Q1 2025 American Eagle Outfitters Inc Earnings Call
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Operator: Greetings and welcome to the American Eagle Outfitters first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If you'd like to ask a question during that time, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Judy Meehan. Thank you. You may begin.
Speaker Change: Greetings and welcome to the American Eagle Outfitters first quarter 2024 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: A brief question and answer session will follow the formal presentation.
Speaker Change: If you'd like to ask a question during that time. Please press star one on your telephone keypad.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: It's now my pleasure to introduce your host Judy Meehan. Thank you you may begin.
Judy Meehan: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer. Dan Foyle, President and Executive Creative Director for AE and Aerie, and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based on information that represents the company's current expectations or beliefs. Results actually realized may differ materially based on risk factors included in our SEC filings.
Judy Meehan: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Chief Executive Chairman and Chief Executive Officer.
Jen Foyle precedent executive creative director for AE, and Aerie, and Mike Matthias Chief Financial Officer.
Judy Meehan: The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Consistent with the retail calendar and the 53rd week last year, first quarter 2024 results and today's discussion are presented for the 13 weeks ending May 4, 2024, compared to 13 weeks ending April 29, 2023. Comparable sales metrics are presented for 13 weeks ending May 4, 2024 compared to 13 weeks ending May 6, 2023.
Speaker Change: Before we begin todays call I need to remind you that we will make certain forward looking statements. These statements are based upon information that represents the companys current expectations or beliefs.
Speaker Change: Results actually realized may differ materially based on risk factors included in our SEC filings.
Speaker Change: The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Speaker Change: Sept as required by law.
Speaker Change: Consistent with the retail calendar and the 53rd week last year.
Speaker Change: First quarter 2024 results and todays discussion are presented for the 13 weeks ending may four 2024 compared to 13 weeks ending April 29 2023.
Speaker Change: Comparable sales metrics are presented for 13 weeks ending may four 2024 compared to the 13 weeks ending may six 2023.
Judy Meehan: Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliations 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.aeo-inc.com in the Investor Relations section. Here, you can also find the First Quarter Investor Presentation. Now, I will turn the call over to Jay.
Speaker Change: Also please note that during this call and any accompanying press release certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis reckon.
Speaker Change: Reconciliations 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 eight Yo Dash, Inc. Dot com in the Investor Relations section here you can also find the first quarter investor presentation.
Speaker Change: And now I will turn the call over to Jay.
Jay L. Schottenstein: Thanks, Judy, and good afternoon, everyone. I'm incredibly pleased with our first quarter results. We posted significant growth from last year and meaningfully exceeded our guide. These results are a strong proof point that our strategic priorities are driving business momentum and solid profit flow. This past March, we were excited to share our new strategy plan.
Jay L. Schottenstein: Thanks, Judy and good afternoon, everyone.
Jay L. Schottenstein: I'm incredibly pleased with our first quarter results, we posted significant growth from last year.
Jay L. Schottenstein: And meaningfully exceeded our guidance. These results are a strong proof point that our.
Jay L. Schottenstein: Strategic priorities are driving business momentum and solid profit flow through.
Jay L. Schottenstein: This past March we were excited to share our new strategy plan.
Jay L. Schottenstein: Powering Profitable Growth. Church is a new path forward for the company and aims to deliver steady growth as we build to an operating margin target of 10% by 2026. AEO is a proven brand builder with distinct and undeniable strength.
Jay L. Schottenstein: Growing profitable growth chart.
Jay L. Schottenstein: Trucks, a new path forward for the company and aims to deliver steady growth as we build to an operating margin target of 10% by 2026.
Jay L. Schottenstein: He is a proven brand builder with distinct and undeniable strength we.
Jay L. Schottenstein: We have exceptional brands in American Eagle and Aerie with powerful customer connections and tremendous growth potential. Our best-in-class operations bring our brilliant design teams' creative vision to life at the highest level every day, we offer shopping experiences across stores, and digital is second to none, powered by decades of customer insight. Our new strategy magnifies these strengths to go after growth opportunities, and our focus on continuous operational improvements will set the business up to deliver consistent, profitable growth in the years ahead. As a reminder, our priorities are defined by three key strategic pillars. First Amplifier Brand
We have exceptional brands and American Eagle and aerie with powerful customer connection and tremendous growth potential.
Our best in class operations.
Brilliant design teams creative vision to life at the highest level every day, our shopping experience across stores and digital and second to none.
Howard by decades of customer insights.
Jay L. Schottenstein: Our new strategy Magnifies these strength to go after growth opportunities and our focus on continuous operational improvements will set the business up to deliver consistent profitable growth in the years ahead.
Jay L. Schottenstein: As a reminder, our priorities are defined by three key strategic pillars.
Jay L. Schottenstein: First amplifier brands second optimize our operations and third execute with financial discipline.
Jay L. Schottenstein: Second, optimize our operations. And third, execute with financial discipline. Chan and Mike will provide more detail on how we deliver against these pillars. But I want to underscore just how pleased I am with the momentum out of the gate. The teams have wasted no time attacking our priorities.
Gee I know, Mike will provide more detail on how we deliver against these pillars, but I wanted to underscore just how pleased I am with my met him out of the gate. The teams have wasted no time in attaching our priorities, let me touch on a few highlights.
Jay L. Schottenstein: Let me touch on a few highlights. First quarter revenue of $1.1 billion reflected a new record for the company, driven by 7% Tom Cruise.
Jay L. Schottenstein: First quarter revenue of $1.1 billion, reflecting a new record for the company driven by 7% top growth.
Jay L. Schottenstein: What's more notable is the strength we saw across brands and channels. American Eagle, Aerie, Digital, and Stores all experienced solid growth and healthy metrics. We saw meaningful increases across Aerie and Offline's core categories, particularly in apparel, where expansion beyond Aerie's foundation and immense has seen strong success. As we reviewed, activewear under the Offline banner and Airy Soft Dressing presents huge long-term growth opportunities. These are large categories with significant white space, and airing offline brings a fresh take to the market that is body positive and fun.
Jay L. Schottenstein: What's more notable is the strength, we saw across brands and channels.
Jay L. Schottenstein: American Eagle and Aerie digital and stores, all experienced solid growth and healthy metrics.
Jay L. Schottenstein: Saw meaningful increases across the area and offline score categories, particularly in apparel.
Jay L. Schottenstein: Expanse should be on Aries Foundation intimates has seen strong success as we reviewed activewear outgrow the offline banner and aerie soft dressing presents huge long term growth opportunities.
Jay L. Schottenstein: These are large categories with significant white space and Aerion offline bring a fresh take on the market then its body positive and fun.
Jay L. Schottenstein: As we continue to build brand awareness and invest in our assortments, we're gaining momentum, and we have strong plans in place to continue to gain share. I also want to take a quick minute to celebrate the great progress we have made on the American Eagle brand. As we shared in March, there's renewed focus on driving growth by leveraging AE's powerful platform and amazing legacy to extend our dominance in casual wear. This presents a sizable growth opportunity.
Jay L. Schottenstein: We continue to build brand awareness and invest into our Assortments, we're getting momentum and we have strong plans in place.
Jay L. Schottenstein: To gain share.
Jay L. Schottenstein: I also wanted to take a quick minute to celebrate the great progress we have made on the American Eagle brand.
Jay L. Schottenstein: As we shared in March there's a renewed focus on driving growth by leveraging a powerful platform and amazing legacy do extend our dominance and casual wear.
Jay L. Schottenstein: This presents a sizeable growth opportunity.
Jay L. Schottenstein: And, as Jen will cover, early initiatives are delivering excellent results. We're gaining momentum and growing market share in a number of our focus categories. Strength was broad-based across channels, with growth of both digital and stores. Here, too, we saw recent initiatives aimed at improving KPIs deliver results. For example, more strategic and targeted customer tactics online led to a double-digit increase in digital revenue.
Speaker Change: And as John will cover early initiatives are delivering excellent results, we're gaining momentum in growing market share in a number of our focus categories.
Speaker Change: Frank was broad based across channels with growth at both digital and stores here too. We saw recent initiatives aimed at improving kpis.
Speaker Change: However results for example, more strategic and targeted customer tactics online led to a double digit increase in digital revenue.
Jay L. Schottenstein: Our first quarter financial results reflected strong early results on our priority. We saw significant leverage across our cost base fueled by a number of initiatives, action on as a part of our strategic priority. Our strong cash position allowed us to fuel investments in the business. Additionally, we returned approximately $60 million in cash to shareholders through a combination of dividends and share repurchases.
Speaker Change: Our first quarter financial results reflect a strong early results on our priorities, we saw significant leverage across our cost base fueled by a number of initiatives.
Speaker Change: Action on as a part of our strategic priorities.
Speaker Change: Our strong cash position allowed us to fuel investments in the business. Additionally, we returned approximately $60 million in cash to shareholders through a combination of dividends and share repurchases our balance sheet is healthy with $300 million in cash.
Jay L. Schottenstein: Our balance sheet is healthy with $300 million in cash and no debt. With a solid start to the year, we are on pace to deliver our full year guidance for revenue and operating income. This is an exciting time for American Eagle Outfitters, and we feel very confident in our future. We have the right focus, a clear strategy, and a highly talented team that will carry us through as we unlock greater value for our shareholders. Now, over to Jen.
