Q2 2024 American Eagle Outfitters Inc Earnings Call
Speaker Change: Greetings and welcome to the American Eagle Alciter Second Quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. If anyone's heard a choir operator systems during the conference, please press stars zero on your telephone keypad.
Operator: for Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone is sure to apply our operator assistance during the conference, please press star zero on your telephone keypad.
Operator: A brief question and answer session will follow the formal presentation. As a reminder, this call is being recorded.
Speaker Change: A brief question and answer session will follow the formal presentation, as a reminder this call is being recorded. I would now like to turn the call over to Judy Meehan, Senior Vice President, Corporate Communications and Investor Relations. Thank you, Judy. You may begin.
Judy Meehan: I would now like to turn the call over to Judy Meehan, Senior Vice President, Corporate Communications and Investor Relations.
Jay Schottenstein: Thank you, Judy. You may begin.
Jay Schottenstein: Good morning, everyone.
Jay Schottenstein: Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Dan Foyle, President, Executive Creative Director for AE&Ari; and Mike Matthias, 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 upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filing. The company undertakes no obligation to publicly update or advise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Judy Meehan: Good morning, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Dan Foyle, President, Executive Creative Director for A.E. and A.E. and A.E. and Mike Mathias, Chief Financial Officer.
Speaker Change: Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs.
Speaker Change: Results actually realized made different materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or advise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Jay Schottenstein: Consistent with the retail calendar, and the 53rd week last year, second quarter, 2024 results, and today's discussion are presented for the 13 weeks ended August 3, 2024, compared to the 13 weeks ended July 29, 2023. Comparable sales metrics are presented for the 13 weeks ended August 3, 2024, compared to the 13 weeks ended August 5, 2023.
Speaker Change: Consistent with the retail calendar and the 53rd week last year, second quarter, 2024 results and today's discussion are presented for the 13 weeks ended August 3rd, 2024, impaired to the 13 weeks ended July 29, 2023.
Speaker Change: Comparable sales metrics are presented for the 13 weeks ended August 3, 2024 compared to the 13 weeks ended August 5, 2023.
Jay Schottenstein: Additionally, you can find the second quarter investor presentation posted on our corporate website at www.aio-nc.com and the Investor Relations section.
Speaker Change: Additionally, you can find the second quarter investor presentation posted on our corporate website at www.ao-ank.com and the investor relation section. And now I'll turn the call over today.
Jay Schottenstein: And now, I'll turn the call over to Jay. Thanks, Judy, and good morning, everyone. During the second quarter, we continued executing on our strategy plan, powering profitable growth, removing our iconic brands forward and strengthening our operating capabilities to continue driving shorter value. Our second quarter results were strong proof. Consolidating financial results showed improvement across the majority of our key performance metrics. We delivered our sixth consecutive quarter of record revenue, while also achieving meaningful operating income growth. Second quarter results built on our strong first quarter performance, locking in a solid first half. We made consistent progress across our strategic priorities and line with our multi-year plan.
Speaker Change: Thanks, Judy, and good morning, everyone. During the second quarter, we continued executing on our strategy plan, powering profitable growth, removing our iconic brands forward and strengthening our operating capabilities to continue driving shorter value.
Speaker Change: Our second quarter results were strong, proof. To solidating financial results showed improvement across the majority of our key performance veterans. We delivered our six consecutive quarter of record revenue, we're also achieving meaningful operating income growth.
Speaker Change: Second Quarter Results
Speaker Change: Milk!
Speaker Change: on our strong first quarter performance.
Lothian: Lothian in a solid first hand.
Lothian: We make insistent progress across our strategic priorities, aligned with our Baltide year plan.
Jay Schottenstein: As a reminder, our three key pillars are first amplify our brands, second optimize our operations, and third execute with financial discipline. Touching on the strategic and financial highlights for the sector. To start, second quarter revenue of $1.3 billion was a new record for the company. We achieved 4% growth and a total revenue increase of 8% for the quarter; notably, both brands and channels posted nice growth. We have two of the most we love brands in retail, American Eagle, and Area. Each with their own exciting roadmap for expanding. AE has defined American casual fashion for countless generations.
Speaker Change: As a reminder, our three key pillars are first amplify our brands, second optimize our operations, and third execute with financial discipline.
Speaker Change: Hutching on the strategic and financial highlights for the corridor. To start, second-quarter revenue of $1.3 billion was a new record for the company.
