as we deepened our assortment of more relaxed.

Speaker Change: With 60% of our business in bottoms, we have an enormous opportunity to grow tops and other categories.

Women's tops returned to growth in the second half.

Speaker Change: The industry standard is a tops to bottoms ratio of two to one and we are below one to one.

Men's accelerated fueled by strength in graphic Tees, as well as new fabric innovation in core Ts and flannels.

Speaker Change: Bridging this gap is not just a revenue opportunity, but also a margin opportunity.

Another smaller example is men's underwear, it's over $100 million in annual revenue and a great basket builder for the men's business.

Over the past year, our creative teams have been zeroing in on fueling our tops assortment better fabrics better fits more on trend designs and standing behind hero collections and we are seeing these efforts begin to deliver results.

Starting this spring, you'll see new innovation around fabric and function as we build out a more robust assortment and as you can see here a dedicated marketing campaign.

Speaker Change: Women's tops returned to growth in the second half.

We are also excited about driving growth for AE by expanding into category Adjacencies, where we know we have a right to play.

Speaker Change: Men's accelerated fueled by strength in graphic Tees, as well as new fabric innovation and core Ts and flannels.

American Eagle edits to a 15% to 25 year old target customer and we are the go to for everyday casual looks whether it's going to school going to the movies with friends or running errands American Eagle offers amazing comfort and quality and everyday staples.

Speaker Change: Another smaller example is men's underwear, it's over $100 million in annual revenue and a great basket builder for the men's business.

Speaker Change: Starting this spring, you'll see new innovation around fabric and functions as we build out a more robust assortment and as you can see here a dedicated marketing campaign.

This is what we're known for and we will continue to lead in this core occasion <unk>.

Speaker Change: We are also excited about driving growth for AE by expanding into category Adjacencies, where we know we have a right to play.

Additionally, as we are positioned for growth we have expanded into three new areas two new dressing occasions that complement our core social casual and men's active.

Speaker Change: American Eagle edits to a 15% to 25 year old target customer and we are the go to for everyday casual looks whether it's going to school going to the movies with friends or running errands American Eagle offers amazing comfort and quality and everyday staples.

And we're going to broaden our customer focus extending into the 25% to 34 year age demo let.

Let's start with social casual.

There are times when customers look for something a little bit more trend toward something they can wear to a party date night or branch with France still comfortable still casual, but just a little bit more fashionable.

Speaker Change: This is what we're known for and we will continue to lead in this core occasion.

Speaker Change: Additionally, as we are positioned for growth we have expanded into three new areas two new dressing occasions that complement our core social casual and men's active and.

Here's a look at how we are beginning to address this with our spring assortment and womens offerings skirts dresses and fashion tops.

And here's a taste of an immense again more style and greater outfitting youll see theres build as the year progresses.

Speaker Change: And we're going to broaden our customer focus extending into the 25% to 34 year age demo.

Speaker Change: Let's start with social casual.

Turning to men's active we see a huge opportunity here, it's a $27 billion market as.

Speaker Change: There are times when customers look for some third party date night or branch with France still comfortable still casual, but just a little bit more fashionable.

As casual dressing continues to evolve men are increasingly adding activewear to their look both in and out of the gym.

Speaker Change: Here's a look at how we're beginning to address this with our spring assortment and womens offerings skirts dresses and fashion tops.

See multiple ways to leverage <unk> strong brand equity to capture our fair share in this exciting opportunity.

Speaker Change: And here's a taste of it in mens again more style and greater outfitting youll see theres build as the year progresses.

In 2023, we launched 24, seven a men's activewear capsule.

Early results are very encouraging it's already a $100 million business. Looking ahead, we see continued potential growth as we leverage learnings and innovate deeper into performance offerings now here's how we're thinking about our customer base. Gen. Z is our core yet. The fact is we resonate strongly across a broader age.

Speaker Change: Turning to men's active we see a huge opportunity here, it's a $27 billion market.

Speaker Change: Casual dressing continues to evolve men are increasingly adding activewear to their look both in and out of the gym.

Speaker Change: We see multiple ways to leverage <unk> strong brand equity to capture our fair share in this exciting opportunity.

Range.

Over the past few years, we've seen more 25% to 35 year olds in AE customer base, and we want to capitalize on this here.

Speaker Change: In 2023, we launched $24 seven a men's activewear capsule.

Speaker Change: Early results are very encouraging it's already a $100 million business. Looking ahead, we see continued potential growth as we leverage learnings and innovate deeper into performance offering.

Here are some looks we've introduced into our spring assortment more neutrals interesting fabrications and more elevated marketing and we are seeing a strong customer response.

Last year, we also relaunched $8 77, a capsule collection operating more premium fabrics and look at competitive price points.

Now here's how we're thinking about our customer base.

Speaker Change: <unk> is our core yet the fact is we resonate strongly across a broader age range over.

A pair of jeans averages $130 compared to the $250 plus market for premium denim.

Speaker Change: Over the past few years, we've seen more 25% to 35 year olds in Aes customer base and we want to capitalize on this here some looks we've introduced into our spring assortment more neutrals interesting fabrications and more elevated marketing and we are seeing a strong customer response.

With our four focus areas everyday casual social casual men's active and a broader demo we have a clear merchandising strategy moving forward and multiple avenues to drive growth.

Speaker Change: Last year, we also relaunched $8 77, a capsule collection operating more premium fabrics and look at competitive price points.

Now a few words about our store fleet, we are updating stores many of which are dated.

Stores are the strongest customer acquisition channels. So it's important that we invest and stay best in show.

Speaker Change: Fair of genes averages $130 compared to the $250 plus market for premium denim.

Last year, we launched a new lived in store design, bringing a fresh aesthetics to a handful of test stores. We've also explored relocations to stronger shopping centers results have been very exciting which are showing a positive lift.

Speaker Change: With our four focus areas everyday casual social casual men's active and a broader demo we have a clear merchandising strategy moving forward and multiple avenues to drive growth.

Speaker Change: Now a few words about our store fleet, we are updating stores many of which are dated.

To give you a feel of our new store design, Here's a walkthrough of our Polaris store in Columbus as you can see it's incredibly inviting with an exciting new look that showcases our product and a fresh and modern way the design offers greater flexibility and merchandising options the.

Speaker Change: Stores are the strongest customer acquisition channels. So it's important that we invest and stay best in show.

Speaker Change: Last year, we launched a new lived in store design, bringing a fresh aesthetics to a handful of test stores. We've also explored relocations to stronger shopping centers results have been very exciting which are showing a positive lift.

The fitting room areas are a nice place to gather and feel very welcomed and comfortable we have plans to remodel approximately 50 stores in 2024, we're just as proud and excited about our digital channel and Mike will cover the opportunities in a few minutes.

Speaker Change: To give you a feel of our new store design, Here's a walkthrough of our Polaris store in Columbus as you can see it's incredibly inviting with an exciting new look that showcases our product and a fresh and modern way the design offers greater flexibility and merchandising options.

In our recent review of the business product allocation was revealed as a significant opportunity we have two priorities to amplify our best sellers and improve localization.

Fitting room areas are a nice place to gather and feel very welcomed and comfortable we have plans to remodel approximately 50 stores in 2024, we're just as proud and excited about our digital channel and Mike will cover the opportunities in a few minutes.

We see room to stand behind our biggest ideas in category with greater conviction across our fleet.

As we do this we will also offer more fashion choices in key markets, where we know there is demand for example urban stores.

As we look to amplify AE in all these ways, we will continue to leverage innovative marketing strategies positioning AE as the center of culture.

In a recent review of the business product allocation was revealed as a significant opportunity we have two priorities to amplify our best sellers and improve localization.

This past year, we had strong success with limited edition product collaborations the summer I turned pretty outer banks and <unk> cosmetics drove strong bus, creating urgency and excitement.

We see room to stand behind our biggest ideas in category with greater conviction across our fleet as.

Speaker Change: As we do this we will also offer more fashion choices in key markets, where we know there is demand for example urban stores.

And we have a robust influencer strategy to engage our customers in social media. Looking ahead. We are excited to launch a new marketing platform for back to school in 2020 for celebrating Ae's heritage of self expression acceptance and optimism.

Speaker Change: As we look to amplify AE in all these ways, we will continue to leverage innovative marketing strategies positioning AE as the center of culture.

Speaker Change: This past year, we had strong success with limited edition product collaborations the summer I turned pretty outer banks and <unk> cosmetics drove strong bus, creating urgency and excitement.

Before I move to Aerie, a big thank you to the AE team for working so diligently to execute our transformation over the past few years, we've come so far together and our future is even brighter.

Speaker Change: And we have a robust influencer strategy to engage our customers in social media. Looking ahead. We are excited to launch a new marketing platform for back to school in 2020 for celebrating Ae's heritage of self expression acceptance and optimism.

And now Aerie.

Aerie has a powerful brand platform with an amazing community of customers. There's so much love for our product and what we stand for and an incredible opportunity to amplify the magic from here.

Speaker Change: Before I move to Aerie, a big thank you to the AE team for working so diligently to execute our transformation over the past few years, we've come so far together and our future is even brighter.

Before I get into that here's a short video highlighting what makes aerie truly special.

Okay.

Speaker Change: And now Aerie.

Speaker Change: Aerie has a powerful brand platform with an amazing community of customers. There's so much love for our product and what we stand for and an incredible opportunity to amplify the magic from here.

Yes.

Yes.

[music].

Speaker Change: Where I get into that here's a short video highlighting what makes aerie truly special.

Speaker Change: Sure.

Speaker Change: [music].

I'm from Nashville, Milwaukee area in Africa for California, Atlanta, Jacksonville, Washington, Texas and Atlanta.

Gary really helped me feel confident and I think Eric.

Loving one another lovingly account generation of girls and women growing up with Eric who I am I am.

Most of our generation to generation.

Generation for me.

Correct.

Our.

And so.

Speaker Change: I'm from Nashville, Milwaukee area in Africa for California, Atlanta, Jacksonville, Gladstone Tech Zhang from Minneapolis.

Yeah.

Sure.

When you think of generation using families of new things change because all generations are different there's always something that is going to be hostile conditions.

Gary really helped me deal.

Speaker Change: I think Gary loving lineup, Theyre loving new generation of girls and women growing up with Eric who I am I hearing that.

Generation is inspiring keep going in the next generation inspire the next it's just like a peripheral effects.

Most of our generation to generation.

Yes.

Generation.

Speaker Change: Yeah.

Find by uniqueness, it's empowering briefing girt or different were beautiful, having that sense of real net still authentic.

Speaker Change: Generation for me.

Speaker Change: <unk>.

Speaker Change: Are you on.

Speaker Change: Pension.

Generation rail introducing change that's never been seen before and the whole point is the next generation is it better than the next one.

Speaker Change: Do you think of generation using families in new things change because all generations are different there's always something that is kind of you.

Speaker Change: Our traditions.

Sure.

Speaker Change: This generation is inspiring keep going in the next generation inspire the next it's just like a tariff.

Yes.

Generation in the future I am generation real I am generation rail is.

Speaker Change: All of that.

Speaker Change: Sure.

Speaker Change: Generation.

<unk>.

Speaker Change: Find by uniqueness, it's empowering free thinkers or different or beautiful, having that sense of real net still authentic.

As we have welcomed more customers into the aerie community. The brand has seen explosive growth, reaching almost $1 $7 billion in revenue last year and we are just getting started.

Speaker Change: Generation rail introducing change that's never been seen before and the whole point is the next generation.

Importantly, our growth has come with strong profit flow through as we have gained scale and introduce new higher margin categories. Overall profit margins have expanded significantly.

Speaker Change: The next one.

Hi.

Speaker Change: Yes.

Speaker Change: And duration in the future I am generation real I am generation cash generation realm.

Intimates continues to be the foundation of the Aerie brand.

Yet two of our biggest categories today are soft apparel and activewear.

Speaker Change: As we have welcomed more customers into the aerie community. The brand has seen explosive growth, reaching almost $1 $7 billion in revenue last year and we are just getting started.