Speaker Change: No yeah.
Speaker Change: With a solid start to the year.
Speaker Change: We're on pace to deliver our full year guidance for revenue and operating income.
Speaker Change: This is an exciting time for American Eagle Outfitters, we feel very confident in our future.
Speaker Change: We have the right focus and clear strategy and a highly talented team that will carry us through as we unlock greater value for our shareholders.
Jack: Now over to Jack.
Jennifer M. Foyle: Thanks Jay, and good afternoon everyone. It's great to see nice momentum across the business as we implement the strategic initiative we reviewed with you last quarter. The teams have truly taken the task of amplifying our iconic brand. We are making great headway and fueling the significant opportunities we see across the assortment while elevating our store and digital experience. I'm incredibly pleased with how we delivered the first quarter.
Jack: Thanks, Jay and good afternoon, everyone, it's great to see nice momentum across the business as we implement the strategic initiatives, we reviewed with you last quarter.
Jack: The teams have truly taken the task of amplifying our iconic brands.
Jack: We are making great headway and fueling the significant opportunities we see across the assortment, while elevating our store and digital experience.
Jack: I'm incredibly pleased with how we delivered the first quarter, we brought innovation to core collection as well as new Adjacencies driving growth across American Eagle and Aerie.
Jennifer M. Foyle: We brought innovation to core collections, as well as new adjacencies, driving growth across American Eagle and Aerie. We maintain inventory discipline and chase winning ideas efficiently, fueling merchandise margin expansion. We also grew our customer file across brands, marrying strong products with exciting marketing activation and a winning shopping experience. Starting with American Eagle, I am particularly encouraged by the acceleration to 8% revenue growth, fueled by a 7% increase in comps. Key drivers of growth included women's overall, especially in tops, which, as I reviewed, is a major priority for us. I'll also highlight strength in dresses, skirts, and jeans.
Jack: We maintain inventory discipline and chased into winning ideas efficiently fueling merchandize margin expansion. We also grew our customer file across brands marrying strong product with exciting marketing activation and are winning shopping experience.
Jack: With American Eagle I am, particularly encouraged by the acceleration to 8% revenue growth fueled by a 7% increase in car T.
Jack: Key drivers of growth included women's overall, especially in top switch as I reviewed is a major priority for us.
Jack: I'll also highlight strength in dresses skirts and genes in these areas. We are seeing a positive customer response, as we look to capture the social casual dressing occasion, and a wider age demo booth.
Jennifer M. Foyle: In these areas, we are seeing a positive customer response as we look to capture the social casual dressing occasion and a wider age demo. Both of these are key growth opportunities within our long-term plan. Men's Soft Strength in Pants, Knit Tees, Sweaters, and Outerwear
Jack: Both of these are key growth opportunities within our long term plan.
Jack: Men saw strength in pants, knit Tees sweaters and outerwear.
Jennifer M. Foyle: I'd also like to add that we are seeing nice momentum in AE24x7, our men's active wear collection. Across the AE brand, our ongoing focus on flow-through led to a 310 basis point improvement in the operating margin to 19%. Turning to other brand priorities, as you know, we are modernizing our stores and improving inventory allocation. We are seeing exciting results from action taking so far.
Jack: I'd also like to add that we are seeing nice momentum in a 24 seven our mens activewear collection.
Jack: Across the AE brand, our ongoing focus on flow through led to a 310 basis point improvement on the operating margin to 19%.
Jack: Turning to other ran priority as you know we are modernizing our stores and improving inventory allocation.
Jack: We are seeing exciting results from action, taking so far.
Jennifer M. Foyle: The new lived-in store design is a truly fresh and modern update, with remodeled stores continuing to outperform the balance of the fleet across several KPIs. Additionally, as I discussed last quarter, our focus on expanding availability of top-selling styles across our fleet is delivering a nice mix. Now moving on to Aerie, we achieved yet another record revenue quarter with brand rev up 4% compared to last year, fueled by a 6% increase in comps, excluding swim, where trends have been challenging in the spring season. Aerie comps are up 11%, consistent with trends exiting last year. The operating margin increased 70 basis points to 16.5%.
Jack: The new lived in store design is a truly fresh and modern update with remodeled stores continuing to outperform the balance of the fleet across several kpis.
Jack: Additionally, as I discussed last quarter, our focus on expanding availability of top selling styles across our fleet is delivering a nice comp lift.
Jack: Now moving on to Aerie, we achieved yet another record revenue quarter with brand revved up 4% to last year fueled by a 6% increase in comps, excluding swim where trends have been challenging in the spring season, Aerie comps were up 11% consistent with trends exiting last year.
Jack: The operating margin increased 70 basis points to 16, 5%.
Jennifer M. Foyle: As Jay noted, we saw incredible strength across our four soft dressing and activewear businesses, and Intimates, we continue to see traction with new fabrications and styles, including our fan-favorite smoothies collection. And looking ahead, there remains significant untapped opportunity for Aerie and Offline as we are confident in their growth trajectory. New area and offline stores continue to come out of the gate positively to expectations. We are also testing a new Aerie store design in Tyson's Corner that showcases our assortment in an exciting and unique way. We opened this location a few weeks ago, and early indications have been encouraging.
Jack: As Jay noted, we saw incredible strength across our core soft dressing and activewear businesses.
Jack: And intimates, we continue to see traction with new fabrications and styles, including our fan favorite Smoothies collection.
Jack: And looking ahead, there remains significant untapped opportunity for aerie and offline as we are confident in their growth trajectory.
Jack: New area in offline stores continue to come out of the gate positive to expectations. We are also testing a new aerie store design in Tysons corner that showcases our assortment in an exciting and unique way.
We opened this location a few weeks ago and early indications have been encouraging as we made investments in our assortment and shopping experience. We also few customer engagement with exciting marketing activation.
Jennifer M. Foyle: As we made investments in our assortment and shopping experience, we also fueled customer engagement with exciting marketing activations. In the first quarter, we kicked off our celebration of the 10th anniversary of Aerie Real, showcasing our decade-long commitment to body positivity and women's empowerment that has forever transformed the retail industry. Throughout the quarter, we shared real-life testimonies from our customers on the life-changing impact AERI has had on them at social and in-person events. This included the first event, an exciting multi-stop Gen Reel tour running through the country this year.
Jack: In the first quarter, we kicked off our celebration of the 10th anniversary of Aerie real showcasing our decade long commitment to body positivity and women's empowerment that has forever transformed the retail industry.
Jack: Throughout the quarter, we shared real life testimonies from our customers on the life changing impact areas had on them in social and in person events.
Jack: This included the first event and exciting multi stop Gen real tour running through the country. This year.
Jennifer M. Foyle: American Eagle continues to be at the epicenter of popular culture. Promoting our spring denim collection and capitalizing on the Western trend, we leverage influencers and organic content to build excitement across social channels. As we approach back to school, we look forward to the relaunch of the brand platform, celebrating AE's heritage of self-expression, individual style, acceptance, and, of course, optimism. As we fuel growth, casual dressing remains a quintessential part of our customers' wardrobes, providing natural tailwinds for our business.
Jack: American Eagle continues to be at the epicenter of popular culture, promoting our spring denim collection and capitalizing on the western trend, we leverage influencers inorganic content to build excitement across social channels.
Jack: As we approach back to school, we look forward to the relaunch of the brand platform celebrating as heritage of self expression individuals' style acceptance and of course optimism.
Jack: As we feel gross casual dressing remains a quintessential part of our customer's wardrobes, providing the natural tailwind to our business. We are seeing exciting new trends emerge on the runway and on the street two of the most beloved brands in the industry American Eagle and Aerie are well positioned to continue to win.
Jennifer M. Foyle: We are seeing exciting new trends emerge on the runway and on the street. Two of the most beloved brands in the industry, American Eagle and Aerie, are well positioned to continue to win. And before I turn the call over to Mike, I want to say a big thank you to the American Eagle and Airy team for their hard work and perseverance. We've had a lot to be proud of this quarter, but the work continues. We are breaking new ground every day and forging ahead. And with that, I'll turn the call over to Mike. Thanks, Jen.
Speaker Change: And before I turn the call over to Mike.
Speaker Change: Want to say a big thank you to the American Eagle and Aerie team for their hard work and perseverance, we've had a lot to be proud of this quarter. Yet. The work continues we are breaking new ground everyday Unfortunately had.
Mike: And with that I'll turn the call over to Mike.
Michael A. Mathias: Thanks, Jen, and good afternoon, everyone. As Jay and Jen discussed, we're off to a strong start for 2021. Our new strategy is delivering great results, with healthy growth across brands coming hand-in-hand with meaningful profit and margin expansion. Our focus on optimizing our operations and executing with financial discipline contributed to strong gross margin expansion in the quarter, and we remain on track to begin leveraging SG&A in the second quarter as additional work streams come into effect.
Mike: Thanks, Dan and good afternoon, everyone as Jay and John reviewed we're off to a strong start for 2020 for our.
Mike: Our new strategy is delivering great results with healthy growth across brands coming hand in hand, with meaningful profit and margin expansion.
Mike: Our focus on optimizing our operations and executing with financial discipline contribute to strong gross margin expansion in the quarter and we remain on track to begin leveraging SG&A in the second quarter as additional work streams come into effect.