Speaker Change: We had achieved 4% top rows and a total revenue increase of 8% for the quarter, notably both brands and channels post at night growth.
Speaker Change: We have two of the most beloved brands in retail, American Eagle and Erie, each with their own exciting roadmap for expansion.
Speaker Change: A.E. has defined American casual fashion, for countless generations. I love seeing it come to life in new ways, as we leverage our powerful legacy and execute on our growth initiatives.
Jay Schottenstein: I love seeing it come to life in new ways as we leverage our powerful legacy and execute on our growth initiatives. We are seeing great results between the model of stores outperforming the balance of the fleet. Aerie is a very special brand, anchored in body positivity and woman empowerment. As we build brand awareness and expand it to new categories, we are reaching new heights. In the second quarter, Aerie achieved another record revenue result with cops increasing 4%, given by strength in apparel and our offline active sub brand. New Aerie and offline stores are performing very well, expanding our reach and bringing in new customers.
Speaker Change: A.E.'s cops grew 5% in the second quarter.
Speaker Change: We are gaining momentum and growing market share and a number of our focus categories. Our new live-in store design has now been rolled out to approximately 30 locations, and we are seeing great results with remodeled stores outperforming the balance of the fleet.
Eric: Eric is a very special brand, anchored in body positivity and woman empowerment. As we build, brand awareness and expand into new categories, we are reaching new heights.
Speaker Change: In the second quarter, area achieved another revenue result, with top-centre increase in 4% driven by strength in the peril and our offline active sub-brand.
Speaker Change: Newary and offline stores are performing very well, expanding our reach and bringing in new customers.
Jay Schottenstein: Second, in line with our focus on delivering profitable growth, we also continue to realize efficiency across key focus areas. This rose significant leverage in our cross phase as we cemented new operating principles across the business and delivered 55% growth and operating income year over year. Third, we exit at the quarter with our balance sheet in excellent shape with $192 million in cash and no debt. During the second quarter, we leverage healthy cash flow to fuel long-term investments in our brands and operations. We also return $120 million in cash to our shareholders through a combination of dividends and share repurchases.
Speaker Change: Second, in line with our focus on delivering profitable growth, you also continue to realize efficiency across key focus areas.
Speaker Change: This drove significant leverage in our cost space as we submitted new operating principles across the business and delivered 55% growth and operating income year over year.
Speaker Change: Third, we exited the quarter with our balance sheet in excellent shape, with $192 million in cash and no debt.
Speaker Change: During the second quarter, we leverage healthy cash flow, the few of long-term investments in our brands and operations.
Speaker Change: We also returned $120 million in cash to our shareholders through a combination of dividends and share repurchases.
Jay Schottenstein: This brings year-to-date returns to $180 million, consistent with our commitment to delivering value to our shareholders.
Speaker Change: This brings you to date returns to $180 million consistent with our commitment to delivering value to our shareholders.
Jay Schottenstein: And lastly, in the second quarter, we are very excited to welcome a new board member, Stephanie Poluli, SA. Stephanie brings a strong track record as a proven strategist with over three decades of brand building experience in the consumer sector. She'll compliment our outstanding board, which always brings strong expertise and invaluable advice through our organization. Now, as I look forward, I'm pleased with the positive customer response to new fall collections, new product innovations combined with our unique formula about standing quality and style offered at great value as a cornerstone of our brands. Position us perfectly for today's consumers.
Speaker Change: And lastly, in the second quarter, we are very excited to welcome a new board damper.
Speaker Change: Stephanie Poulouly Essay
Speaker Change: Stephanie brings a strong track record as a proven strategist with over three decades of brand-building experience in the consumer sector. She'll complement our outstanding board, which is always brings strong expertise and a valuable advice to our organization.
Speaker Change: Now as I look forward, I'm pleased with the positive customer response to new fall collections.
Speaker Change: New Product Innovations, combined with our unique formula of outstanding quality and style, offered at great value as a cornerstone of our brands. Position us perfectly for today's consumers.
Jay Schottenstein: Across brands, I'm optimistic that we will continue to deliver great experiences for our customers in the upcoming seasons. At the same time, we recognize the importance of inventory and expense discipline in this dynamic macro environment, and that will remain a core focus across the organization. In closing, the second quarter results lock in a solid first half for AEO and our Powering Profitable Growth strategy. As Michael will review, we are attracted to liver operating profits at $455 to $465 million at the high end of our previous outlook. Looking beyond this, I am confident we have the right plan in place.