We have seen standout performance in loungewear, and Cozy collection benefiting revenue and margins.

Looking at the total addressable market for Aerie, we still have significant runway for growth.

Speaker Change: Importantly, our growth has come with strong profit flow through as we have gained scale and introduce new higher margin categories. Overall profit margins have expanded significantly.

Our core product lines represent an over $70 billion market.

Area today commands just over 2% of that pie, making the growth opportunity exponential.

Speaker Change: Intimates continues to be the foundation of the Aerie brand.

Speaker Change: Two of our biggest categories today are soft apparel and activewear.

Here's our strategy to go after that growth to amplify area. We are focused on winning across the aerie lifestyle. This includes fueling intimates and soft apparel and building on offline explosive growth in activewear.

Speaker Change: We have seen standout performance in loungewear, and Cozy collection benefiting revenue and margins.

Speaker Change: Looking at the total addressable market for Aerie, we still have significant runway for growth.

We will also expand awareness of the Aerie brand as we target underpenetrated markets, new customer growth and build the basket across more categories. So let's dig in.

Speaker Change: Our core product lines represent an over $70 billion market.

Speaker Change: Aerie today commands just over 2% of that pie, making the growth opportunity exponential.

Here's a snapshot of areas brand positioning.

Speaker Change: Here's our strategy to go after that growth to amplify area. We are focused on winning across the aerie lifestyle. This includes fueling intimates and soft apparel and building on offline explosive growth in activewear.

Or you just chill, it's effortless, we're famous for intimates cozy dressing sleep insulin in addition to being your favorite first layer key customer occasions, our chill out girls night in Beach and pool Party.

Speaker Change: We will also expand awareness of the Aerie brand as we target underpenetrated markets, new customer growth and build the basket across more categories. So let's dig in.

Now starting with intimates. This continues to be a very powerful category for aerie is the number one driver of new customer acquisition.

Great fit quality and comfort are key and aerie excels at all three.

Speaker Change: Here's a snapshot of areas brand positioning areas chill separate lists we're famous for intimates cozy dressing sleep insulin. In addition to being your favorite first layer key customer occasions, our chill out girls night in Beach and pool Party.

As trends evolve we are constantly innovating.

For example in 2022, we launched smoothies at differentiated second skin fabrication.

Super soft barely there and later there.

Speaker Change: Now starting with intimates.

This is now our number one bra collection.

This continues to be a very powerful category for aerie. It's the number one driver of new customer acquisition great.

Last year, we expanded smoothies into body suits and exciting new trend. This has been a tremendous success and we are bringing new cuts and colors to this fan favorite style. In addition to other exciting smoothie launches later this year.

Speaker Change: Great fit quality and comfort are key and aerie excels at all three.

Speaker Change: As trends evolve we are constantly innovating.

For example in 2022, we launched smoothies at differentiated second skin fabrication Super soft barely there and later there.

This past fall, we also introduce more matching sets, which were a great hit.

Aerie soft apparel business has been our highest growth category expanding double digits last year.

Speaker Change: This is now our number one bra collection.

<unk> repurchases and we see more upside from here.

Speaker Change: Last year, we expanded smoothies into body suits and exciting new trend. This has been a tremendous success and we are bringing new cuts and colors to this fan favorite style. In addition to other exciting smoothie launches later this year.

We recently expanded sleepwear, where we're seeing great rates, it's a natural adjacency to Aries intimates and lounge offerings and we are looking forward to building this collection over time.

Now moving on to Activewear, where we see significant growth ahead.

Speaker Change: This past fall, we also introduce more matching sets, which were a great hit.

This is a very attractive category. It's large it's growing it has great margins and it's ripe for disruption.

Speaker Change: Aerie soft apparel business has been our highest growth category expanding double digits last year.

We launched into activewear with offline in 2020, and let me tell you. This business has been on a care and we expect across $600 million in.

Speaker Change: <unk> repurchases and we see more upside from here.

Speaker Change: We recently expanded sleepwear, where we're seeing great read it's a natural adjacency to Aries intimates and lounge offerings and we're looking forward to building this collection over time.

In 2024.

It's also highly incremental in fact, our offline bottoms business was the number two driver of new customer acquisition across all offline and aerie categories in 2023.

Speaker Change: Now moving on to Activewear, where we see significant growth ahead.

Speaker Change: This is a very attractive category. It's large it's growing it has great margins and it's ripe for disruption.

Offline brings a unique and fresh take to the activewear category, one that is fun empowering and body positive and this is resonating.

Speaker Change: We launched into activewear with offline in 2020, and let me tell you. This business has been on a tear and we expect across $600 million in 2024.

We are now the number three legging brand and we are right up there at number four and sports bras too.

We are very excited about this new platform a fresh take on the activewear category.

Speaker Change: It's also highly incremental in fact, our offline bottoms business was the number two driver of new customer acquisition across all offline and aerie categories in 2023.

<unk> is active fashionable with the perfect blend of style quality and function.

And the team on the go on and off the court.

Speaker Change: Offline brings a unique and fresh take to the activewear category, one that is fun empowering and body positive and this is resonating. We are now the number three legging brand and we are right up there at number four and sports bras too.

We are bringing more performance activewear for the upcoming back to school season.

As we invest in our Assortments. We are also heavily focused on building our customer base in key markets.

Customer penetration in our strongest markets is in the high teens compared to an average in the mid single digits brand awareness at 55% compares to American Eagle and other more established brands at 80%.

Speaker Change: We are very excited about this new platform a fresh take on the activewear category offline as active fashionable with the perfect blend of style quality and function on the team on the go on and off the court.

As with AE stores are the main source of customer acquisition for the Aerie brand and a key driver of revenue growth.

We are bringing more performance activewear for the upcoming back to school season.

Speaker Change: As we invest in our Assortments. We are also heavily focused on building our customer base in key markets.

<unk> had great success in driving expansion with different store formats.

Speaker Change: <unk> penetration in our strongest markets is in the high teens compared to an average in the mid single digits brand awareness at 55% compares to American Eagle and other more established brands at 80%.

One of our focused markets has seen rapid growth Ross Park is our best mall and our strongest state we've moved aerie to a bigger box and nearly doubled mall sales in.

And Green Hills Mall, we added an offline standalone store in a mall, where we had an aerie store the offline stores revenue is almost on par with the Aerie box. This is a very strong proof point of the power and the future opportunity for offline.

Speaker Change: As with AE stores are the main source of customer acquisition for the Aerie brand and a key driver of revenue growth.

Speaker Change: We've had great success in driving expansion with different store formats.

We are also very focused on building the basket across Ares category multi.

Speaker Change: Houston, one of our focused markets has seen rapid growth Ross Park is our best mall and our strongest state we've moved aerie to a bigger box and nearly doubled mall sales.

Multi category customers spend more and shop more frequently.

Expanding these customers is a major priority.

Speaker Change: And Green Hills Mall, we added an offline standalone store in a mall, where we had an aerie store the offline stores revenue is almost on par with the Aerie box. This is a very strong proof point of the power and the future opportunity for offline.

This year, we celebrate 10 years of Aerie real and we're going to do it with a bang lookout for some great throwbacks to our biggest product kits and exciting content elevating the voice of our community the faces of Aerie real.

We are also very focused on building the basket across Ares categories multi.

And we will continue to leverage various marketing platforms to drive awareness and build the aerie community.

Speaker Change: Multi category customers spend more and shop more frequently.

We had great success last year with a 360 degree campaign and intimates targeted engagement in focused markets and of course, our incredible grassroots and paid Influencer community.

Speaker Change: Expanding these customers is a major priority.

Speaker Change: This year, we celebrate 10 years of Aerie real and we're going to do it with a bang lookout for some great throwbacks to our biggest product kits and exciting content elevating the voice of our community the faces of Aerie real.

In 2024, we're excited to launch a dedicated marketing platform for offline as we look to mirror this excitement and activewear.

Speaker Change: And we will continue to leverage various marketing platforms to drive awareness and build the aerie community.

Before I turn the call over to Mike to take you through our optimized pillar I want to thank the incredible aerie team for the passion and excitement they bring to our brand every day. This is a very talented team of seasoned leaders and together we are ready to take on the next chapter.

Speaker Change: We had great success last year with a 360 degree campaign in intimates targeted engagements in focused markets and of course, our incredible grassroots and paid Influencer community.

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

Speaker Change: In 2024, we're excited to launch a dedicated marketing platform for offline as we look to mirror this excitement and activewear.

Jen <unk>.

As Jay and John described we are energized by the work we've undertaken over the past year to set us on a path to greater profitability.

Speaker Change: Before I turn the call over to Mike to take you through our optimized pillar I want to thank the incredible aerie team for the passion and excitement they bring to our brand every day. This is a very talented team of seasoned leaders and together we are ready to take on the next chapter.

The focus and drive across the organization is very exciting to see.

As part of this project, we uncovered a number of opportunities to sharpen our operations and support profitable growth.

I'll provide some key examples today and then we'll round out our presentation with our financial targets and capital allocation plans.

Mike: And now I'll turn the call over to you.

Let's get started.

Mike: Thanks Jen.

Mike: As Jay and John described we are energized by the work we've undertaken over the past year to set us on a path to greater profitability.

As Jay noted our operations are second to none.

As we look ahead, we're focused on elevating our capabilities, even further to unlock incremental growth and create greater efficiencies.

Mike: The focus and drive across the organization is very exciting to see.

Mike: As part of this project, we uncovered a number of opportunities to sharpen our operations and support profitable growth.

These are four focus areas stores digital supply chain and marketing.

First I'll talk about our selling channels.

Mike: I'll provide some key examples today and then we'll round out our presentation with our financial targets and capital allocation plans.

Let me start by saying we are channel agnostic, we operate as a single channel our customers shop across stores and digital and we're well positioned to capture demand through both our comparable margins.

Speaker Change: Let's get started.

Speaker Change: As gene noted our operations are second to none.

Speaker Change: As we look ahead, we're focused on elevating our capabilities, even further to unlock incremental growth and create greater efficiencies.

Just to underscore where similarly profitable across both digital and stores.

We aim to maximize our profits per transaction, regardless of the channel.

Speaker Change: These are four focus areas stores digital supply chain and marketing.

Now looking at the store portfolio, we have a very healthy and profitable fleet and our four wall positive and over 90% of our comp stores.

Speaker Change: First I'll talk about our selling channels.

Speaker Change: Let me start by saying we are channel agnostic, we operate as a single channel.

Our average lease term is approximately two years, providing good flexibility.

Speaker Change: Our customers shop across stores and digital and we are well positioned to capture demand through both our comparable margins.

We've been pleased to see customers return to in person shopping underscoring the importance of having a strong physical footprint.

Speaker Change: Just to underscore where similarly profitable across both digital and stores, we aim to maximize our profits per transaction regardless of the channel.

And given our strong portfolio of brands, we've been successful in achieving favorable rent terms.

Our investment priorities moving forward start with Aerion offline store expansion.

Speaker Change: Now looking at the store portfolio, we have a very healthy and profitable fleet and our four wall positive and over 90% of our comp stores.

This continues to be our highest return on investment with the majority of new stores paying back in under three years.

We expect to add 100, aerie offline stores over the next three years.

Our average lease term is approximately two years, providing good flexibility.

As we open stores, we see a digital halo as more and more customers get introduced to the brand.

Speaker Change: We've been pleased to see customers returned to in person shopping underscoring the importance of having a strong physical footprint.

We need to upgrade and modernize the American Eagle store fleet today, the average age of our AE stores is 12 years and we've not had a new store design in over 15 years.

Speaker Change: And given our strong portfolio of brands, we've been successful in achieving favorable rent terms.

Speaker Change: Our investment priorities moving forward start with Aerion offline store expansion.

We're targeting 300 remodels over the next three to five years using varying degrees of investment from full upgrades simpler refreshes, depending on the market opportunity.

Speaker Change: Which continues to be our highest return on investment, but the majority of new stores paying back in under three years, we expect to add 100 aerie offline stores over the next three years.