Michael A. Mathias: Expanding on a few highlights, consolidated revenue of $1.1 billion was up 6% from last year, driven by a 7% increase in comparable sales. As discussed last quarter, the shift in the retail calendar contributed approximately $15 million to revenue, reflecting the capture of a higher-volume spring.
Mike: Expanding on a few highlights consolidated revenue of $1 1 billion was up 6% to last year, driven by a 7% increase in comparable sales growth.
Mike: As discussed last quarter the shift in the retail calendar contributed approximately $15 million to revenue, reflecting the capture of a higher volume spring week.
Michael A. Mathias: Operating income was $78 million. This represents a 76% increase over last year's adjusted operating income of $44 million. The operating margin rose 270 basis points to 6.8% against an adjusted operating margin last year, and whereas profit dollars of $464 million increased 12%, gross margin expanded 240 basis points to a rate of 40.6. This was our second highest rate since 2008, which really speaks to the structural improvements we're making in our business. Strong inventory management and our shift to a more profitable clearance model initiated in the second quarter of last year contributed to gross margin expansion. Lower product and transportation costs also had a favorable impact.
Mike: Operating income was 78 million, which represents a 76% increase to last year's adjusted operating income of $44 million.
Mike: Operating margin rose 270 basis points to six 8% against an adjusted operating margin last year.
Mike: Gross profit dollars at $464 million increased 12%.
Mike: Margin expanded 240 basis points to a rate of 46%.
This was our second highest rate since 2008, which really speaks to the structural improvements, we're making to our business.
Mike: Strong inventory management, and our shift to more profitable clearance model initiated the second quarter of last year contributed to gross margin expansion.
Mike: Lower product and transportation costs also had a favorable impact margin.
Michael A. Mathias: As I've reviewed over the past several quarters, our focus on reducing costs across the business continues to deliver results. Operating expenses within the gross margin were leveraged, including 90 basis points of leverage on BOW costs driven by rent, delivery, and distribution of warehousing costs. ST&A expense of $333 million was up 7% from last year and roughly in line with sales growth consistent with our guidance. As noted in March, SG&A is a big focus for us.
Mike: As I reviewed over the past several quarters, our focus on reducing costs across the business continues to deliver results.
Mike: Operating expenses within the gross margin leverage, including 90 basis points of leverage on B O W costs, driven by rent delivery and distribution and warehousing costs.
Mike: SG&A expense of $333 million was up 7% in the last year and roughly in line with sales growth consistent with our guidance.
Mike: As noted in March SG&A is a big focus for us.
Michael A. Mathias: We have work streams that are continually addressing 85% of our expense base, with focus areas being store and corporate compensation, professional fees and services, and optimization of marketing spend. We're making good progress across the board and remain on track to begin leveraging SG&A in the second quarter. Depreciation was down slightly year over year, leveraging 60. The first quarter tax rate benefited from discrete items; we expect the tax rate to be in the mid to high 20s for the remainder of the year. Earnings per share for the first quarter were $0.34 per share, and this was 98% of last year's adjusted earnings. Consolidated ending inventory at cost was up 9% year-over-year, with units up 10%.
Mike: We have work streams that are continually addressing 85% of our expense base with focus areas being store and corporate compensation.
Mike: On fees and services and optimization of marketing spend.
Mike: Making good progress across the board and remain on track to begin leveraging SG&A in the second quarter.
Mike: Depreciation was down slightly year over year, leveraging 60 basis points.
Mike: The first quarter tax rate benefited from discrete items, we expect the tax rate to be in the mid to high twenties for the remainder of the year.
Mike: Earnings per share for the first quarter was 34 cents per share and this was 98% for last year's adjusted earnings Consol.
Mike: Consolidated ending inventory at cost was up 9% year over year with units up 10%. This includes higher end of season merchandise due to our shift to a more profitable clearance strategy, which will anniversary next quarter.
Michael A. Mathias: This includes higher end-of-season merchandise due to our shift to a more profitable clearance strategy, which will anniversary next. Inventory levels remain healthy and in line with demand trends across brands as we maintain buying discipline and continue to chase. We ended the quarter with a strong balance sheet holding approximately $300 million in cash and over $900 million of total liquidity, including our revolver. CapEx totaled $36 million, and we continue to expect full year spend to be in the range of $200 to $250 million.
Mike: Inventory levels remain healthy and in line with demand trends across brands as we maintained buying discipline and continue to chase.
Mike: We ended the quarter with a strong balance sheet, holding approximately $300 million in cash and over $900 million of total liquidity, including our revolver.
Mike: Capex totaled $36 million and we continue to expect full year spend to be in the range of $200 million to $250 million.
Michael A. Mathias: As we discussed, the strategic plan is driving great results. There's a new mindset across the organization, with every team decision now incorporating an end-to-end assessment of its ability to power healthy top and bottom line growth. This is a permanent cultural shift across the business that is optimizing how we operate every day and allowing us to maintain strong financial, And importantly, as we discussed in March, the work is ongoing. We have formalized this new mindset and rigor into an Office of Continuous Improvement to identify incremental efficiencies and drive accountability and results. Now on to our Outlook.
Mike: As we discussed the strategic plan is driving great results. There is a new mindset across the organization with every team decision now incorporating an end to end assessment of its ability to power a healthy top and bottom line growth.
Mike: This is a permanent cultural shift across the business that is optimizing how we operate every day.
Mike: Allowing us to maintain strong financial discipline and.
Mike: And importantly, as we discussed in March the work is ongoing.
Mike: We have formalized this new mindset and rigor into an office of continuous improvement identify incremental efficiencies and drive accountability and results.
Mike: Now onto our outlook.
Michael A. Mathias: We are making steady progress across our strategic pillars. As Jay noted, we are on pace to achieve our four-year operating income guidance of $445 to $465 million. This reflects revenue growth in the range of two to four percent, including an approximately one point negative impact from one less selling. As we control expenses, we continue to expect four-year SG&A dollars to be flat at the low end of our revenue outlay. Additionally, DNA is still expected to be approximately 220 million, and our projections for the weighted average share count remain in the high one-ninth.
Mike: We're making steady progress across our strategic pillars.
Mike: They noted we're on pace to achieve our full year operating income guidance of $445 million to $465 million.
Mike: This reflects revenue growth in the range of 2% to 4%.
Mike: Including an approximately one point negative impact from one less selling week.
Mike: As we control expenses, we continue to expect full year SG&A dollars to be flat at the low end of our revenue outlook.
Mike: Additionally, DNA is still expected to be approximately $220 million and our projections for weighted average share count remains in the high 100 Ninety's.
Michael A. Mathias: As I discussed last quarter, we expect total revenue and profit growth to be skewed to the first half of the year, reflecting easier year-over-year comparisons, the impact of the retail calendar shift, and one less selling week in the fourth quarter. As noted last quarter, this implies a low single-digit comp assumption in the back half. Quarter to date, we feel really good about the pace of the business with strength continuing into the second. We're guiding operating income in the range of $95 to $100 million with revenue up in the high single digits.
Mike: As I discussed last quarter, we expect total revenue and profit growth to be skewed to the first half of the year, reflecting easier year over year comparison, the impact of the retail calendar shift and one less selling week in the fourth quarter.
Mike: As noted last quarter. This implies a low single digit comp assumption in the back half of the year.
Mike: Quarter to date, we feel really good about the pace of the business with strength continuing into the second quarter.
Mike: Regarding operating income in the range of 95 to 100 million with revenue up in the high single digits.
Michael A. Mathias: As a reminder, this includes a $55 million positive impact on the top line from the shift in the retail calendar as we pick up a week of back-to-school, which is some of our busiest weeks of the year. Before I open up for questions, I want to underscore our confidence in the direction of the business. With a strategy and priorities aligned toward delivering consistent profitable growth, we have a solid plan in place that is already unlocking significant value across the company. The teams are focused and driving to our long-term plan. And with that, we'll open up for questions.
Mike: As a reminder, this includes a $55 million positive impact to the top line from the shift in the retail calendar as we pick up a week of back to school, which are some of our busiest weeks of the year.
Mike: Before I open it up for questions I want to underscore our confidence in the direction of the business.
Mike: Our strategy and priorities aligned towards delivering consistent profitable growth, we have a solid plan in place that is already unlocking significant value across the company.
Mike: The teams are focused and driving toward a long term plans.
Mike: And with that we'll open up for questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Mike: Thank you.
Speaker Change: Now be conducting a question and answer session if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate that your line is in the question queue.
Speaker Change: And you May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question.
Speaker Change: Please while we poll for questions.
Speaker Change: Yeah.
Speaker Change: Thank you. Our first question comes from the line of Matthew Boss with J P. Morgan. Please proceed with your question.
Matthew Robert Boss: What you've seen in May, maybe what you're seeing across your product assortments across brands into the back half of the year, just your confidence in comping that comp, you know, as we move through the year. And then Mike, just on SG&A, maybe how things came in during the first quarter relative to plan, and then drivers of the inflection to leverage that you cited in the second quarter and back half of the year.
Matthew Robert Boss: Great. Thanks.
Speaker Change: So John could you elaborate maybe on current demand trends.
John: What you've seen in May maybe what youre seeing across your product assortments across brands into the back half of the year just your confidence in comping that comp.