Speaker Change: Across France, I'm optimistic that we will continue to deliver great experiences for our customers in the upcoming seasons.
Speaker Change: At the same time, you recognize the importance of the inventory and expense discipline in this dynamic, macro-environment. And that will remain a core focus across the organization.
Speaker Change: In closing, the second quarter results lock in a solid first half for AEO and our powering profitable growth strategy.
Speaker Change: Review, we on track to deliver operating profits of $455 to $465 million at the high end of our previous outlook.
Jay Schottenstein: The further expand our brands of delivery, the sustainable profit growth over the long term. Our focus on greater efficiencies is yielding results, and we remain steadfast in making continued progress to drive shareholder value.
Speaker Change: Looking beyond this, I'm confident we have the right play and the place, the further expand our brands of deliveries, the sustainable profit growth over the long term.
Speaker Change: Our focus on greater efficiencies is healing results, and we remain steadfast in making a pin you progress to drive sureholder value, now over to Jayne.
Jennifer Foyle: Now over to Jen. Thanks, Jay, and good morning, everyone. I'm really pleased with our second quarter performance. Our brand strategies are guiding us in delivering strong results. Across brands, we offered trend rate collections and exciting new marketing. We stayed disciplined on inventory and chased into fan favorites profitably, which contributed to higher merchandise margins. And we are actively engaging with our customers more than ever. Both AE and Airy saw double-digit growth in their customer files, further demonstrating the widening appeal of our brand.
Jayne: Thanks, Jay, and good morning, everyone.
Jayne: I'm really pleased with our second quarter performance.
Jayne: Our brand strategies are guiding us in delivering strong results.
Jayne: Across France, we offer trend rate collections and exciting new marketing. We say disciplined on inventory and chased into fan favorites, profitably, which contributed to higher merchandise margins.
Jayne: And we are actively engaging with our customers more than ever, both AE and Erie saw double-digit growth in their customer files, further demonstrating the widening appeal of our brand.
Jennifer Foyle: Let me start today with American Eagle. As Jay noted, AE is the mainstay in casual fashion that has brought joy to generations of customers. And one incredible journey we've been on over the past year. Modernizing AE's legacy of optimism and individual style, anchored in an exciting new growth agenda. In fact, this was the fourth consecutive quarter of revenue and profit growth for AE, with revenue rising 8% and comes up 5%. Operating profit also continues to rise, with every quarter we are making steady progress amplifying American Eagle with exciting collections. I am particularly pleased with the momentum and women, which once again led growth for the quarter.
Speaker Change: Let me start today with American Eagle. As Jay noted, AE is a mainstay in casual fashion that has brought joy to generations of customers.
Jay: and one incredible journey we've been on over the past year, modernizing A.E.'s legacy of optimism and individual style anchored in an exciting new growth agenda.
Speaker Change: In fact, this was the fourth consecutive quarter of revenue and profit growth for AE, with revenue rising 8% and comes up 5%.
Speaker Change: Operating Profit also continues to rise with every quarter we are making steady progress, amplifying American Eagle with exciting collections.
Speaker Change: I am particularly pleased with the momentum and women which once again let's grow for the quarter. We continue to drive tops a category that has now seen six consecutive quarters of growth.
Jennifer Foyle: We continue to drive cops, a category that has now seen six consecutive quarters of growth. As I reviewed in March, completing the outfit is a huge focus for us. And I love seeing new fashion check across nits, fees, and shirts. Shirts, dresses, and shorts were also very strong. We have seen a great response to new looks targeting social casual occasions and our widening age demo, both of which are key growth opportunities. In men, we were very pleased with improving trends in tops and strength in 12 bottoms. Additionally, our active wear collection 24-7 is gaining traction, offering a new active casual option defined by high quality, sharp design, and great value.
Speaker Change: As I reviewed in March, completing the outfit is a huge focus for us, and I love seeing new fashion, check the cross-knits, tease, and shirts.
Speaker Change: Schotz, stressors and shorts were also very strong.
Speaker Change: We have seen a great response to new looks targeting social casual occasions and our widening age demo, both of which are key growth opportunities.
Speaker Change: In men, we were very pleased with improving trend in top and strength in 12 bottles.
Speaker Change: Additionally, our ActiveWare Collection 24-7 is gaining traction, offering a new active casual option defined by high quality, sharp design and great value.