As Jen noted test stores have shown a nice positive sales lift.

Speaker Change: As we open stores, we see a digital halo as more and more customers get introduced to the brand.

And we're targeting a minimum ROI of 15%.

Speaker Change: We need to upgrade and modernize the American Eagle store fleet today, the average age of our AE stores is 12 years and we've not had a new store design in over 15 years.

As we make these changes we're also investing in new technologies to drive efficiencies in our store operations.

Jen talked about product allocation to make sure our best sellers are available across all stores and this is already having a positive impact.

Speaker Change: We're targeting 300 remodels over the next three to five years using varying degrees of investment from full upgrades simpler refreshes, depending on the market opportunity.

We're using AI driven forecasting tools that are improving inventory allocation. This is providing more precise information by store, creating greater in stocks and strengthening the customer experience.

Speaker Change: As John noted test stores have shown a nice positive sales lift.

Speaker Change: And we're targeting a minimum ROI of 15%.

Ameren planning RFID technology, which for the first time in our history will enable us to have a real time view of inventory counts in our stores.

Speaker Change: As we make these changes we're also investing in new technologies to drive efficiencies in our store operations.

While still in early days, we're very encouraged by what we're seeing in our initial 100 stores and we're targeting rollout to approximately 500 stores by the end of the year.

Speaker Change: Jen talked about product allocation to make sure were best sellers are available across all stores and this is already having a positive impact.

Together these investments greatly improve our ability to redemand and keep fast turning items in stock.

Speaker Change: We're using AI driven forecasting tools that are improving inventory allocation. This is providing more precise information by store, creating greater in stocks and strengthening the customer experience.

We also anticipate significant upstream benefits to how we manage inventory ultimately, allowing us to buy more accurately and fuel sales with less inventory.

Speaker Change: Ameren planning RFID technology, which for the first time in our history will enable us to have a real time view of inventory counts in our stores.

Turning to digital at $1 $8 billion in annual revenue, we have a very powerful digital business in the last five years alone revenue has grown 61% with digital penetration expanding six points to 34% today.

Speaker Change: While still in early days, we're very encouraged by what we're seeing in our initial 100 stores and we're targeting rollout to approximately 500 stores by the end of the year.

Together these investments greatly improve our ability to redemand and keep fast turning items in stock.

Last year, we appointed a new head of digital David Zhang to lead the business. He is bringing a new level of analytical rigor to how we operate with particular success in improving online conversion.

We also anticipate significant upstream benefits to how we manage inventory ultimately, allowing us to buy more accurately and fuel sales with less inventory.

To highlight one small example, we're using test as a means to rollout new engagement tactics.

Speaker Change: Turning to digital at $1 8 billion in annual revenue, we have a very powerful digital business in the last five years alone revenue has grown 61% with digital penetration expanding six points to 34% today.

With 1 million visitors coming to our website every day, our scale is an incredible and competitive advantage when it comes to testing allow.

Allowing us to build real time insights very quickly.

As we've implemented learnings we've seen small changes to how we engage with customers lead to very dramatic results.

Speaker Change: Last year, we appointed a new head of digital David Zhang to lead the business.

David Zhang: You bring a new level of analytical rigor to how we operate with particular success in improving online conversion.

In aggregate this work drove a strong acceleration in digital conversion.

And comps in the second half of last year.

David Zhang: To highlight one small example, we're using test as a means to rollout new engagement tactics.

With work in very early stages, there are material benefits still to come as we continue to test and scale new insights.

David Zhang: With 1 million visitors coming to our website every day our scale is an incredible competitive advantage when it comes to testing.

Moving on to our supply chain.

Let me address our fulfillment business in the restructuring taken in the fourth quarter.

David Zhang: <unk> us to build real time insights very quickly.

Due in large part a macro volatility which has impacted demand for ecommerce fulfillment third party business component acquired has not met our expectations.

David Zhang: As we've implemented learnings we've seen small changes to how we engage with customers lead to very dramatic results in.

David Zhang: In aggregate this work drove a strong acceleration in digital conversion.

As a result in the fourth quarter, we took charges to streamline the operation focused on core capabilities to serve our brands and our best customers.

David Zhang: And comps in the second half of last year.

David Zhang: With work in very early stages, there are material benefits still to come as we continue to test and scale new insights.

Now as we talked about the edge fulfillment capabilities, we acquired with this network I want to underscore the significant benefits and has provided <unk> and our brands.

David Zhang: Moving on to our supply chain.

David Zhang: Let me address our fulfillment business in the restructuring taken in the fourth quarter.

Let me start by looking at how we used to operate prior to the acquisition.

Due in large part a macro volatility which has impacted demand for ecommerce fulfillment third party business component acquired has not met our expectations.

Like a traditional modern retail we had a small number of large distribution centers.

Ours were located in Pennsylvania, Kansas in Mississauga, Ontario.

David Zhang: As a result in the fourth quarter, we took charges to streamline the operation focused on core capabilities to serve our brands and our best customers.

This was simple, but not terribly efficient.

And as our brands were growing we were running out of capacity.

The decision back in 2020 was to buy or build.

David Zhang: Now as we talked about the edge fulfillment capabilities, we acquired with this network I want to underscore the significant benefits. It has provided <unk> and our brands.

In anticipation of our future needs in many of the changes we're seeing unfold in the industry today, including demand for faster shipping and rising costs. We made the decision to buy a regionalized fulfillment network.

David Zhang: Let me start by looking at how we used to operate prior to the acquisition.

David Zhang: Like a traditional modern retail we had a small number of large distribution centers.

Here's how we operate today for customer focused built for efficiency speed and agility.

David Zhang: Ours were located in Pennsylvania, Kansas in Mississauga, Ontario.

David Zhang: This was simple, but not terribly efficient and as our brands were growing we were running out of capacity.

Inventories closer to customers aligning with population density in big Metro areas inventories.

The decision back in 2020 was to buy or build.

Inventories also closer to stores, enabling faster delivery times and lower costs.

David Zhang: In anticipation of our future needs in many of the changes we're seeing unfold in the industry today, including demand for faster shipping and rising costs. We made the decision to buy a regionalized fulfillment network.

In the last two years, we've lowered our cost per order by 8% relative to 2021, even if some of the industry's largest shipping companies who've taken double digit rate increases.

We've done this while speeding up our delivery times with over 80% of orders now delivered in three business days or less.

David Zhang: Here's how we operate today for customer focused built for efficiency speed and agility.

This network has also given us the needed capacity to fuel long term growth.

David Zhang: Inventories closer to customers aligning with population density in big Metro areas.

Separately in terms of logistics business as discussed earlier, we're refocusing on core capabilities.

David Zhang: Inventories also closer to stores, enabling faster delivery times and lower costs.

This will greatly simplify our operations and resulting cost efficiencies, which will drive structural ongoing benefits beginning this year.

David Zhang: In the last two years, we've lowered our cost per order by 8% relative to 2021, even if some of the industry's largest shipping companies who've taken double digit rate increases.

And lastly, I'll talk about marketing, which typically averaged 3% to 4% of sales annually.

David Zhang: We've done this while speeding up our delivery times with over 80% of orders now delivered in three business days or less.

It's an important driver of the business will continue to spend in support of our brands, yet we see opportunity to make our marketing dollars work harder for us.

David Zhang: This network has also given us the needed capacity to fuel long term growth.

We are enhancing our capabilities here leveraging advanced marketing analytics.

David Zhang: Separately in terms of logistics business as discussed earlier, we're refocusing on core capabilities.

This has been a game changer and improving our return on media spend.

David Zhang: It will greatly simplify our operations and result in cost efficiencies, which will drive structural ongoing benefits beginning this year.

Reallocated, how and when we're spending to be more efficient and effective.

Saw excellent results from this over the holiday season, and expect continued benefits as we implement new learnings.

David Zhang: And lastly, I'll talk about marketing, which typically averaged 3% to 4% of sales annually.

Now a few minutes on our international opportunity. We are the partner of choice in licensed international markets across the globe.

David Zhang: It is an important driver of the business will continue to spend in support of our brands, yet we see opportunity to make our marketing dollars work harder for us.

We have a successful capital light model and we continue to pursue opportunities for expansion with existing and new franchise partners.

David Zhang: We are enhancing our capabilities here leveraging advanced marketing analytics.

David Zhang: This has been a game changer and improving our return on media spend.

The largest part of our business outside of the U S. As our company owned operations in Mexico and Canada.

David Zhang: Reallocated, how and when we're spending to be more efficient and effective.

Mexico in particular has been especially successful more than doubling since 2019.

David Zhang: Saw excellent results from this over the holiday season, and we expect continued benefits as we implement new learnings.

We continue to expand this market, where we have strong brand recognition and customer loyalty.

Now a few minutes on our international opportunity. We are the partner of choice in licensed international markets across the globe.

This includes introducing and further expanding aerie and offline in key markets across the country.

David Zhang: We have a successful capital light model and we continue to pursue opportunities for expansion with existing and new franchise partners.

And now the final pillar of our strategy executing with financial discipline.

Last year, we kicked off project breakthrough or our profit improvement initiatives.

David Zhang: The largest part of our business outside of the U S. As our company owned operations in Mexico and Canada.

Jay said, we left no stone unturned keeping.

David Zhang: Mexico in particular has been especially successful more than doubling since 2019.

Keep in mind. This is a growing business in our variable expenses associated with fueling that.

However through this project, we have identified efficiencies and savings that will enable us to keep operating expenses across B O W and SG&A flat this year.

David Zhang: We continue to expand this market, where we have strong brand recognition and customer loyalty.

David Zhang: This includes introducing and further expanding aerie and offline in key markets across the country.

And repeating this structure is our intent for the next several years.

And now the final pillar of our strategy executing with financial discipline.

Importantly, this work is ongoing.

David Zhang: Last year, we kicked off project breakthrough or our profit improvement initiatives.

And it's been formalized into an office of continuous improvement to identify incremental efficiencies and drive accountability and results.

David Zhang: As Jay said, we left no stone unturned keep.

David Zhang: Keep in mind. This is a growing business in our variable expenses associated with fueling that.

As Jay shared with you a little earlier, here's another look at our financial algorithm, we are driving to five 7% to 6 billion in revenue and an operating margin rate of approximately 10% by 2026.

David Zhang: However through this project, we have identified efficiencies and savings that will enable us to keep operating expenses across <unk> and SG&A flat this year.

On the revenue front, we have multiple levers, we can flex to achieve our 3% to 5% growth target for.

David Zhang: And repeating this structure is our intent for the next several years.

We're very encouraged by the opportunity at the American Eagle brand as we position for category growth and expansion into new Adjacencies.

David Zhang: Importantly, this work is ongoing and it's.

David Zhang: Been formalized into an office of continuous improvement to identify incremental efficiencies and drive accountability and results.

As Jen said, our plans here are strategic and thoughtful we will test and scale fueling areas with clear proof points.

As Jay shared with you a little earlier, here's another look at our financial algorithm, we are driving to $5 $7 6 billion in revenue and an operating margin rate of approximately 10% by 2026.

Our expectation for Aes as low single digit revenue growth with potential for upside as we continue to understand the benefits from new initiatives.

<unk> presented very exciting growth potential.

David Zhang: On the revenue front, we have multiple levers, we can flex to achieve our 3% to 5% growth target.

We're encouraged by the level of customer excitement around activewear and soft apparel.

David Zhang: Very encouraged by the opportunity at the American Eagle brand as we position for category growth and expansion into new Adjacencies.

Our plans here are modest as well.

Expectations are mid to high single with the ability to chase into stronger demand.

David Zhang: As Jen said, our plans here are strategic and thoughtful we will cast some scale fueling areas with clear proof points.

Our 10% operating margin goal of embedded gross margin outlook of 39% to 40%.

We closed out 2023 above 38%, reflecting the startup of our profit improvement work.

David Zhang: Our expectation for Aes as low single digit revenue growth with potential for upside as we continue to understand the benefits from new initiatives.