Speaker Change: As we move through the year and then Mike just on the SG&A, maybe how things came in during the first quarter relative to plan and then drivers of the inflection to leverage that you cited in the second quarter and back half of the year.
Jennifer M. Foyle: Sure. Okay.
Speaker Change: Sure, Okay, Thanks, Matt and thinking about American Eagle first.
Speaker Change: As I said back in March were really up to amplifying not only American eagle that both brands and as I think about make you just said it well, we really did deliver on the strategy.
Jennifer M. Foyle: Thanks, Matt. And thinking about American Eagle first, you know, as I said back in March, we're really up to amplifying not only American Eagle but both brands. And as I think about, Mike, you just said it well, we really did deliver on the strategy. You know, we continue to dominate in jeans. I believe there will be tailwinds there.
Speaker Change: Continue to dominate in genes I believe there will be tailwind there.
Speaker Change: Early trends, particularly in womens and the Assortments with great for back to school and onward.
Jennifer M. Foyle: We're seeing early trends, particularly in women's, and the assortments look great for back to school and onward. And completing the outfit, that's been something so important on the American Eagle side. We were very single-minded, and it was time to rebuild that lifestyle that the customer was demanding from us. And wow, those results have been better than expected.
Speaker Change: And completing the outfit that's been something so important on the American Eagle side, we were very single noted and it was time to rebuild that lifestyle that the customer was demanding from us and Wow those results have been better than expected.
Jennifer M. Foyle: And so we're going to continue to expand in those adjacencies, Matt. And then, thinking about our fleet, we have a new store design that is getting an incredible response from the customers. So again, we're going to continue to deliver on that, as I think just more so about the product and how we're set up for back to school. Look, the tailwinds are there in denim. I just said that.
Speaker Change: And so we're going to continue to expand in those Adjacencies, Matt and then thinking about our fleet, we have a new store design.
Speaker Change: <unk> lived in that is getting an incredible response from the customers. So again, we're going to.
Continued to deliver on that as I think just more so the product and how we're set up for back to school look the tailings or theyre in denim I, just said that we're going to round out the assortment in men's more so with the early reads that we've seen in the business, which are great categories. We just need to dominate more and we need to distort more into these categories that did win in men's women's wear and.
Jennifer M. Foyle: We're going to round out the assortment in men's more so with the early reads that we've seen in the business, which are great categories. We just need to dominate more, and we need to distort more into these categories that did win in men's. Women's was on a great trajectory, so we're going to continue to drive the early trends and get back into those businesses. We leave it open to buy, so we can really course correct as we build out into the back half. Aerie, look, the comps outside of swim were powerful.
Speaker Change: Great trajectory. So we're going to continue to drive the early trends and get back into those businesses. We leave open to buy so we can really.
Speaker Change: Of course, correct as we build out into the back half aerie.
Jennifer M. Foyle: We were right in line where we left in Q4, and those businesses continue, and we actually build on them in Q3 and Q4. So I think you're going to see a nice change in pace in that business as well as we lead into the back to school season, soft dressing, and some new categories. We love what we're seeing in some of these new offerings that our customers have not really seen from us, one being sleep. There are some really fun ideas around that category.
Speaker Change: Look the console side of swim where powerful we were right in line, where we left in Q4 and those businesses continue and actually we build on them in Q3 and Q4, So I think youre going to see you know a nice change in pace in that business as well as we lead into the back to school season.
Speaker Change: Soft dressing and some new categories, we love what we're seeing in some of these new offerings that our customer has not really seen from us one being sleep and theres, some really fun ideas around that category, we're going to continue to innovate.
Speaker Change: And our core categories, even in some of the slowdown in intimates, we held our position and our market share and we have new surprises in that category. So what's your in store for back to school are not only just with the product offerings, but also our marketing we're gonna re pitch the American Eagle brand I think youre going to be really excited with what you see it's getting back to our.
Jennifer M. Foyle: We're going to continue to innovate in our core categories, even in some of the slowdown and intimates. We hold our position in our market share, and we have new surprises in that category. So lots in store for back to school, not only just with the product offerings but also our marketing. We're going to re-pitch the American Eagle brand. I think you're going to be really excited with what you see. It's getting back to our roots, our heritage. The campaign looks phenomenal, and the same for Aerie. So lots in store, and Matt on SG&E.
Speaker Change: Our heritage campaign looks phenomenal and same for aerie, so what's in store.
Michael A. Mathias: Matt, on SG&A, the Q1 result for SG&A was right in line with our guidance. Dollars were up 7%, exactly in line with our comp result of plus 7%.
Matt: Yeah, Matt on SG&A Q1 result for SG&A was right in line with our guidance dollars were up 7% exactly in line with our comp result of plus 7%.
Michael A. Mathias: Second quarter, we're looking at SG&A growth in the mid-single digits on high single-digit revenue growth. That includes the impact of that $55 million shift of revenue into the quarter from the retail calendar shift, and the SG&A up mid-single digits includes some variable expense shift with that revenue. Then in the back half of the year, SG&A dollars are planned down. So from here, we are structured to leverage. I think I'm really pleased and proud of the expense leverage we saw in the first quarter across the P&L, a lot of which was in gross margin and then depreciation. From here, we're really looking forward to and excited about the fact that SG&A is where we'll see a significant amount of leverage from the second quarter onwards.
Speaker Change: Second quarter, we're looking at SG&A growth in the mid single digits on high single digit revenue growth in.
Speaker Change: And that includes the impact of that $55 million shift of revenue into the quarter from the retail calendar shift and the SG&A up mid single include some variable expense shifts with that revenue.
Speaker Change: In the back half of the year SG&A dollars are planned down that so.
Speaker Change: From here, we are structured to leverage I think a really pleased and proud of all of the expense leverage we saw in the first quarter across the P&L.
Speaker Change: A lot of which was in gross margin and then depreciation.
Speaker Change: From here, we're really looking at two and excited the fact that SG&A is where we will see a lot of significant amount of leverage from the second quarter on.
Speaker Change: Great color best of luck.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Okay.
Speaker Change: Our next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.
Adrienne: Great. Thank you very much my first question is basically the reiteration of the full year does that have anything to do with sort of visibility or macro. If you can just speak to that Jen can you go over the percentage of sales at swim contribute obviously.
Adrienne Eugenia Yih: Does that have anything to do with sort of visibility or macro, if you can just speak to that? Jen, can you go over the percent of sales that SWIM contributes? Obviously, it's tough to sell SWIMwear when it's 50 degrees.
Speaker Change: Obviously, it was tough to cellphone, where I when it's 50 degrees.
But wondering did that impact does it have you have like a delayed impact on the second quarter and then.
Adrienne Eugenia Yih: But wondering, does that impact, do you have like a calculated impact on the second quarter? And then my last one is on the inventory. Mike, can you just clarify the ending inventory? How much, I think there's some confusion, how much of that is that you are holding that inventory on your balance sheet rather than liquidating it with a third party? I think that would be helpful too. Thank you.
Speaker Change: And my last one on the inventory Mike can you just clarify the ending inventory how much. It I think there's some confusion how much of that is that you are holding that inventory on your balance sheet, rather than liquidating it with third party.
Speaker Change: Helpful. Thank you.
Michael A. Mathias: Sure. Thanks, Adrienne. I can start with the reiteration of the full year guidance. I think we're very pleased with our Q1 results. As we said, we exceeded expectations and guidance both on the top line and our operating income range of 65 to 70, so we did exceeding nicely on both revenue and income.
J J: Sure. Thanks, J J I can talk to start with the reiteration of the full year Guide I think we're very pleased with our Q1 results as we said.
Speaker Change: We exceeded expectations and guidance both on top line and our.
Speaker Change: Operating income range of 65 to 70 so.
Speaker Change: We exceeded nicely on both revenue and income.
Speaker Change: The reiteration of the year is really where we're on plan or slightly ahead of our plans for the first half.
Speaker Change: It's really more of a cautious guide for the back half of the year as we lap. Some better results has started with back to school last year July and August are a proof point for us in terms of what we should expect it's always a proof point for what we would expect in the back half of the year. So I think it's.
Michael A. Mathias: The reiteration of the year is really we're on plan; we're slightly ahead of our plans for the first half. It's really more of a cautious guide for the back half of the year as we lag behind some of the better results that started with back to school last year. July and August are a proof point for us in terms of what we should expect. It's always a proof point for what we would expect in the back half of the year.
Michael A. Mathias: So I think it's just kind of maintaining the strategic path, executing on our plans. And, you know, as we see the back half of the second quarter and back-to-school, we can update our expectations for the year. I can hit inventory quickly. And if you want to just...
Speaker Change: Just kind of maintaining.
Speaker Change: The strategic path executing on our plans.
Speaker Change: And.
Speaker Change: As we see the back after the second quarter into back to school.
Speaker Change: If we can update our expectations for the year.
Michael A. Mathias: So on inventory, yeah, we have a plus nine in inventory, which is in line with sales or with it with our brand demand. And yes, Adrienne, there are a few points. We would have been mid-single-digit inventory without the impact of carrying clearance and selling it ourselves profitably now versus our previous sell-off strategy. That will anniversary here in the second quarter. So at the second quarter ending inventory, then back-cap inventory will be more apples-to-apples. Right now, we are carrying more inventory as we clear it ourselves.
Speaker Change: I can hit them pretty quickly.
Speaker Change: If you wanted to just know not sure may join inventory plus nine and inventory.
Speaker Change: Which was in line with sales with our brand demand.
Speaker Change: And yes, Adrian is a few points.
Speaker Change: Around three we would have been mid single digit inventory without the impact of carrying clearance and selling it ourselves profitably now versus our previous sell off strategy.
Speaker Change: That will anniversary here in the second quarter, So second quarter ending inventory in the back half inventory will be more apples to apples right. Now we are carrying more inventory as we cleared ourselves.
Michael A. Mathias: And the impact of SWIM is, for AERI specifically, a high single-digit impact on the front half and then not material at all on the back half. So, as I mentioned, other core categories that we will then double down on as we get into Q3, Q4, we're really excited about. We've seen nice wins there.
Speaker Change: Super helpful and the impact of swim is for Aerie, specifically high single digit impact on the front half and then not material at all in the back half so as I mentioned other core categories that we.
Speaker Change: Then double down on as we get into Q3 Q4, we're really excited about and we've seen nice wins there.
Operator: Right. Thank you very much. Best of luck.
Speaker Change: Alright, Thank you very much best of luck.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.
Speaker Change: Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.
Dana Lauren Telsey: Hi. Good afternoon, everyone, and nice to see the results. As you look at the channel sales of stores and digital, the difference between Aerie and American Eagle, what you saw traffic-wise or transaction-wise in unbundling the comp by channel, and any change to your new store openings for this year and how you're looking at it. Thank you.
Hi, good afternoon, everyone and nice to see what the results as you look at the channel sales of stores and digital difference between Aerie and American Eagle, what you saw traffic wise or transaction wise and unbundling the comp by channel and any change to your new store openings for this year and how you're looking at it.
Speaker Change: Yeah.
Michael A. Mathias: Yeah, I can. Thanks, Dana. The channel specifics for the brands were Aerie stores and digital were pretty close to both mid-single. So Aerie's comp was plus six, and digital and stores were pretty close in terms of that plus six. Swim has a bigger impact on digital.
Speaker Change: Yeah I can.
Dana Lauren Telsey: Thanks, Thanks, Dana the channel specifics for their brands, we're aerie stores and digital were pretty closer both mid single so areas accomplish plus six.
Dana Lauren Telsey: Digital and stores were pretty pretty close in terms of that plus six swim has a bigger impact on digital so as we talk about the aerie comp being plus 11 without swim.
Michael A. Mathias: So as we talk about the Aerie comp being plus 11 without swim, that impacted the digital comp more than stores. Aerie stores were slightly positive, and digital was high in the high teens growth. So that's, you know, AE brand plus 7 comp was a mix of stores being slightly positive, and digital high teens. Aerie plus six, both channels are similar.
Dana Lauren Telsey: That impacted the digital comp more than stores.
Dana Lauren Telsey: The stores were slightly positive in digital was high in the high teens growth.
Dana Lauren Telsey: So that's.
Dana Lauren Telsey: E brand plus seven comp was a mix of stores being slightly positive digital high teens.
Dana Lauren Telsey: Aerie plus six but the channels are similar.
Dana Lauren Telsey: Right.
Michael A. Mathias: And then store plans continue to be. 25 to 30 offline new stores and kind of a net, 20 or so 2025 closures for AE, but that's something we're looking at even more closely. We expect that number to continue to come down as we look to reposition more locations and because of the success that we're seeing, or early success in our remodel program with the results of those stores.
Dana Lauren Telsey: Then store plans continue to be.
Dana Lauren Telsey: 25% to 30, Aerie offline, new stores and kind of the next 20 years or so 2025 closures for AE, but that's something we're looking at even more closely.
Dana Lauren Telsey: That number to continue to come down as we look to reposition more locations and because of the success that we're seeing early success in our e-mail remodel program with the results of those stores.
Jennifer M. Foyle: Just one follow-up, Jen, on the category of denim. How did denim do?
Speaker Change: Got it just one follow up then on the category of denim had a denim to how is pricing and with some of the new styles.
Jennifer M. Foyle: How is pricing? And with some of the new styles, you mentioned tops being a key call-out. Sounds like it's helping the tops business too. Is that driving margins also?
Speaker Change: Mentioned tops being a key a key call out it sounds like it's helping the tops business too is that driving margins also thank you absolutely absolutely we've really taken that category back we're winning definitely in womens some early learnings in men's as I mentioned that we're gonna.
Jennifer M. Foyle: Absolutely. We've really taken that category back. We're definitely winning in women's, some early learnings in men's, as I mentioned that we're going to, you'll see more of that, those learnings in Q3. We remain very nimble in that category, but we're definitely more balanced than we had been in the past, where we can chase the right fashion, not over a sort either, but make sure that we are in a better balanced situation.
Jennifer M. Foyle: Thank you. Absolutely. Absolutely. We've really taken that category.
Speaker Change: Youll see more of that those learnings in Q3, we remain very nimble in that category, but we are definitely more balance than we had been in the past, where we can chase the right fashion not over a sewer either but make sure that we are at a better balanced situation.
Speaker Change: As we get into Q3, you will see more new fits new learnings, we've had a bunch of tests out there that will drive the assortments and I like what I see I definitely feel like Theres tailwind as I mentioned it earlier I think we're about to head into a cycle, which is obviously a winning category for us it's our dominant category we dominate in it.
Jennifer M. Foyle: As we get into Q3, you'll see more new fits, and new learnings. We've had a bunch of tests out there that will drive the assortments, and I like what I see. I definitely feel like there's tailwinds. I mentioned it earlier. I think we're about to head into a cycle, which is obviously a winning category for us. It's our dominant category, and we dominate in it, and like I said, women, in particular, are already seeing these trends, and we will continue to drive those trends.
Speaker Change: And like I said women's in particular already are seeing these trends and we will continue to drive those trends.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.
Speaker Change: Our next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.
Paul Lawrence Lejuez: Hey, thanks, guys. I think I'm seeing this right. Aerie comps were up six, and I think total revenue is up four. Why the negative spread on the Aerie business? And then, curious if you could talk about what you saw by month throughout the quarter by brand and if you saw any weather impacts. Thanks.
Speaker Change: Hey, Thanks, guys.
Speaker Change: That's right.
Speaker Change: Aerie comps were up six total revenues up four was a negative spread on the on the Aerie business and then I'm curious if you could talk about what you saw by month throughout the quarter by brand and if you saw any weather impact.
Michael A. Mathias: Hi Paul. Yeah, the difference in the area plus six comp versus plus four total revenue is fully an impact from sell-off revenue last year. So as we still did last year in the first quarter, we had not made the operational change around selling our own clearance profitably versus sell-off. So we did have we did book sell-off revenue in the first quarter last year at a loss.
Paul Lawrence Lejuez: Hi, Paul Yes, the the difference in the Aerie plus six comp versus plus four total revenue.
Speaker Change: As fully.
Speaker Change: And impact from sell off revenue last year, so as we still with last year in the first quarter, we had not made the operational change.
Paul Lawrence Lejuez: Selling our own clearance profitably versus sell off so we did have we did book.
Paul Lawrence Lejuez: Sell off revenue in the first quarter of last year at a loss.
Michael A. Mathias: So that differential this year impacted the area more than last year in the first quarter, which is driving that differential this year. We'd expect that to normalize as we anniversary that in the second quarter, and you won't have that impact go forward. We still expect Aries' spread to be about one point Directionally, for the rest... And I think by month to answer that question. Yeah, I think it's always a little rocky when you've got kind of spring break and Easter calendar shifts. Definitely a couple of rocky weeks there in terms of weather, but it's always a March-April phenomenon. We're pleased with the total quarter result coming in above our expectations.
Paul Lawrence Lejuez: So that differential this year impact that impacted the area more last year than the first quarter, which is driving that differential this year.
Paul Lawrence Lejuez: We would expect that to normalize as we anniversary that in the second quarter and you won't have that impact go forward, we still expect aries spread to be about one point.
Paul Lawrence Lejuez: Directionally for the rest of the year.
Paul Lawrence Lejuez: And then I think by months.
Speaker Change: To answer that question, yes.
Speaker Change: Yes, I think it's always a little rocky when you've got kind of the spring break and Easter calendar shifts.
Speaker Change: Definitely a couple rocky weeks there in terms of weather, but it's always a March April phenomenon. We're pleased with the total quarter result.
Speaker Change: Coming in above our expectations.
Michael A. Mathias: and then May, you know, two queues to date, anything you can talk about by brand? Yeah, continuing the momentum similar to what we've been.
Speaker Change: And then may.
Speaker Change: <unk> to date.
Speaker Change: But by brand.
Michael A. Mathias: Yeah, continuing momentum, similar to what we've been seeing, pretty commensurate with the first quarter trend, so we're very pleased with that coming into the second quarter. Our guidance is based on mid-single.
Speaker Change: Yes, continuing momentum similar to what we've been seeing.
Speaker Change: Pretty commensurate with the first quarter trends. So we're very pleased with that coming into the second quarter. Our guidance is based on mid single.