As we move forward, we expect to maintain inventory discipline and continue to optimize promotions and markdowns.

David Zhang: Erin offline present very exciting growth potential.

David Zhang: We're encouraged by the level of customer excitement around activewear and soft apparel.

We're also seeing favorability in product costs and pursuing other opportunities to cross sourcing and the overall supply chain.

David Zhang: Our plans here are modest as well.

David Zhang: Expectations are mid to high single with the ability to chase into stronger demand.

Delivery and transportation are also areas, where efficiencies and cost savings will continue as we leverage our edge fulfillment model and benefit from the recent restructuring activity and we expect rent to continue to be controlled as we focus on maintaining a favorable cost structure across the fleet.

David Zhang: Our 10% operating margin goal of embedded gross margin outlook of 39% to 40%.

David Zhang: We closed out 2023 above 38%, reflecting the startup of our profit improvement work.

David Zhang: As we move forward, we expect to maintain inventory discipline and continue to optimize promotions and markdowns were also seeing favorability in product costs and pursuing other opportunities to cross sourcing and the overall okay.

Moving to SG&A, we expect to be in the range of 25% to 26% we closed out 2023, a little over 27%.

Over the long term, we are structuring the business to keep SG&A dollar growth below revenue growth.

David Zhang: Delivery and transportation are also areas, where efficiencies and cost savings will continue as we leverage our edge fulfillment model and benefit from the recent restructuring activity and we expect rent to continue to be controlled as we focus on maintaining a favorable cost structure across the fleet.

We have work streams that will continually address 85% of our expense base with focus areas being store and corporate compensation.

Professional fees and services and optimization of marketing spend.

So all of that said here's a few of the major building blocks should take us to approximately 10% over the next three years.

David Zhang: Moving to SG&A, we expect to be in the range of 25% to 26%.

Our outlook is balanced anticipating both puts and takes.

David Zhang: We closed out 2023, a little over 27%.

As I reviewed we have a number of initiatives to control expenses and drive efficiencies across the business.

David Zhang: Over the long term, we're structuring the business to keep SG&A dollar growth below revenue growth.

As we grow American Eagle and scale Aerie offline. We also expect to see leverage from a higher revenue base.

David Zhang: The work streams that will continually address 85% of our expense base with focus areas being store and corporate compensation.

These initiatives will allow us to comfortably absorb pressure from wage inflation, new store openings and investments, we're making to incubate emerging brands like Todd Snyder subscribed.

David Zhang: <unk> fees and services and optimization of marketing spend.

David Zhang: So all of that said here's a few of the major building blocks to take us to approximately 10% over the next three years.

As we build profitability, we expect to generate even stronger cash flow.

David Zhang: Our outlook is balanced anticipating both puts and takes.

Focus on providing returns to shareholders and have a long history of doing so.

David Zhang: As I reviewed we have a number of initiatives to control expenses and drive efficiencies across the business.

In fact over the past decade. These returns totaled nearly $2 billion.

David Zhang: As we grow American Eagle and scale Aerie offline. We also expect to see leverage from a higher revenue base.

We recently announced a 25% increase in our quarterly cash dividend and we also have a new $30 million share repurchase authorization in place to offset dilution and fuel opportunistic repurchase.

These initiatives will allow us to comfortably absorb pressure from wage inflation, new store openings and investments, we're making to incubate emerging brands like Todd Snyder and unsubscribed.

So here it is our model for driving shareholder value.

David Zhang: As we build profitability, we expect to generate even stronger cash flow.

Starting with our financial algorithm to drive mid to high teens operating income growth. We believe we are set up to deliver double digit total shareholder returns over the next three years.

David Zhang: We're focused on providing returns to shareholders and have a long history of doing so.

David Zhang: Fact over the past decade, these returns totaled nearly $2 billion.

We are extremely confident in the roadmap we shared with you today.

David Zhang: We recently announced a 25% increase in our quarterly cash dividend and we also have a new $30 million share repurchase authorization in place to offset dilution and fuel opportunistic repurchase.

The levers at our disposal to drive growth and profit provide multiple paths for us to deliver on our three year plan with potential for upside.

Our priorities are clear and the teams are focused.

David Zhang: So here it is our motto for driving shareholder value.

And now back to Jay.

David Zhang: Starting with our financial algorithm to drive mid to high teens operating income growth. We believe we are set up to deliver double digit total shareholder returns over the next three years.

Mike as I hope, we can very clearly to you today. This is an incredible company with powerful brands capabilities and talent and we have significant opportunity to scale further.

David Zhang: We are extremely confident in the roadmap we shared with you today.

We are at an inflection point in our journey, having undergone a huge cultural transformation over the past year to align our strategy and priorities towards delivering consistent profitable growth.

David Zhang: The levers at our disposal to drive growth and profit provide multiple paths for us to deliver on our three year plan with potential for upside.

David Zhang: Our priorities are clear and the teams are focused.

From here, we our focus on execution and we know we are setup for success.

David Zhang: And now back to Jay.

Jay: Thanks, Mike as I hope, we conveyed clearly to you today. This is an incredible company with powerful brands capabilities and talent and we have significant opportunity to scale further.

With that I will open it up for questions Judy over to you.

Okay. Thanks to everyone for joining us for the question and answer portion of our meeting today.

Jay: We are at an inflection point in our journey, having undergone a huge cultural transformation over the past year to align our strategy and priorities towards delivering consistent profitable growth from.

Mark Greg and we want to get right to your questions. So first up is Matt boss with Jpmorgan.

Great. Thanks.

Really appreciate all the color this was great today.

Jay: From here, we are focused on execution and we know we are set up for success.

So maybe to just start off Jen.

Could you speak to the total addressable market and customer file opportunity just as we think about the market share opportunity for the AE brand or more specifically how are you positioning the assortment across key destination categories and price points to drive that consistent profitable growth that <unk> cited.

Speaker Change: With that I will open it up for questions Judy over to you.

Judy: Thanks, Jay before we start our question and answer session will take a quick three minute break.

Judy: Okay.

Judy: Thank you.

Judy: Yes.

Judy: Okay.

Yeah.

Judy: Yeah.

Yes sure. The total addressable market is 70 billion, which is incredible and there is huge white space here that we can go after.

Judy: Okay.

Judy: Yes.

Judy: Great.

Judy: Yes.

Judy: Yes.

Judy: Yes.

Judy: Okay.

Judy: Okay.

One is the social casual I love this new term, it's our new.

Judy: Okay.

Judy: Okay.

Certainly that we're using to describe our core assortments, which are going to be strong across all of our fleet. That's what we're up to getting all of our fleet robot certainly managing the inventory in the end.

Judy: Yes.

Judy: Hi.

Judy: Okay.

Thank you.

Judy: Okay.

Judy: Okay.

Judy: Sure.

Judy: Okay.

Obviously doing it with prudent discipline.

Judy: Yes.

Judy: Yes.

But we've really been up to just going back really rationalizing the fleet.

Judy: Hi.

Judy: Okay.

Judy: Yes.

Judy: Okay.

Judy: Okay.

<unk>, our SKU count so we've really built a base borrow now that we can sort of leap off and introduce all these new expanded category.

Judy: Yes.

Judy: Okay.

Judy: Hi, Jamie.

Judy: Sure.

Judy: Bringing over.

<unk> $27 billion market.

Judy: Okay.

Judy: Sure.

We've only just begun and you heard that number $100 million, we're only just getting assets keep.

Judy: Thank you Julien.

Judy: Sure.

Judy: Three months ago.

Keep in mind, when we launched outlined that's where it started $100 million and now look where it is it's almost over $600 million. This year, so think about that but we have huge expansion there.

Judy: Okay.

Judy: We believe we are in there.

Judy: Yes.

I believe a variety of places.

Judy: Got it.

Judy: Turning to me.

And we're already seeing results in the 25 to 35 age group there.

Judy: Sure.

Speaker Change: Thank you Amy.

Speaker Change: Okay.

Speaker Change: Sure.

You know, Matt our denim category is a rite of passage.

Speaker Change: All right.

Speaker Change: I bring it back to back.

We lost Dan.

Speaker Change: Hi.

Speaker Change: Yes.

And getting denim on all ages, that's really what we're up to but if you noticed in the slide.

Speaker Change: Great.

Speaker Change: Alright.

Speaker Change: Right.

Now, we have such opportunity to round out the assortment.

Speaker Change: Right.

Speaker Change: So Brittany.

We're so excited about that yet and we didn't even mention the premier Denim collection, we launched last year, we loved the early read so we have categories now that we can expand our we have a great baseline and we're looking forward to building on that.

Speaker Change: Right.

Speaker Change: Hi.

Speaker Change: Im very Mahmud.

<unk> foods.

Speaker Change: Right. So let me may mostly grade one.

Speaker Change: Hi, good morning.

Great and then maybe just a follow up for Mike.

Yes.

Speaker Change: Good question.

SG&A expected deleverage roughly 200 basis points I think relative to 2023, maybe just could you elaborate on the expense buckets, where you've found savings and efficiencies to support the plan while at the same time funding brand marketing Reinvestments.

Speaker Change: I'm wondering if I could.

Speaker Change: I mean, it's all black.

Speaker Change: Heading into 'twenty.

Jeff: So Jeff.

Jeff: Maggie.

Jeff: Great.

Ron: Go ahead Ron.

Speaker Change: No you may begin.

Sure I think maybe just to highlight again.

Speaker Change: In his place.

Ron: Got it.

I think a proof point around this initiative. This past year is definitely the expenses up in gross margin.

Ron: Good morning, Craig.

Ron: Okay.

Craig: Thank you Amy.

That's where we started we thought we've articulated that in for a few quarters now every quarter. This past year not only to the extent product margins, but we leveraged expenses within gross margin every quarter you have been in the first half of the year when revenue was a little tougher.

Craig: Okay.

Craig: We run them all right.

Craig: We know why we brought it back.

Speaker Change: Thank you.

Okay.

Speaker Change: Oh great.

Speaker Change: Yes.

Speaker Change: Alright.

Speaker Change: Greg.

We've expanded that to SG&A now so we've talked about the big buckets in SG&A, 85% of the total expenses within store compensation corporate compensation really.

Speaker Change: Right.

Yes.

Speaker Change: Yes.

Speaker Change: Got it.

Speaker Change: Thanks.

Speaker Change: Got it.

Incentives and taxes marketing dollars in services, so the big areas that we've got.

Speaker Change: Right right.

Maggie.

We have gone out there.

Speaker Change: Hi.

Speaker Change: Got it.

Reflected in this 24 plan and the guidance we're providing.

Speaker Change: Maggie.

But then as continuous improvement office program office as we call. It underneath project breakthroughs that work is going to continue and not stop.

Speaker Change: Okay. Thanks, everyone for joining us for the question and answer portion of our meeting today.

Speaker Change: Mark Greg and we want to get right to your questions. So first up is not boss with Jpmorgan.

So those are the buckets store labor we found.

Efficiency offsets to what has been wage growth and wage inflation pressures in the industry.

Speaker Change: Matt.

Matt: Great. Thanks.

Matt: Really appreciate all the color this was great today.

We're looking at flat rate or revenue per store dollar stores and marketing a place where we places we will continue to invest to fuel growth, but we want to maintain at that rate.

Matt: So maybe to just start off Jenn could you speak to the total addressable market and customer file opportunity just as we think about the market share opportunity for the AE brand or more specifically how are you positioning the assortment across key destination categories and price points.

The savings a reduction areas at a leverage areas or other compensation corporate compensation incentives taxes and services is the other bucket that we are.

Going after two actually more aggressively reduce.

Matt: Drive that consistent profitable growth that <unk> cited.

So thats for your puts and takes are continue to invest in store store compensation in advertising to fuel growth, but will not be looking to deleverage that maintain rate there.

Jenn: Yes sure. The total addressable market is 70 billion, which is incredible and there is huge white space here that we can go after.

Other compensation areas, along with services, that's another area of smaller areas that supplies and repairs and maintenance were looking at is where is the leverage would be.