Michael A. Mathias: So, again, you know, early in the quarter, three and a half weeks in, it's early in the year in general. So, you know, both the second quarter guidance and the full year, we still have a long way to go. Some big, big summer and back-to-school weeks coming in the second quarter, and then obviously, you know, our bigger time of year is back-to-school and holidays. So, pleased with, very pleased with the start of the year, a lot of business ahead of us, and good luck. Our next question is from Jonna Kim with T.D. Cowan, please proceed with this.
Speaker Change: So again no you know early in the quarter, three and a half weeks in.
Speaker Change: It's early in the year in general So basically you know both the second quarter guide and the full year, we still got a long way to go.
Speaker Change: Some big Big kind of summer and back to school weeks coming in the second quarter and then obviously our.
Speaker Change: Bigger we are bigger time of years back to school and holiday so.
Speaker Change: Pleased with very pleased with the start of the year a lot of business ahead of us.
Good luck.
Speaker Change: Okay.
Speaker Change: Okay.
Operator: Our next question comes from the line of Jonna Kim with TD Cowan. Please proceed with your question. Thank you for taking my questions.
Speaker Change: Our next question comes from the line of John Kim with TD Cowen. Please proceed with your question.
Jungwon Kim: Thank you for taking my question just curious on the promotion side. If you saw any more uptick this year versus last year and AUR that you've seen this quarter and what your expectations are for the remainder of the year and it looks like you have a lot of exciting marketing initiatives just any color around the spend if you're looking at the <unk>.
Speaker Change: It's down year on year, and how are you allocating by channel. Thank you so much.
Operator: On promotions, I think our gross margin result is a testament to our strategies and our plans, with 240 basis points of gross margin expansion that came from multiple facets within gross margin, product margin, and initial IMUs were healthy, with controlled freight and transportation costs and our sourcing strategies at work. That structural change in clearance, as much as we didn't book that revenue, there was actually a benefit to gross margin in the quarter because of selling through clearance profitably versus selling off those goods historically at a loss. And then we leveraged the expenses in Gross Martin by 90 basis points. So I am very pleased with that result in the first quarter.
Speaker Change: Okay I'm on promotions snow.
Speaker Change: Our gross margin result is a testament to our strategy and our plans with 240 basis points of gross margin expansion.
Speaker Change: That came from multiple facets within gross margin product margin and initial imu's were healthy with control of freight and transportation cost and our sourcing strategies at work.
Speaker Change: That that structural change in clearance as much as we didn't book that revenue that was actually a benefit to gross margin in the quarter because of selling through clearance profitably versus selling off those goods historically at a loss.
Speaker Change: And then we leveraged the expenses in gross margin.
Speaker Change: By 90 basis points. So very pleased with that result in the first quarter promotions are still in very much in check.
Michael A. Mathias: Promotions are still very much in check. Those are structural changes we've made that we've talked about that we do not plan to revert, which are, you know, changes to our day-in, day-out, no BOGO on jeans like we were running for a long time.
Speaker Change: Those are structural changes we've made that we've talked about that we do not plan to revert which are changes to.
Speaker Change: Our day in day out.
Speaker Change: No bogo on jeans like we were running for for a long time.
Michael A. Mathias: We've made changes to our loyalty program where we're not giving away free jeans or free bras anymore. And then this clearance change that has a structural benefit to markdowns as well within the gross margin. All those things are permanent, and we are happy with the results we've seen from all those changes.
Speaker Change: We've made changes to our loyalty program, where we're not giving away free jeans or free bar brawls anymore, and then there's clearance change that has a structural benefit to markdowns as well.
Speaker Change: Within the gross margin all of those things are permanent and see what the results we've seen from all of those changes.
Michael A. Mathias: And marketing spend, we are, we have spent more, and we do plan to spend more. I've talked about advertising dollars, and marketing expense is not being a place that we're looking to reduce spend. It's actually a place, as we're looking to reduce or leverage in other places, that we'd want to continue to fund marketing as we've gotten better and better at spending our marketing dollars effectively and measuring the return from that spend. It is, you know, in the media space, kind of digital media, performance marketing, and then branding in general. So we're seeing great results kind of across the disbursement of that spend, and we'll continue to, you know, look at ways to spend advertising dollars where we're generating a return.
Speaker Change: And marketing spend we are we have spent more we do plan to spend more of talking about the advertising dollars and marketing expense not being a place that we're looking to to reduce spend.
Speaker Change: It's actually a places were looking to reduce our leverage and other places that we'd want to continue to fund marketing is getting we've gotten better and better at spending our marketing dollars effectively and measuring the return from that spend.
Speaker Change: It is in the media space kind of digital media performance marketing and then brand brand in general So we're seeing great results kind of across the disbursement of that spend and we'll continue to.
Speaker Change: You know to look at ways to spend spend advertising dollars, where we're generating a return.
Speaker Change: Got it thank you so much.
Speaker Change: Thank you.
Operator: The next question comes from the line of Chris Nardone with Bank of America. Please proceed with your question.
Speaker Change: The next question comes from the line of Christopher <unk> with Bank of America. Please proceed with your question.
Christopher Michael Nardone: Thanks and good afternoon, guys. Mike, just a follow-up on SG&A. How should we think about the outlook for SG&A dollar growth for the full year if you guys are approaching the upper end of your sales guidance? And then in the back half, I think you alluded to SG&A dollars being down. Can you walk through some of the specific drivers of where you're seeing savings versus last year?
Thanks, and good afternoon, guys, Mike just a follow up on SG&A, how should we think about the outlook for SG&A dollar growth for the full year.
Speaker Change: Guys are approaching the upper end of your sales guidance and then in the back half I think you alluded to SG&A dollars down can you walk through some of the specific drivers of where you're seeing savings versus last year.
Speaker Change: Yes.
Michael A. Mathias: Sure. Yeah, look, I think we're entering a period now where SG&A leverage will be the contribution to operating rate improvement. We're structured to leverage from here, as we've said. You know, we're talking about mid-single-digit growth in the second quarter on high single-digit revenue expectations. That will produce significant leverage in the second quarter. Third quarter dollars are down slightly on a low single-digit, basically a low single-digit assumption for the back half of both quarters.
Speaker Change: Sure Yeah look I think where we're entering a period now where SG&A leverage will be such in contribution to operating rate improvement, we're structured to leverage from here as we said.
Speaker Change: You know, we're talking about mid single digit growth in the second quarter on high single digit revenue expectations are that will produce significant leverage in the second quarter.
Speaker Change: Third quarter dollars are down slightly.
Speaker Change: On a low single digit both basically a low single digit assumption for the back half in both quarters SG&A dollars are down so we're actually looking to leverage SG&A.
Michael A. Mathias: SG&A dollars are down. So we're actually looking to leverage SG&A on low single-digit comp, and then a reminder, We actually have kind of flat total revenue dollars on that assumption in Q3, and then total revenue would actually be down slightly in the fourth quarter off that assumption. So the exciting part about that for me is we are structured to leverage on every comp point of upside from there, knowing that the revenue, you know, the revenue expectation right now is cautious until we see a few more months of business.
Speaker Change: On low single digit comp and that a reminder, that with the retail calendar shift.
Speaker Change: We'd actually have kind of flat total revenue dollars on that assumption in Q3, and then total revenue would actually be down slightly in the fourth quarter off that assumption. So the exciting part about that for me is we are structured to leverage on any every comp point of upside from there.
Speaker Change: Knowing that the revenue.
Speaker Change: The revenue expectation right now is cautious until we see a few.
Speaker Change: A few more months of business here.
Michael A. Mathias: So, yeah, Chris, we're looking to leverage SG&A significantly for the rest of the year across the remaining three quarters. And then at the end of the new guide, we would just expect a healthy flow through to the bottom line from expense.
Speaker Change: So yes, Chris we're looking to leverage SG&A significantly for the rest of the year across the remaining three quarters.
Speaker Change: And then at the high end of revenue Guide, we would just expect a healthy flow through on to the bottom line from expense leverage.
Michael A. Mathias: Got it. And then just a quick one on the back half comp expectations of Buffalo single digits. Is that uniform across both brands? Are you expecting different trends between Eagle and Aerie in the back half? We'd expect Aerie to be
Speaker Change: Got it and then just a quick one on the back half comp expectations of up low single digits is that uniform across both brands are you expecting a different trends between the eagle and aerie in the back half we.
Michael A. Mathias: We'd expect Aerie to be on the higher end. Again, comp in Q1 was plus 11 when you back out the impact of Swim. We're seeing that continue into the second quarter, and swim becomes less of a contribution to the brand as we pass through the second quarter. Like last year, we saw some pressure on Aerie's comp through the first half because of Swim, but it went right back to double-digit comps in the back half.
Speaker Change: We would expect <unk> to be in the higher end again the comp in Q1 was plus 11, when you back out the impact of swim.
Speaker Change: We're seeing that continue into the second quarter swim becomes less of a contribution to the brand as we pass through the second quarter like last year, we saw some pressure on areas comp through the first half because of the swim and went right back to double digit comps in the back half.
Michael A. Mathias: So there's no reason to expect we wouldn't see kind of Aerie's comp exceed A.E. But the flip side of that is we're seeing momentum in the A.E. brand as well. So I think there are reasons why that guy in the back half is cautious. It's early in the year.