Jenn: One is the social casual I love this new term, it's our new.

Jenn: Certain that we're using to describe our core assortments, which are going to be strong across all of our fleet. That's what we're up to getting all of our fleet robust certainly managing the inventory and the and.

Continuously.

Providing leverage in those areas.

Great color best of luck.

Thank you. Thank you thanks, Matt.

Jenn: Obviously doing it with prudent discipline.

Next question comes from Jay sole from UBS.

Jenn: But we've really been up to just going back really rationalizing the fleet rationalizing our SKU count. So we've really built a base borrowing now that we can sort of leap off and introduce all these new expanded category men's active $27 billion market.

Hey, Jay.

Hi, Judy. Thank you so much for taking my question I wanted to ask you about some of the newer topics that came up in the presentation. One is about Todd Schneider, you mentioned youre going to since 2015 its grown nicely just.

Just wanted to talk about what's what's implied in the guidance from Todd Snyder and what gives you confidence that Todd so that it can become a bigger business and also.

Jenn: We've only just begun and you heard that number $100 million, we're only just getting at this.

International.

How does the international opportunity play into the three year outlook and maybe beyond like what's the ultimate aspiration for the international business for the company.

Jenn: Keep in mind, when we launched offline, that's where it started $100 million and now look where it is it's almost over $600 million. This year, so think about that but we have huge expansion there.

Jay.

If we bought Cox.

2015 that time Tom.

Jenn: And we're already seeing results in the 25% to 35 age group there.

$2 million goodwill asset.

Let me clarify 100 plus million dollar business, we see it.

Jenn: You know.

Jenn: Net our denim category is a rite of passage.

Big opportunity with it.

Yes.

Jenn: Donna.

This year I think we're set up for success.

Jenn: And getting denim on all agents is really what we're up to but if you noticed in the slide.

Additional stores.

The appliance assortment of branded in several years that can expand upon that.

Jenn: Now, we have such opportunity to round out the assortment.

Jenn: We're so excited about that yet and we didn't even mention the premier Denim collection, we launched last year. We loved the early reads. We have categories now that we can expand on we have a great baseline and we're looking forward to building on that.

Reaching the point of profitability so.

Nice growth this past year right around that breakeven Mark and our plans for 'twenty for this three year plan is tricky.

Distribute profit to the bottom to the company.

So thats a great milestone.

Double digit topline growth is the continued expectation of profit increases from here.

Speaker Change: Great and then maybe just a follow up for Mike.

Mike: With SG&A expected deleverage roughly 200 basis points I think relative to 2023, maybe just could you elaborate on the expense buckets, where you've found savings and efficiencies to support the plan while at the same time funding brand marketing reinvestment.

For the international opportunity I think the one thing you will highlight.

Canada and Mexico from an entity there are owned our owned markets and our biggest contributors from a revenue perspective.

Mexico specifically.

Source of growth, especially it's really 90% plus AE brand the size of the business in Mexico actually contributes the trajectory you saw contribute one point to total AE brand revenue growth at this point so as we talked about 80 brand expectations being in the low single digits, Mexico alone with this growth.

Mike: Sure I think.

Speaker Change: Just to highlight again I.

Mike: I think a proof point around this initiative. This past year is definitely the expenses up on gross margin.

Mike: That's where we started we thought we would articulate that in for a few quarters now every quarter. This past year not only to the extent product margins, but we leveraged expenses within gross margin every quarter, even in the first half of the year when revenue was a little tougher.

Providing about a point.

Right.

And part of it actually goes back up again.

Company.

2014 that we were losing $33 million.

Mike: We've expanded that to SG&A now so we've talked about.

Mike: Buckets in SG&A.

Actual business today.

Mike: 85% of the total expenses within store compensation corporate compensation.

A very good profit center.

We haven't we haven't.

Excellent.

Mike: Related to incentives and taxes marketing dollars in services. So the big areas that we can.

We're not in Europe, yet, there's still opportunity there.

Right.

South America major opportunity.

We have gone after.

Mike: Reflected in this 24 plan and the guidance we're providing.

We see.

With our national business.

Mike: But then it's continuous improvement office program office as we call. It underneath project breakthrough that network is going to continue and not stop.

Very well received.

Very strong partnerships with our franchisees and we're looking to expand.

With that then with new franchisees, that's the model from here with the Mexican business in Canada business to their own yes, we are in North America.

Mike: So those are the buckets store labor we found.

Mike: Efficiency offsets to what has been wage growth and wage inflation pressures in the industry.

There is plans for expansion in Latin America.

Mike: We're looking at flat rate or revenue per store dollar stores and marking a place where we places we will continue to invest to fuel growth, but we want to maintain at that rate.

It's a natural progression from the success in Mexico, So as Jay said Theres runway here will not banking on a lot of growth within the next three years, but there is continued runway for multiple years.

Mike: Savings and reduction areas or the leverage areas or other compensation corporate compensation incentives taxes and services is the other bucket that we are.

Good morning, Brad.

But we'll do it I think we mentioned in the presentation, it's asset light outside of North America, we like that model franchise revenue dropped straight to the bottom line. We have a few joint ventures that are really just in early stages. So we will be well.

Mike: After two actually more aggressively reduce.

Mike: So thats, where your puts and takes are continue to invest in store store compensation in advertising to fuel growth, but will not be looking to deleverage that maintain rate there.

Bill.

Roy oriented without expansion.

Mike: Other compensation areas, along with services and some other areas small areas like supplies and repairs and maintenance. We're looking at is where is the leverage would be.

I hope our investors.

Yes.

Okay great.

Okay next up we have Janet Kloppenburg J J.

Mike: Continuously.

Okay.

Mike: Providing leverage in those areas.

Hi, everybody thanks for a great presentation.

Speaker Change: Great color best of luck.

Jan.

Speaker Change: Thank you. Thank you thank you Matt.

Unlike the Adjacencies I'm seeing any AE stores.

Speaker Change: Your next question comes from Jay sole from UBS.

Im just wondering about maybe a risk of building SK use and also as you move a bit older.

Jay: Okay Jay.

Jay Daniel Sole: Jay are you muted.

Worry at all about <unk>.

Losing that young that older teen customer that's always had a strong loyalty to your brands.

Jay Daniel Sole: Maybe on mute.

And then the intimates category.

Jay Daniel Sole: Can you hear me now.

Jay Daniel Sole: Yes.

Which I think you've done a great job on with the Smoothies line do you see that category growing we're hearing from others that the intimate sector is.

Speaker Change: Okay. Thank you for that.

Speaker Change: Mike.

Mike: Hi, Judy. Thank you so much for taking the question I wanted to ask you about some of the newer topics that came up in the presentation. One is about Todd Schneider, you mentioned youre going to since 2015 its grown nicely.

Is experiencing a downturn in the range of mid single digit revenues and for Michael When you talk about SG&A going from 27% to 25% to 26, that's a three year period do you see more of that coming in the in the in the later year or.

Mike: Just wanted to talk about what's what's implied in the guidance from Todd Snyder and what gives you confidence that Todd so that it can become a bigger business and also.

Mike: International.

Mike: How does the international opportunity play into the three year outlook and maybe beyond like what's the ultimate aspiration for the international business for the company.

Mike: Jay.

Or should it be linear as we move along thanks a lot.

If we bought <unk>.

Mike: 2015 that time.

Yeah.

Jay Daniel Sole: Probably the $2 million.

Look everything we deal is with discipline.

Jay Daniel Sole: A few years.

No.

Jay Daniel Sole: 700, plus million dollar business, we see a big opportunity with it.

American Eagle, we went back to our heritage we completely over the past three years and by the way I may add we rationalized profit profitability, it's really hard to do that when you are getting rid of thousands of Skus and we did we got rid of thousands of Skus to focus on the core assortment. This new social casual that we're talking about.

Jay Daniel Sole: Yes.

Jay Daniel Sole: This year I think we've spent locally.

Jay Daniel Sole: Additional stores.

Jay Daniel Sole: All of that can be acquired assortment of branded in several years.

Speaker Change: Okay I can expand upon that.

Speaker Change: The point of profitability so.

We are not going to comp with just buying our comp which means we're not going to just add skus Randall we're going to do it with integrity theres always trends that ebb and flow and as we do so we're going to make sure that we're leaning into the categories that are trending.

Speaker Change: Nice growth this past year right around that breakeven Mark and our plans for 24 in this three year plan is for Todd distribute profit to the bottom to the company.

Speaker Change: So thats a great milestone.

Speaker Change: What is your topline growth as we continue to expectation and profit increases from here.

Out over assorted I cannot stand of our assortment. We are the most disciplined teams around that I think you can see as you see it in our stores.

Speaker Change: For the international opportunity I think the one thing you will highlight Ken.

Speaker Change: Canada, and Mexico from an answer our owned markets and our biggest contributors from a revenue perspective.

They look incredible and I think we're out to be better than ever. So certainly not we're going to do this with integrity product and that's what we're up to.

Mexico, specifically has been a.

Speaker Change: Source of growth, especially really.

As far as intimates is concerned look.

Speaker Change: Plus AE brand.

Speaker Change: The size of the business in Mexico actually contributes the trajectory sort of contribute one point to total AE brand revenue growth at this point so as we talked about 80 brand expectations being in the low single digits, Mexico alone with its growth.

There has been a slowdown, but we held our market position number one number two.

We leaned into new categories that are behaving like Internet. So you saw this literally I mean I hope you left the picture the smoothies Smoothy collection is just amazing new love it.

Speaker Change: Providing about a point.

Not only is it around right and by the way that's our number one bra within that collection, but other collections outside of just broad.

Speaker Change: Part of it actually goes.

Speaker Change: Company back in 2014 that we were Lucerne 2030.

The body suits.

Speaker Change: On your international business today.

Crop capture all do is incredible.

Speaker Change: Profit Center.

There's a little bit about where our trend thats, what happening and again last year and we were on broadcast.

Speaker Change: We haven't.

Speaker Change: Tip of iceberg.

Speaker Change: We're not in Europe yet.

Speaker Change: Gary there.

Cleveland trending and we still see that business working however, internet that this is a huge untapped category and May I remind you. It's just incredible the way Eric tapped into that business we were disruptive.

Right.

Speaker Change: South America major opportunity.

Speaker Change: We see a major opportunity with our actual business is doing very.

Speaker Change: Well everything.

Speaker Change: Very strong partnerships with our franchisees and we're looking to expand.

And we did it.

Looking at that business to have the areas is one $7 billion.

Speaker Change: And with new franchises.

Speaker Change: That's the model from here with the Mexico business in Canada business, Yes, we are in North America.

This growth has been exceptional and it's still huge market that's ripe for the taking so we're highly focused on libra launches on these we haven't even spoken about on these new categories and Andy.

Speaker Change: There is plans for expansion in Latin America.

Speaker Change: Natural progression from the success in Mexico, So as Jay said, there's runway here, we're not banking on a path of growth.

We're going to keep on innovating there in delivering newness.

And continue to dominate the way I think we have leveraging our platform.

That SG&A, yes, I think.

I want to make sure status for the results.

We are providing our guidance for 'twenty for flat flat operating expense dollars across the entire P&L is a milestone for us and flat SG&A dollars also within that is a milestone for us.

In providing that guidance.

<unk> dollar growth being in line with revenue in the first quarter, but second to leverage SG&A every quarter thereafter, even with some of the revenue shifts that we outlined for the day that today based on the calendar shift.

The work is continuous it's not a one and done.

So I think and then very much correlated to revenue. So the guidance, we're providing down to that 25 to six range is more about so thats, probably the low to mid mid about of that three years to 5%.

Revenue guide, we achieved a higher end of that guide, we expect to get from 25% faster.

So one assume linear for now will be assuming sort of basically achieving the mid range of the revenue guidance high end of that revenue guidance further.

Five sooner and the expectations continue to leverage their our leverage from there in out years beyond this figure Glenn.

Thanks, So much and Jan I just want you to know we all think the stores look the Assortments look amazing so good luck.