Speaker Change: So there's no reason to expect we wouldnt see kind of areas comp exceed AE, but the flip side of that is we're seeing momentum in the AE brand as well so I think because of the reasons why that guide in the back half is cautious it's early in the year.
Michael A. Mathias: We've got momentum across the brands. The strategies we've got in place to grow the brands are working. So, you know, to answer the question, on average, you would think A.E. would be a little below Aerie based on that. But, you know, we've got momentum in both brands, which is exciting.
Speaker Change: Got momentum across the brands the strategies, we've got in place to grow the brands are working.
Speaker Change: So I think to answer the question on average do you think you would be a little below area based on that but.
Speaker Change: We've got momentum in both both brands, which is exciting.
Speaker Change: Very clear thank you.
Operator: Our next question comes from Marni Shapiro with Retail Tracker. Please proceed with your question.
Speaker Change: Our next question comes from the line of Marni Shapiro with retail tracker. Please proceed with your question.
Marni Shapiro: Hey, everybody. Jen, congrats. The shirts have looked really beautiful. The tops are amazing. I wanted to talk a little bit about something you said about broadening or widening the age range for the Eagle customer. I wasn't sure if that was just Eagle and Aerie or the combination of the two.
Marni Shapiro: Hey, everybody.
Marni Shapiro: John Congrats as far as I've looked really beautiful the tops are amazing I wanted to talk a little bit about something you said about broadening of Whiting widening the age range for the Eagle customer I wasn't sure if that was eagle and aerie or the combination of the two.
Jennifer M. Foyle: Are you seeing an older shopper, a non-high school teen shopper, stay longer or come into offline, or is it kind of a reflection? I've noticed in some of your media posts and things like that that the teens look a little bit older, and there's a feeling out there that the teens are going from 12 to 18 today. They're skipping that hole in between. So, can you just talk a little bit about where your head is at with this?
Speaker Change: Are you seeing an older shopper or non high school teen shopper stay longer or come into offline or is it kind of a reflection you know ive noticed in some of your media post and things like that that the teams look a little bit older and there's a feeling out there that the teens are calling from like women make myself.
Speaker Change: Sounds like an old person, but that theyre going from like 12 to 18 today, they're skipping that hole in between so could you just talk a little bit about where your head is at with this widening of the age.
Jennifer M. Foyle: Sure. Marni, welcome to my world. I have a 17-year-old daughter. Oh, my God. She's like 34, right?
Speaker Change: Sure Mark.
Speaker Change: Welcome to my World I have a 17 year old So Oh, my God, She's like 34 right.
Jennifer M. Foyle: Right. Just going back to our strategy, you know, we are staying the course, and I love what I'm seeing. Look, we will always dedicate ourselves to our core customer, and we'll make sure that we always have offerings to serve that customer so that they can engage with us. I think our focus is now, how do they stay with us?
Speaker Change: Right just going back to our strategy you know we are staying the course.
Speaker Change: And I love, what I'm seeing look we will always dedicate to our core customer and we'll make sure that we always have offerings to serve that customer. So that they can enter with us I think our focus is now how do they stay with us and thinking back to your thinking back to our strategy that we put forth. We wanted to offer new occasions core occasion.
Jennifer M. Foyle: And thinking back to our strategy that we put forth, we want to offer new occasions, core occasions, social casual, men's active, and everyday casual. And I think as we broaden those assortments, customers are going to stay with us, and we're seeing that. We're actually seeing the next bracket of the age group actually increase slightly, so they are sticking around, and that has been an initiative for us because, in the past, they did drop out at a certain age.
Speaker Change: <unk>.
Speaker Change: Social casual men's active everyday casual and I think as we brought in those assortments customers are going to stay with us and we're seeing that we're actually seeing the next bracket of age.
Speaker Change: Of the age group actually increased slightly so they are sticking around and that has been an initiative for us because in the past they did jump out at a certain age and the more we focus on this and like I said broaden our assortment I think the more they will stay with us and Thats, what I like and it's working so well you'll see more offering.
Jennifer M. Foyle: And the more we focus on this, and, like I said, broaden our assortments, I think the more they will stay with us, and it's working. So you'll see more offerings around this as we head into future assortments and quarters.
Speaker Change: Around this as we head into.
Speaker Change: Future Assortments and quarters.
Speaker Change: Yeah.
Jennifer M. Foyle: Will the marketing stay very reflective of the younger shopper, and will just the product assortment expand a little bit?
Speaker Change: Well the marketing stay very reflective of the younger shopper and just the product assortment will expand a little bit.
Jennifer M. Foyle: The product will expand, and I think you're going to see a more balanced age demo as we continue to offer these other occasions. And, of course, denim is ageless, our core competency business. And as we offer new fits, we're getting customers, new customers, because we were so focused on one fit in the past, particularly for women. I think now that we've brought in that assortment, we're getting more and more customers. And you know, they love our jeans.
Speaker Change: Our product works the N and I think youre going to see a more balanced age demo as we continue to offer these.
Speaker Change: Other occasions and of course denim is age lists our core competency business and as we offered new fits we're getting customers new customers. Because we were so focused on one fit in the past, particularly in women's I think now that we've brought in that assortment, we're getting more and more customers.
And you know they love our genes are there they just for for all the reasons that we now between trace value quality wash.
Jennifer M. Foyle: They just, for all the reasons that we know, between price, value, quality, wash, our innovation there, you know. So I like that we might be having some tailwinds in this category. We're seeing that because I think that will bode well for this brand. Fantastic. Thanks.
Speaker Change: Our innovation there.
Speaker Change: So I like that we might be having some tail winds in this category were seeing it because I think that will bode well for this brand.
Marni Shapiro: Fantastic. Thanks. Best of luck for the summer.
Speaker Change: Fantastic Thanks best of luck for summer.
Operator: Thank you. And our next question comes from the line of Janet Kloppenburg with JJK Research. Please proceed with your question.
Speaker Change: Thank you and our next question comes from the line of Janet Kloppenburg with J J K Research. Please proceed with your question.
Janet Joseph Kloppenburg: Hi everybody, and congratulations on a great quarter. Janet, I know you work hard on every aspect of your business, but weather has hurt you in the swimming pool for a couple of years in a row now.
Speaker Change: Hi, everybody and congratulations on a great quarter.
Speaker Change: John I know you work hard on every aspect of your business, but weather has hurt you in the swimming pool.
Speaker Change: A couple of years in a row now.
Speaker Change: And it.
Janet Joseph Kloppenburg: I just wonder about the time and focus you put into it and how you'll think about that category going forward. I also wanted to hear what you think about the progress in the men's business and in the social occasion business. And Mike, I think you said that SG&A would be up mid-single digits in the second quarter and down, I presume, in dollars in the back half. Maybe you could give us an idea of how much, but that we should have leveraged it even in the fourth quarter with sales up modestly. You know, I think that's what you're guiding us to, a very modest fourth quarter. So thanks for all your help.
Janet Joseph Kloppenburg: I just wonder about the time and focus you put into it and how you think about that category going forward also wanted to say here.
Speaker Change: Thank you.
Speaker Change: About the progress and the men's business and in the social occasion business.
Speaker Change: Mike.
Speaker Change: I think you said that SG&A would be up mid single digits in the second quarter and down I presume onto all of those in the back half maybe you could give us an idea of how much but that we should have leverage even in the fourth quarter with sales up modestly.
Speaker Change: I think thats, what youre guiding to very modest fourth quarter. So.
Speaker Change: Thanks for all your help.
Jennifer M. Foyle: Yeah, great call. Certainly, we dedicate the time that's appropriate for that category. We have a new team in place, new eyes on it, new ideas. I just went through their strategies for next year. I like what I'm seeing. And we will, of course, correct as we continue into 2025. I saw the assortments.
Speaker Change: Yeah, great call.
Speaker Change: Certainly we dedicate the time that's appropriate for that category.
We have a new team in place new eyeballs on it new ideas I just went through their strategies for next year I like what I'm seeing.
Speaker Change: And we will of course correct as we continue into 2025 I saw the Assortments.
Jennifer M. Foyle: And again, we have new categories that we're offering in Aerie that you will see expanded not only digitally but in stores as well. So that'll also be a great win for the brand next year. And as we continue, actually, starting in Q3. Men's, look, we have some great wins in men's. I think it was just really more about the sorting into those wins that we saw early on. 24-7 is doing great out of the gate. Select knit categories, outerwear; I mentioned them in my script there.
Speaker Change: And again, we have new categories that we're offering an area that you will see expanded not only digitally but in stores as well. So that will also be a great win for the brand next year and as we continue actually.
Speaker Change: Starting in Q3.
Speaker Change: But we have some great wins in men's I think it was just really more about the storting into those wins that we saw early on 24 seven is doing great out of the gate.
Jennifer M. Foyle: And look, it's really now about getting the investment behind the new wins that we're seeing. I think you can see in the marketing, you'll see more trend rate categories going forward, and we will be leaning in there.
Speaker Change: Select knit categories outerwear I mentioned them.
Speaker Change: My script, there and look it's really now about getting the investment behind the new wins that we're seeing I think you can see in the marketing you will see more trend right categories on the go forward and we will be leaning in there.
Michael A. Mathias: Thank you for having me. Let me just be specific about SG&A. So yes, again, dollars up mid-single digit in the second quarter on high single-digit revenue, both revenue and SG&A dollars being impacted by the retail calendar shift with the $55 million benefit in the second quarter. In Q3, we'd expect SG&A dollars to be down slightly on what I think is a cautious low single-digit comp. But again, with the retail calendar shift impact, there's a negative $45 million impact in Q3.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Let me just be specific on SG&A, So yes again.
Speaker Change: Up mid single digit in the second quarter on high single digit revenue, both the revenue revenue and SG&A dollars being impacted by the retail calendar shift with the $55 million benefit second quarter.
Speaker Change: Q3, we expect SG&A dollars to be down slightly.
Speaker Change: On yes, but I think it's a cautious low single digit comp, but again with the retail calendar shift impact theres, a negative $45 million impact in Q3.
Speaker Change: So in that kind of comp expectation total revenue would be relatively flat so we'd be set to leverage.
Michael A. Mathias: So in that kind of comp expectation, total revenue would be relatively flat, so we'd be set to leverage. On top of that, with dollars being slightly down in the third quarter, fourth quarter, same kind of on the low end of the revenue guide, and low single-digit comp dollars being down pretty significantly in the fourth quarter, actually could be kind of in the high single to 10% range in terms of ST&A dollars being down at the low end of that guide. Again, both quarters and the whole back half set to leverage on it for revenue above and beyond that expectation. Hopefully, that's more specific and helpful.
Speaker Change: On top of that with dollars being slightly down in the third quarter.
Speaker Change: Fourth quarter same kind of on the low end of the revenue guide and low single digit comp dollars being down pretty significant in the fourth quarter actually it could be kind of high single to 10% range in terms of SG&A dollars being down at the low end of that guide.
Speaker Change: Again, both quarters in the whole back half set to leverage on it on revenue above and beyond that that the expectation.
Speaker Change: Hopefully that's more specific and helpful for you.
Michael A. Mathias: And the only way that won't happen is if the sales numbers disappoint.
And the only way that doesn't happen is the sales numbers disappoint.
Speaker Change: Disappoint.
Michael A. Mathias: Correct. So that's how we're structured on the low end of our revenue guide of 2%, and then we're structured to leverage significantly on kind of every comp point above that expectation.
Speaker Change #100: Correct. So that's how we're structured on the low end of our revenue guide of 2%.
Speaker Change #100: And then we restructured to leverage significantly on every comp point above that expectation.
Michael A. Mathias: And Michael, some brands are seeing an uptick in their transportation costs right now. They're afraid. What's going on with you guys?
Michael: And just Michael.
Speaker Change #102: Some brands are seeing an uptick in those transportation costs right now.
What's going on with you guys.
Michael A. Mathias: We're not seeing that. Again, first quarter gross margin results were kind of a mix of benefits across the board from initial markup, including freight and transportation costs. Well Controlled Inventory and Promotions and in Leveraging our Expenses and Gross Margins. A line of sight for the rest of the year is, you know, no headwinds from freight and transportation costs, and we're expecting kind of initial markup benefits in future quarters. Great.
Speaker Change #103: We're not seeing that again first quarter gross margin results.
Speaker Change #104: We're kind of a mix of benefits across the board from initial markup, including freight and transportation costs, well controlled inventory and promotions and leveraging our expenses and gross margin.
Speaker Change #104: Our line of sight for the rest of the year is no headwinds from freight and transportation costs, and we're expecting kind of initial markup benefit in future quarters.
Michael A. Mathias: Great. Thanks so much.
Great. Thanks, so much.
Operator: And our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question.
Speaker Change #105: And our next question comes from the line of Alex <unk> with Morgan Stanley. Please proceed with your question.
Alexandra Ann Straton: Perfect. Thanks a lot. I've just got two for you here. First, on SG&A, can you elaborate qualitatively on what exactly is happening in the back half that enables you to pull back on the spend there just so we can understand the drivers? And then secondly, just on the Aerie Intimates weakness that I believe you all highlighted, can you just remind us how much of the business that comprises as well as provide any color on how that market is trending or what you're seeing in Intimates? That'd be super helpful. Thanks a lot.
Speaker Change #106: Perfect. Thanks, a lot I've just got two for you here first on SG&A can you elaborate qualitatively on what exactly is happening in the back half that enables you to pull back on the spend there just we can understand the drivers and then secondly, just on the Aerie intimates weakness that I believe you all highlight.
Speaker Change #106: Can you just remind us how much of the business that comprises as well as provide any color on how that market is trending or or what youre seeing in intimates that'd be super helpful. Thanks, a lot.
Michael A. Mathias: So the drivers of SG&A we've talked about really for a year now, as we kicked off our profit improvement initiative last year and started to see, you know, the expenses and gross margin, the benefits of working around rent delivery, kind of distribution supply chain costs coming through our gross margin, the whole back half of last year, we talked about those being the priorities with SG&A coming later. So as we landed our plans for this year, you know, the work across 85% of our P&L in general with the line items in SG&A that we've talked about being store labor, corporate compensation, related incentives, services, kind of optimizing our advertising dollars, reducing and leveraging supplies and repairs.
And so the drivers of SG&A, we've talked about really for a year now as we kicked off our profit improvement initiative last year.
Speaker Change #107: Starting to see the expenses in gross margin the benefits of work around rent delivery and distribution supply chain costs coming through our gross margin the whole back half of last year, we talked about those being our priorities with SG&A coming later.
Speaker Change #107: So as we landed our plans for this year.
Speaker Change #107: The work across 85% of our expense base.
Speaker Change #107: Across the P&L in general with the line items in SG&A that we've talked about being store labor corporate compensation related incentives services kind of optimizing our advertising dollars, reducing deleveraging supplies and repairs a lot of that work is taking hold some of it in the first quarter, but.
Michael A. Mathias: A lot of that work is taking hold, some of it in the first quarter, but then a large majority of the benefits really start here in the second quarter and for the rest of the year, including compensation in general and incentives. So I think that's the continuous improvement office we've established, continuing to work on those work streams. 85% of our SG&A base is continuing to find efficiencies to control costs, and those benefits are really coming through kind of starting here in the second quarter and the rest of the year. Engineering, you know, roughly it's about a third of the business. But as I said,
Speaker Change #107: A large majority of the benefits really starting here in the second quarter and for the rest of the year, including compensation in general.
Speaker Change #107: And incentives being in that.
Speaker Change #107: That pool.
Speaker Change #107: So I think that's the.
Speaker Change #107: Continuous improvement.
Speaker Change #107: Office, we've established continuing the work on those work streams, 85% of our SG&A base continuing to be final find efficiencies to control costs and those benefits really coming through kind of starting here in the second quarter and the rest of the year.
Jennifer M. Foyle: And, Neri, you know, roughly it's about a third of the business. But as I mentioned, we're not forgetting about these core competency businesses that we launched and we owned. The smoothies category, you're going to see newness there.
Speaker Change #108: And Larry.
Speaker Change #109: It's about a third of the business, but as I mentioned, we're not forgetting about these core competency businesses that we launched and we owned the smoothie category Youre going to see newness, they're really excited about where we're taking the intimates business.
Jennifer M. Foyle: I'm really excited about where we're taking the intimates business. And really, what's changed a little bit is the customer has pivoted. If you think about our offline business, which has done incredibly well this quarter, sports bras are amazing. So thinking about that category as well, and it gives us the ability to leverage, you know, both businesses, online and offline, on where the customer is going. And we certainly did that.
Speaker Change #109: And really what's changed a little bit as the customer has pivoted.
Speaker Change #109: You think about our offline business, which has done incredibly well this quarter.
Speaker Change #109: <unk> are amazing so.
Speaker Change #109: About that category as well and it gives us the ability to leverage them.
Speaker Change #109: Both businesses Erie and offline on where the customer is going and we certainly did that the sports bra business has been amazing in fact, we ranked fairly high market share in that category and also in leggings, we gained over two points of market share in the leggings category in this quarter, so really excited about that business and again.
Jennifer M. Foyle: The sports bra business has been amazing. In fact, we rank fairly high in market share in that category and also in leggings. We gained over two points of market share in the leggings category this quarter. So really excited about that business. And again, it's just a natural as we head into Q3 and Q4.
Speaker Change #109: It's a natural as we head into Q3 and Q4.
Jennifer M. Foyle: You know, we're really happy about the airy business. And, you know, again, going back to our strategy, we want to win in intimates and in soft apparel. And we're seeing that happen, particularly in apparel.
Speaker Change #109: We're really happy about the aerie business and again going back to our strategy, we want to win in intimates and in soft apparel, we're seeing that happened, particularly in apparel growing up the offline business and we definitely want to be the new authority inactive where so I'm very excited about all these other.
Jennifer M. Foyle: Growing off the offline business, and we definitely want to be the new authority in activewear, so I'm very excited about all these other areas that we are diving into and owning and winning at. Lots of expansion opportunity there. So really excited for more to come as we build out the rest of this year.
Speaker Change #109: Areas areas that we are diving into and owning and winning it so lots of expansion opportunity there. So.
Speaker Change #109: Really excited for more to come as we build out the rest of this year.
Jan: Okay, great. Thanks, Jan so that completes our call for this afternoon and thanks to everyone for your participation and we appreciate your interest.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #111: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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