Thank you the teams.

Really working hard and I'm really proud of them.

He back on the growth trajectory in Aerie, certainly adds growth that we can talk about that here, we will get questions.

We can see how hard you work.

Thank you.

Okay up next we have Kelly Crago from Citi, Hi, Kelly.

Hi, everyone.

I'm on for Paul today, Thanks for taking our questions one on the long term and one on the near term first to John just wondering if you could elaborate on the.

The opportunity to broaden the demo Ed at a what percent of your business. Currently is in that 25% to 34 year old demo and where can that go over time.

Curious what tools, you're using to market to that customer differently than the core Gen Z consumer.

And then secondly to Mike just on the near term congrats on the Great results you made a comment on the momentum is continuing <unk> quarter to date wondering if you could elaborate on that comment just given some of the other retailers calling out weakness in February. Thank you.

Sure.

As the business grew in 2023, and American Eagle quarter over quarter.

We actually saw this happening roughly about 20% to 30% of our shares in this 25 to 35 and I think it's because our genes are so state.

Like I mentioned jeans, and a right of passage for us and once you get into our jeans, they grow with us. So we've seen our retention rates continue to accelerate something that wasn't happening in the past.

I believe the biggest reason why we now because of <unk> now as we round out the top business like I said I think it's going to really just add on and win new customers. So.

Look we're leaning a little bit, but it's not to say, we're going to ever walk away. Our core is our core.

Tried and true, but if we still extend new ideas, which are 24, 7% 77. Some of these new asked you I think we're going to gain new customers and win them over time, it's something we are highly focused on we were losing customers. After roughly the age between the age of 18 and 25, so we've been focused on.

And certainly doing it you are most tactics right. We have new brands labs that you worked on you saw them on the spring and.

To summarize.

Some Reits are pretty that number one hits last summer.

And we're going to continue to work on these collabs or Sony exciting ones coming your way.

Fluent is our Influencers are certainly a big win for us.

Leveraging them, but.

Again, we're always and protect our core and now we're going to expand into the space and we're excited about it and like I said, we're already seeing the results that's happening as we speak. So now we're just to hone in a little bit wrong.

And then on the first quarter guidance, we're pleased with the momentum that we saw in February just coming off of Q4.

As always at this point.

Some caution in February the smallest market quarter.

Sure.

Peak.

Spring break and Easter holiday periods coming up in March and April March and April obviously bigger months in February So I'm pleased with the momentum and guide reflects that with some questions.

Okay next we have Adrian <unk> from Barclays.

Great.

Thank you very much.

Then just let me add the top look phenomenon the denim always looks great. So it's really nice to see the entire kind of top to bottom looking fantastic. So I just wanted to set out March game.

So on that Youre welcome on that on the.

There is a fashion bottoms thing thats been happening at sort of percolating simmering and now it's really happening right. So you walk the malls and everywhere, it's kind of the wider bottom. Finally here can you just remind us sort of a denim penetration at AE I think it's like north of 30 mid 30%.

And then just remind us like the skinny legs emerged in 2011 and then it really peaked in the next few years and it's been there for a decade. So this could be potentially something that continues to help kind of drive that piece of the business and then for Mike on the can you give us just the markdown rates relative to <unk>.

I mean like average kind of over the past where are you in that continuum, and then remind us.

<unk>, probably up 20% relative to 2019 and how much are contributing.

Contributing to the LLP. Thank you.

Yeah.

In denim and bottoms were seeing wide rate trend and honestly it started for us last year, we were.

Head of the cargo turnaround I would say first bikini on the beach, there and the teams did a great job testing and scaling and wider leg and the beauty of our denim business and how we approach. It is we have such incredible testing model and we are now on testing. So many new silhouettes not just wildlife so.

We're on that we're ahead of the curve as new fashion silhouettes trend. So I can't tell you just what this team does as we.

Build out new assortments towards the future and learn and we're just so agile to deal with imbalance at our Assortments when I started.

Jay I think dominated our business in women's in particular.

Huge percentage of the business over 80% now we're seeing fashion emerge in other silhouettes, where we can really own and what's trending and that's what we're that's what Rob just honestly, it's about simpler that the team is executing with style. So we've been really since 21 Ben.

We've been very we've been managing the markdown rate very consistently and we found a sweet spot.

We maintain our AUR gain.

Post pandemic.

Couple of fiscal years ago.

And then some of our.

Few years prior and even 2019 I'd say, we were on our markdown rate in the mid fifties. We're now in the mid Forty's and been able to do that consistently for a few years. So we know it.

Giving any of that back.

Initial retail we have seen markup benefits.

And I think the mix of our categories and jet outlined in the entire amplify section of today's presentation.

The mix of categories will continue to be beneficial there pops being a driver Arie apparently a driver offline within aerie.

All of those growth drivers have mixed benefits to initial tickets and margin rate in general.

I will say in the three year targets, we are not assuming much product margin improvements most of this three year target.

Keller today is based on expense leverage expense leverage within the gross margin line and expense lever mezzanine appreciation.

John outlined a lot of initiatives a lot of opportunity within categories, but our product margins due to expand.

That would be beneficial to these targets.

So I think thats something.

You should all understand is that one.

We've pushed product margins over the last three years up 300 basis points. We're at a very healthy place, we're not assuming much improvement in these targets, but there is opportunity there.

On top of the expense leverage.

Fantastic. Thank you very much best of luck.

Thank you next up is Dana Telsey Telsey advisory.

Hi, everyone. Congratulations on a terrific presentation I can tell the thought and the hard work that went into it one of the areas that you touched on is modernizing the fleet as you think about the fleet and modernizing the existing stores opening new stores, what's the cost model and the return model that you're thinking of for each and how do you see the role.

<unk> malls versus open act in your in your network and lastly, Jen with the enhancements to the product offering that youre doing and the category adjustments what is the impact on margin that you see is there a higher merch margin potential from new categories versus existing thank you.

I start with the fleet remodel I think we outlined it very well I think.

The average age of the fleet is 12 years definitely caused.

Some plans to.

Basically during the pandemic.

For obvious reasons.

<unk> come up with Amazing design has been well accepted in the test stores that we've rolled out in 2023, so a nice sales lift that we have.

Outline.

With sales doesn't always translate to income in cash. So we havent, we havent ROI focused investment as well I think we said 15% is a good target for a remodel. So we are managing inventory managing store labor managing investments.

Beyond underneath the capital investments to generate that type of return to driving cash flow generation incremental to what the store was doing practically remodel metro areas, we outline for new store growth, whether it's aerie stores Repositions and American Eagle store in spots neither three.

Three year payback is our partner.

No better return on investments 77, new store openings.

But we have very defined process around those decisions and we've now again.

Three year payback.

No reason to believe that won't continue to see that kind of thing.

Yeah, and as we build into these assortments, we like what we already saw in Q4 on the margins were great.

So we're going to be really careful were not over SKU I already mentioned that.

These businesses typically are higher margin businesses top T shirts.

Typically our like I said higher margin businesses. So the one thing we have to be careful of is not over assort, Okay and turn those items SaaS. That's what that business is all about and that's what we're going to be focused on.

Thank you.

Dana.

Up next we have Dan stroller at BMO capital markets.

Hey, guys. Thanks for all the details this morning.

See if theres any color for the next several years on how is the general corporate expense line should trend.

A percent of sales targets, so anyway, that's a tailwind to margin or any way to think about that thank you.

Yeah, I think this last year the growth in corporate debt to corporate expense bucket definitely correlated with incentives against no accruals in 2022.

We will see that dollar amount come down in 2024 within our plants and Thats talked about addressing 85% of our expense base there definitely.

One within the corporate.

Segment, there that we are looking to continue to optimize.

Although dollars flat to then leverage that write down or like I've said look I've outlined some places where we would be looking to reduce dollars.

We've been.

Historically.

Alright, I think Thats 708, percents low higher this past year for already said.

As we look to leverage that line item within the 3% to 5% revenue target, we see that rates come down on the higher end of revenues.

Result, faster, but sequential leverage from here is the impact for that expense.

Expense line as well.

Got it thanks very much good luck.

Okay next we have John Mckenzie, our TD Cowen.

Thank you for taking our question just curious a little bit more details around the promotional strategy.

You mentioned, how it changed over time, but if you can provide any more color around that and what the new promotional discipline will look like going forward and also if you can just talk to current lead time now and how much you plan to leave open for buy across both banners going forward and then just the near term any color around.

With fleet and modernizing the existing stores opening new stores, what's the cost model and the return model that you're thinking of for each and how do you see the role of malls versus open air in your in your network and lastly, Jan with the enhancements to the product offering that you're doing and the category.

Gross margin cadence will be helpful. Thank you so much.

Sure I think just.

Underscore again I reiterate that.

Our markdown rate keeps a run in the fifties pre pandemic.

Really for the last three years, we've been articulating talking about inventory optimization and reductions in choices skus.

Jan: <unk> what is the impact on margin that you see is there a higher merch margin potential from new categories versus existing thank you.

Which inventory had a lot of markdowns attached to it is largely an American eagle brand initiatives outlined in the fact that thats been the case, we are now reset for profitability.

Speaker Change: I can start with the fleet.

Jan: I think we outlined it very well I think or the average age of the fleet is 12 years definitely fast on them some plans to basically.

Inventory work is never done that.

Chaucer work is completed and now we're looking to actually expand and grow the brand.

Jan: Basically during the pandemic for obvious reasons.

But we'll do that prudently.

Jan: <unk> come up with Amazing design has been well accepted in the test stores that we laid out in 2023, so a nice sales lift.

Choice counts in SKU counts.

Represent what's needed there to do that.

So there is sort of the end of season impact or that scale of inventory markdown.

Jan: The outline.

Jan: With sales doesn't always translate to income in cash. So we havent, we havent ROI focus, but that investment as well I think we said 15% is a good target for a remodel. So we are managing inventory managing store labor managing investments.

Pre pandemic phenomenon that will no longer be part of our operating model and from there. We've learned over these last three years had a pace promotion. So we yes.

Yes, we used a bogo jeans almost everyday.

Doing that anymore.

Jan: Beyond underneath the capital investments to generate that type of return to driving cash flow generation that incremental to what the store was doing prior to the remodel metro areas, we outlined for new store growth, whether it's aerie stores Repositions in American Eagle stores spot Snyder.

Intend to ever go back to that type of promotional strategy that was a big markdown driver a big driver as well.

But then even within key periods key holiday weekends, we haven't we might run our 40% off or whatever the deal, but we're doing it at less with less days pulsing and in a way at a customer's reacting more positive.

The year payback as our partner.

Jan: No better return on investment than be spending store openings.

Our strategies are intact with improvements for three years now.

Jan: But we have very defined process around those decisions and we've now again.

So this mid 40% is.

We think we have settled in a sweet spot in terms of the balance.

Jan: Three year payback is consistent and no reason to believe that.

Value for the customer and driving driving traffic and conversion and not having to overcome about to do that.

Jan: We won't continue to see that kind of payback.

Speaker Change: Yeah, and as we build into these assortments, we like what we already saw in Q4 on the margins were great.

I think open to buy we are back to chase mode. So I think that's the only thing this is bill.

Jan: So we're going to be really careful were not going to over SKU I already mentioned that.

Understand that the supply chain disruptions suffer a few years are behind us.

Jan: These businesses typically are higher margin business with top T shirts.

Some minor issues out there and we all know around things happening in the middle East, but where we have very little exposure to that that won't change our timeline drastically any product coming from that region, but we have adjusted time lines for the remainder of the year. So you don't see that means they get back.

Jan: Typically our like I said higher margin businesses. So the one thing we have to be careful of is not over assort, Okay and turn those items fast that's what that business is all about and that's what we're going to be focused on.

But chase mode as demand, putting a 3% to 5% revenue growth number out there.

Speaker Change: Thank you.

Speaker Change: Okay up next we have Dan stroller at BMO capital markets.

We've achieved the high end of that historically for the last 10 years setting ourselves up structurally to leverage on that but then chase a higher revenue amount was the formula to win and that's what we'll continue to do.

Dan Stroller: Hey, guys. Thanks for all the details this morning.

Speaker Change: Let's see if there's any color for the next several years.

And like I said earlier, we're not really looking for product margin expansion and the three year plan. So when you ask about the gross margin outlook and puts and takes.

Speaker Change: General corporate expense line should trend.

Speaker Change: As a percent of sales target so anyway.

Jan: <unk> merchant or any way to think about that thank you.

Speaker Change: Yeah, I think this past year the growth in corporate debt to corporate expense bucket definitely correlated with incentives against no accruals in 2022.

The gross margin of 39 to 40 to route planning for the next three years. It was more about expense leverage than it is about product margin expansion, but I know Jeff would be disappointed if we don't see that there are a lot of initiatives that <unk> outlined earlier that could benefit product margin beyond what we're expecting right now.

Speaker Change: We will see those dollar amounts come down in 2024 within our plants.

Speaker Change: And that's as we talked about addressing 85% of our expense base Theyre definitely expense line within the corporate <unk>.

So gross margin leverage so that 39 are expansion that 39% is all about expenses at the moment.

Speaker Change: Segment, there that we are looking to continue to optimize.

And we would get there faster on the high end of the revenue guided 5% them with reed, but expecting to expand within that range.

Mike: Although $1 flat to then leverage that write down or like I said about life in places, where we would be looking to reduce dollars. So have you been.

Alright next question comes from Chris Knockdown of Bank of America.

Mike: Historically.

Speaker Change: And I think that 78% low higher this past year for all the reasons, we said.

Thanks, guys good afternoon.

Speaker Change: As we look to leverage that line item within the 3% to 5% revenue target, we see that rate come down on the higher end with revenues.

So within your area growth expectations over the three years of mid to high single digits can you clarify what youre assuming for comp growth and then how we should think about growth by category and then one follow up on this gross margin topic. We've been discussing can you remind us how long you have visibility into both freight and cotton.

Mike: Result, faster, but sequential leverage from here is the incentive for that expense.

Mike: Expense line as well.

Speaker Change: Got it thanks very much good luck.

Speaker Change: Okay next we have Johanna can kind of TD Cowen.

Costs, given the recent price moves in both of those inputs. Thank you.

Johanna: Thank you for taking our question just curious a little bit more details around our promotional strategy and you've mentioned how it change over time, but if you can provide any closure on that and what the new promotional discipline will look like going forward and also if you can just talk to current lead time now in <unk>.

Okay very good.

Only opening 30 stores a year now.

The gap between total growth and comp growth closes for one to two points now.

Guiding mid to high single digit expectations, which is modest we believe that bought us theres more opportunity than that you can assume about a one point differential so you.

Speaker Change: How much do you plan to leave open for buy across both banners going forward.

Call it mid single digit comp.

Speaker Change: Just the near term any color around gross margin cadence will be helpful. Thank you so much.

Mid to high single digit total growth.

Yeah, and I think if you just think about Aerie. This brand platform. He saw the video it's incredible this community that we're building and guess what we only have 55% brand awareness out there there's still tons of expansion that we can do to introduce the current categories to our customer. So we're pretty excited about just getting the brand out there more market and.

Speaker Change: Sure I think.

Speaker Change: Yes.

Speaker Change: Underscore again I reiterate that.

Speaker Change: Our markdown rates used to run in the <unk> pre pandemic.

Mike: And really for the last three years, we've been articulating talking about inventory optimization and reductions in choice and Skus.

Mike: Which inventory had a lot of markdowns attached to it and so now as largely an American Eagle brand initiatives <unk> outlined and the fact that thats been the case, we are now reset for profitability.

Secondly.

This is another incredible staff.

65% of our customer base formal purchase one category. So the marketing team has really helped to introducing all the other categories that we.

Mike: Inventory work is never done but that tranche of work is completed so now we're looking to actually expand and grow the brand.

That we're in.

And ensuring that the customers can see it right now if we can get them to buy.

Mike: But we'll do that prudently.

Two of our categories their expansion rate there I mean, we see the aerie business getting to well over $2 billion in the year couple.

Mike: And choice counts in SKU counts.

Represent what's needed there to do that.

Mike: So there is sort of the end of season impact or that tail of inventory markdown.

A couple of years and with that we're going to definitely introduce our current categories.

Pre pandemic phenomenon that will no longer be part of our operating model and from there we've learned over the last three years kind of pace of promotions. So we yes.

It's our job to introduce innovation in this category excite the customers in those categories and make sure we're expanding in trends in those categories.

Mike: We used the bogo jeans, almost everyday denim heme are not doing that anymore.

Those are the two really important back then I would love you to hear because it just Bruce Bruce.

Mike: We don't intend to ever go back to that type of promotional strategy that was a big markdown driver a big big driver as well.

Groups that we have just so much more opportunity.

Okay next.

But then even within key periods key holiday weekends, we haven't you might run a 40% off or whatever the deal, but we're doing it with less days pulsing in a way and our customers reacting more positive. So those strategies are intact, they've been proven for three years now.

Carlo decade.

Okay.

Great. Thanks.

I was wondering if you could talk a little bit about how you intend to leverage AI within your long term plan to enhance the customer experience drive better sales and enhanced profitability.

Mike: So this mid 40%.

And then second question is within your long range plan, what's your outlook for wages over the multi year time horizon and how do you expect that to trend as we move ahead.

Mike: We think we've settled in a sweet spot in terms of the balance of value to the customer and driving driving traffic and conversion and not having to overcome out to do that.

Mike: I think open to buy.

Second addressing a question I think some of what we've already seen benefits from this past year.

Mike: We are back to chase mode. So I think that's the only thing you should do with everybody should understand that the supply chain disruptions and suffer a few years are behind us.

And upon our machine learning forecasting capabilities within our inventory allocation work.

Mike: Minor issues out there and we all know around things happening in the middle East, but where we have very little exposure to that.

And the more data we gather there the more we.

See the optimization of that new small, we're seeing better in stocks and stores.

Mike: Won't change our timeless drastically any product coming from that region, but we have adjusted time lines for the remainder of the year as you don't see that being they get back.

Better fulfillment rates.

Mike: But chase mode.

We expect I think that continued conversion benefits both in stores and digitally.

Mike: Marsha, putting a 3% to 5% revenue growth number out there we've achieved the high end of that historically for the last 10 years setting ourselves up structurally to leverage on that but then chase a higher revenue amount just a formula to win and that's what we'll continue to do.

And also market does it add there from the customer standpoint in the next couple of years.

It will be it will be.

We'll be introducing a new concept on our envoy historically slower day.

Mike: And like I said earlier, we're not really looking for product margin expansion and the three year plan. So when you ask about the gross margin outlook and puts and takes.

To make a better chocolate spread.

Combination of those capabilities with RFID rollout will be able to expand the customer experience not just inventory optimization around getting towards benefits that we see.

Mike: The gross margin of 39 to 40 to route planning for the next three years. It was more about expense leverage than it is about product margin expansion, but I know John and team will be disappointed if we don't see that there are kind of initiatives that <unk> outlined earlier that could benefit product margin beyond what we're expecting right now.

But those efforts when we see a big opportunity tremendous opportunity.

On wage growth.

Two components, we've always talked about historically, one would be in our distribution centers.

Part of our supply chain, which with the expansion.

Mike: So gross margin leverage to that 39 or expansion that 39% is all about expenses at the moment.

U S fulfillment network and by nodes.

Mitigated some of our peak needs a door and went back to school and holiday peak iron, which is where some of that wage pressures come into play. So there's some mitigation efforts there or some mitigation impact there.

Mike: And we would get there faster on the high end of the revenue guided 5% than we were three but expecting to expand within that range in total.

Mike: Okay.

Mike: Alright next question comes from Christian are down our bank of America.

Expanded supply chain and what we have on the storefront since the pandemic wage growth has been a hurdle.

Thanks, guys good afternoon.

That subsided and this last year year and a half.

Christian: So within your area growth expectations over the three years of mid to high single digits can you clarify what youre assuming for comp growth and then how we should think about growth by category and then one follow up on this gross margin topic. We've been discussing can you remind us how long you have visibility into both freight and cotton.

Kind of come back to the mean in terms of annual expectation more around.

<unk> annual increases.

Minimum wage increases by markets.

That is a massive major focus for us has been the profit driven work to offset that wage growth with efficiencies at our stores, especially in the area.

Mike: Costs, given the recent price moves in both of those inputs. Thank you.

Non selling tasks dollars somewhere else, where AI can come into the extra.

Speaker Change: Hi, I guess, Eric we're only opening 30 stores a year now that.

Extra data points, not only just the customer experience within stores, but efficiency from both RFID and AI that we then store so it mitigates some non selling tasks wage.

Mike: The gap between total growth and comp growth closes where it one to two points now.

Mike: So if we're guiding mid to high single digit expectations, which is modest we built.

To offset some of that wage challenge that will that we had onslaught.

Mike: Leave that spot if there's more opportunity than that you can assume about a one point differential so youre.

Next is Alex <unk> from Morgan Stanley.

<unk>.

Mike: Call it mid single digit comp than on a mid to high single digit total growth.

Perfect. Thanks, a lot for taking the question I just have two for you. The first is on the American Eagle banner can you just break down that business is it looks like 300 basis points of improvement versus pre COVID-19.

Mike: And I think if you just think about Aerie. This brand platform. He saw the video it's incredible this community that we're building and guess what we only have 55% brand awareness out there there's still tons of expansion that we can do to introduce the current categories to our customer. So we're pretty excited that just getting the brand out there in more markets and <unk>.

Big picture, what's happened there and then also explain kind of what your 10% target over time assumes American Eagle can get too I'm looking at that low 20, as I said I think on the pandemic I'm wondering if that's within the realm and I just have a quick follow up.

Jay: Secondly.

Jay: This is another like incredible stack.

Jay: 65% of our customer base formal purchase one category. So the marketing team has really helped to introducing all of the other categories that we.

Yes, the 300 basis points improvement over the last several years has been very much tied to product margin and gross margin.

Jay: That we're in.

Benefits, both both product margin and the deleverage of expenses within gross margin benefiting both brands.

Jay: And ensuring that the customers can see it like right now if we could get them to buy.

Jay: Two of our categories their expansion rate there I mean, we see the aerie business getting to well over $2 billion in linear.

And that's been that's where stagnant flat even revenue being down slightly so we reset the ramp to profitability through all of that inventory work and optimization of the gross margin balances are turning our attention to growth.

Jay: A couple of years and with that we're going to definitely introduce our current categories again, it's our job to introduce innovation in those categories excite the customers in those categories and make sure we're expanding in trends in those categories.

Even with modest growth, we could leverage other areas through the P&L in other areas within the brands to drive bottom line operating rate so the gas.

Jay: But those are the two really important facts that I would love you to hear because it just Bruce.

This year's guidance is implying another 100 150 basis points of operating rate of improvement to the mid eights.

Jay: Groups that we have just so much more opportunity.

We would expect really the brand if you get to that high teen rate and Circus Circus passport, 20%.

Speaker Change: Okay next.

Speaker Change: Before I turn out separate.

While we are also optimizing on leveraging that corporate overhead bucket.

Jay: Right.

Speaker Change: Great. Thanks I.

Speaker Change: I was wondering if you could talk a little bit about how you intend to leverage AI within your long term plans to enhance the customer experience drive better sales and enhance profitability.

So now AE brand growth revenue growth was part of the leverage story, a part of the operating rate improvement that we expense over the next several years.

Great. That's Super helpful. Maybe same question on area in terms of when it might be the same story in terms of that profitability improvement versus pre Covid and then also what you're assuming in terms of what that business gets too within the 10% target as well. Thank you.

Jay: And then second question is within your long range plan, what's your outlook for wages over the multi year time horizon and how do you expect that to trend as we move ahead.

Jay: That can address the question I think some of what we've already seen benefits from this past year.

So it is very similar areas product margins have reached new milestones this past year as they close the gap, where AE has gotten too.

And upon our machine learning forecasting capabilities within our inventory allocation work.

And Thats again from here I think even on the modest mid to high single digit revenue, we expect that to continue.

Jay: And the more data we gather there.

Jay: Sure.

Jay: See the optimization of that.

Both leveraging again expect some gross margin SG&A expenses, but even beyond that where the growth is coming down and soft apparel in offline or even product mix benefits on top of that.

Mike: Well, we're seeing better in stocks and stores.

Mike: Yeah.

Mike: Better fulfillment rates.

We expect those things that continued conversion benefits both in stores and digitally.

Mike: And also wanted to get it out there from the customer standpoint in the next couple of years.

Margins should also expand so I think both brands have their path to this high teens, 1%.

Mike: It will be it will be we'll be introducing a new concept on our envoy historical store with AI to make a better chocolate spread.

Brand operating rates.

Over the next several years.

Thanks, a lot.

Yes.

Mike: The combination of those capabilities with RFID rollout will be able to expand the customer experience not just the inventory optimization inventory benefits that we see.

Okay now we have Marni shapiro from the retail tracker.

Guys Congrats on a great quarter and thank you for doing this it's very helpful.

Just a couple of housekeeping questions I just want to make sure did you just say mid <unk> operating margin for.

Mike: But those out but when we see a big opportunity tremendous opportunity.

Mike: On wage growth.

<unk> 24, and did you put a dollar value to that you gave out a bunch of numbers in my hands as fast as you were speaking.

Yes.

Mike: Clients, we've always we've talked about historically, one would be in our distribution centers.

And part of our supply chain, which with the expansion to this.

Yes, the math on.

Three to five 2% to 4% revenue growth not at a point of impact from the 50 <unk> week. So we're basically getting 3% to 5% consistently but this year is a one point impact.

Mike: As fulfillment network and by nodes.

Mike: <unk> mitigated some of our peak needs during went back to school and holiday peak Iron, which is where some of that wage pressures come into play. So there's some mitigation efforts there or some mitigation impact there okay.

$445 or 65 on that growth what puts you.

In the low to mid 8% operating rate range.

Mike: Expanding the supply chain and where we have on the storefront since the pandemic wage growth has been a hurdle.

Different ways to get that income but.

Just on that guidance, you get to a low to mid 8% operating ratio.

Mike: That subsided and this last year year and a half.

Mike: Kind of come back to the mean in terms of annual expectations more around <unk>.

Great and then did you guys give any guidance about store openings and closings for 'twenty four I know you talked about some renovations, but did you talk about store openings and closings for the year.

Mike: <unk> annual increases.

Mike: Minimum wage increases by markets.

Mike: That is a massive major focus for us within the profit driven work to offset that wage growth with efficiencies in our stores, especially in the area.

Yes. It was about 30 aerie offline that we're expecting.

Plus either stores, we're looking to add about five.

And then for the AE brand still a net closure amount, but we are.

Mike: Non selling tasks dollars somewhere else, where AI can come into the mix of data points not only just the customer experience within stores, but efficiency from both RFID and AI capabilities in store. So it mitigates some sort of non selling tasks wage.

<unk> is the brand is seeing growth now thats, becoming.

The net number would be about 130 stores over the last three years. Another 25 to 30 this past year wouldnt be more than that and we're actually seeing opportunities in the repositions in some of these markets. So that number we expect to continue to come down.

Mike: So some of that wage challenge that will that we had on the study.

So net net for the year 30 openings very offline.

Mike: Next is Alex that move from Morgan Stanley.

Net closures right, he's still being maybe around that 20, mark but thats being refined.

Mike: Eric.

Alex: Perfect. Thanks, a lot for taking the question I just have two for you. The first is on the American Eagle banner can you just break down that business is it looks like 300 basis points of improvement versus pre Covid, just big picture. What's happened there and then also explain kind of what you were 10%.

A handful of other storage for Todd and I will describe the results from the Remodels, we like with hospitals to hopefully that can close the gap.

Low single digits.

Yes.

And then I did have a couple of quick questions here on the product side. The first is just you made two comments one about skewing a little bit older in spots, but then also about the urban stores would where you wanted to add a little bit more product a little more variety with these with this.

Target over time assumes American Eagle can get too I'm looking at that low twenty's that it did I think of the pandemic I'm wondering if that's within the realm and I just have a quick follow up.

This slightly older skewed product does belong in those urban stores is that how youre thinking about it I've seen it in some of the other stores as well, but I'm just curious and then can we talk about the tops business.

Mike: Yes, the 300 basis points improvement over the last several years has been very much tied to product margin and gross margin.

Mike: This benefits both both product margin and the leverage of expenses within gross margin benefiting both brands.

Tom you started spring off with a bang congrats.

Mike: And that's been that sort of stagnant flaxseed and revenue being down slightly.

I'm curious do you have this ratio issue in area as well because I feel like you have a very solid tops business in aerie and as you grow back or grow the Eagle tops business. How do you make sure that you can keep areas top service is also very strong.

Mike: He set the ramp to profitability through all of that inventory work and optimization of gross margin that was a turning our attention to growth even with modest growth, we could leverage other areas through the P&L in other areas within the brands to drive bottom line operating rate so as a class II.

Yeah. Thank you for the top line by the way, we're really proud of what we're delivering.

Mike: This year's guidance isn't buying another 100 150 basis points of operating rate of improvement to the mid eights.

What happened in Q4, what we're seeing as we head into Q1.

Mike: We would expect really with the brands to get to that high teen rate and start to start the passport 20%.

Look.

Not even just about urban we're going to get the best assortment, where they belong.

We've done a deep dive on how we approach.

Mike: While we are also optimizing on leveraging that corporate overhead bucket.

Our assortments by store.

We used the tier so we have tier one tier two doesn't really mean anything to you know, we're calling them clusters, where it's about a market cluster, where we can put the best assortments.

Mike: So now AE brand growth revenue growth, we pointed the leverage story, a part of the operating rate improvement that we expect to see over next several years.

Mike: Yes.

Mike: Great. That's super helpful. Maybe same question on Aerie in terms I mean, it might be the same story in terms of that profitability improvement versus pre Covid and then also what you're assuming in terms of what that business gets too within the 10% target as well. Thank you.

In the mass market essentially that so its not just necessarily or so that's what we're after their tops to bottoms, yes, youre right aes tens of.

The opportunity here to round this out and the assortment I love, what I'm seeing it even further denim launch.

More recently as you noticed that was really.

Mike: So it is very similar I mean every product margins have reached new milestones. This past year, if they close the gap, where AE has gotten too.

It really fun to do this because basically we're leaning into our key category and American Eagle and doing a different route.

Mike: And that's again from here I think even on the modest mid to high single digit revenue, we expect that to continue.

We showed up with our.

Initial spring campaign.

We'll probably denim on data.

Looking at Aerie.

Speaker Change: Both leveraging again expenses and gross margin SG&A expenses, but even beyond that where the growth is coming from and soft apparel in offline or even product mix benefits on top of that.

Yes, you are right we are definitely more balanced in the head to toe assortment levels are very strong as you know it's there.

Very strong quarter for the offline business. So if you think of offline always lean heavier on the legacy side of the business and the bond side of the business.

Product margins should also expand so I think both brands have their path to the high teens to 20%.

We will always be definitely more balanced and keep in mind for intimate than other categories.

Agenda: <unk> operating rates.

Jay: Over the next several years.

Great. Thanks Best of luck for spring.

Speaker Change: Thanks, a lot.

Thank you. Thank you.

Speaker Change: Okay. Okay.

All right well that wraps up our question and answer session today.

Speaker Change: Now we have Marni Shapiro from the retail tracker.

Marni Shapiro: Congrats on a great quarter and thank you for doing this it's very helpful.

And we look forward to speaking to you soon have a great day.

Marni Shapiro: Just a couple of housekeeping questions I just want to make sure did you just say mid eights operating margin for 'twenty.

Okay.

Okay.

[music].

Yeah.

Speaker Change: <unk> 24, and did you put a dollar value that you gave out a bunch of numbers in my hands as fast as you were speaking.

Okay.

Okay.

[music].

Speaker Change: Yes, the math on.

Speaker Change: Three to five 2% to 4% revenue growth none of the points of impact from the 50 <unk> week. So we're basically getting 3% to 5% consistently but does this year is a one point impact.

Speaker Change: 445 to 465 on that growth, but puts you.

Speaker Change: In the low to mid 8% operating rates range.

Speaker Change: Different ways to get that income but.

Speaker Change: Just on that guidance, you get to a low to mid 8% operating rate for 2020.

Speaker Change: Great and then did you guys give any guidance about store openings and closings for 'twenty four I know you talked about some renovations, but did you talk about store openings and closings for the year.

Speaker Change: Yes, there is about 30 aerie offline that we're expecting.

Plus either stores were looking at about five.

Speaker Change: And then for the AE brand still a net closure amount, but we are.

Speaker Change: <unk> is the brand is seeing growth now thats, becoming.

Speaker Change: The net number would be left with about 130 stores over the last three years. Another 25 to 30 this past year wouldnt be more than that and we're actually seeing opportunities in the repositions in some of these markets so that number.

Speaker Change: To continue to come down.

Speaker Change: So net net for the year 30 openings very offline.

Speaker Change: Net closures right, he's still being maybe around that 20, mark but thats being refined.

Speaker Change: A handful of other storage for Todd and I subscribe to request the results from the Remodels, we wait with that still so hopefully that can close the gap.

Speaker Change: In this low single digit growth.

Speaker Change: And then I did have a couple of quick questions for you on the product side. The first is just you made two comments one about skewing a little bit older in spots, but then also about the urban stores would where you wanted to add a little bit more product a little more variety with these with this slightly older SKU product belong in those urban stores.

Speaker Change: Is that how youre thinking about it I've seen it in some of the other stores as well, but I'm just curious and then can we talk about the tops business.

Speaker Change: Eagle's tops, you started spring off with a bang congrats.

Speaker Change: I'm curious do you have this ratio issue in area as well because I feel like you have a very solid tops business in aerie and as you grow back or grow the Eagle tops business. How do you make sure that you can keep areas. Thomas This is also very strong.

Speaker Change: Yeah, and thank you for the comprehensive by the way, we're really proud of what we're delivering that look what happened in Q4, what we're seeing as we head into Q1.

Speaker Change: Look.

Speaker Change: It's not even just about urban we're going to get the best Assortments, where they belong Tom we've done a deep dive on having approach.

Speaker Change: Our assortments by store.

What we used to tiers that we have tier one tier two doesn't really mean anything to you know, we're calling them clusters, where it's not a market cluster, where we can put the best assortment in.

Speaker Change: In the mass market, it's essentially that so its not just necessarily a and so that's what we're after their.

Speaker Change: Tops to bottoms, yes, youre right Aes tens of.

Speaker Change: The opportunity here to round this out and the assortment I love, what I'm seeing at an even higher again in March.

Speaker Change: More recently as you noticed that would tend to tell really fun to do this because basically we are leaning into our key category and American Eagle and doing it differently as well, how we showed up with our.

Speaker Change: Initial spring campaign.

Public denim on data.

Speaker Change: Looking at Aerie.

Speaker Change: Yes, you are right we are definitely more balanced in the head to toe assortment leggings are very strong as you know and it's a very strong pillar for the offline business. So if you think about growing the always lean heavier on the legacy side of the business and the bond side of the business.

Speaker Change: We will always be definitely more balanced and keep in mind any sort of internet and other categories.

Speaker Change: Great. Thanks Best of luck for spring.

Speaker Change: Thank you. Thank you.

Speaker Change: All right well that wraps up our question and answer session today.

Speaker Change: And we look forward to speaking to you soon have a great day.

Speaker Change: [noise].

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Mainly.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change:

Speaker Change: Okay.

Speaker Change: Thank you.

[music] reviews.

Yes.

Speaker Change: Yeah.

Speaker Change: Thanks.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: [music].

Speaker Change: Yes.