Jennifer Foyle: We look forward to continuing to use our learnings to read and react to new trends.
Speaker Change: We look forward to continuing to use our learnings to read and react to new trends.
Jennifer Foyle: In the second quarter, we were also excited to reintroduce our marketing platform, Live Your Life. Built on AE's legacy of individuality and optimism, it's a powerful anthem that inspires every generation to live life to the fullest. Our fall campaign features US Open champion Coco Gough and star quarterback Trevor Lawrence. Just last week, we introduced the limited edition product collaboration with Coco, designed to highlight denim-forward styles. We look forward to building on our platform as we move ahead.
Speaker Change: In the second quarter, we were also excited to reintroduce our marketing platform, Live Your Life. Built on A.E.s legacy of individuality and optimism, it's a powerful anthem that fires every generation to live life to the fullest.
Speaker Change: Our fall campaign features U.S. Open Champion Coco Gough and star quarterback Trevor Lawrence.
Speaker Change: Just last week, we introduced a limited edition product collaboration with Coco designed to highlight denim-forward styles.
Jennifer Foyle: And now moving on to Ari, we continue to see a terrific response to this amazing brand. Our soft dressing categories and the expansion into active wear with offline has been simply incredible. The second quarter marks yet another record for Ari, with revenue up 9% to last year, fueled by a 4% increase in comps. And as we continue to scale, profit flow through is improving, with margins that are expanding. Soft to parallel and active where are two of Ari's hottest categories and where we see the most growth potential in the coming years. I love how we delivered here in the second quarter with both categories comping in the double digit.
Speaker Change: We look forward to building on our platform as we move ahead.
Speaker Change: and now moving on to Erie.
Speaker Change: We continue to see a terrific response to this amazing brand, our soft dressing categories and the expansion into active wear with offline has been simply incredible. The second quarter marked yet another record for Aerie with revenue up 9% to last year fueled by a 4% increase in cons.
Speaker Change: and as we continue to scale, profit flow through is improving with margins that are expanding.
Speaker Change: Most major categories were positive. One callout continues to be the expected weakness in slim, excluding slim, which is a seasonal spring category, airy comps were up 7%.
Speaker Change: As we shared in March, Softaparel and Activeware are two of Erie's hottest categories and where we see the most growth potential in the coming years.
Speaker Change: I love how we deliver here in the second quarter with both categories, copying in the double digits. In soft apparel, strength was led by Teeves, tanks, and pants, and shorts, as our customers reach for our tried and true, cozy favorites.
Jennifer Foyle: In soft to parallel strength was led by T's, tanks, and pants and shorts as our customers reach for our tried and true cozy favorites. Offline continues to be outstanding. We came to market with a seller assortment that captured key summer active looks, driving strength and sports fraud, shorts and active tops. As we transitioned back to school, we are seeing a very positive customer response to newness and categories, including sleepwear as well as strongholds like fleece and leggings. We are also amping up our influencer strategy to expand the power and the exposure of Very Real. In July, we launched Get Real with me featuring 30 prominent TikTokers, sharing what makes them real.
Speaker Change: Offline continues to be outstanding. We came to market with a stellar assortment that captured key summer active looks, driving strength and sports fraud, shorts and active tops.
Speaker Change: As we transition to back to school, we are seeing a very positive customer response to menace and categories, including sleepwear, as well as strongholds, like sleep and leggings.
Speaker Change: We are also amping up our influencer strategy to expand the power and the exposure of very real. In July, we launched Get Real with me featuring 30 prominent TikTokers, sharing what makes them real. And the campaign has been a huge success to date.
Jennifer Foyle: And the campaign has been a huge success to date. As we continue to build buzz around offline, we are unveiling new activewear-focused marketing for the first time this fall, highlighting our breath of fabrications with the tagline "moved away."
Speaker Change: As we continue to build buzz around offline, we are unveiling new activeware focused marketing for the first time in the fall, highlighting our breath of fabrications with the tagline, moved away you aren't.
Jennifer Foyle: In summary, our brands are healthy, growing, and well positioned. Our new fall collection is doing well, and I'm pleased with our performance so far in August. I'm excited about upcoming collections, which include fun collaborations and marketing events to delight our customers. We are making fantastic progress across our strategic initiatives. I remain incredibly confident that we are on the right path to unlock the tremendous potential we see across our brands. Thanks to the teams for delivering once again, and I look forward to the continued momentum.
Speaker Change: In summary, our brains are healthy, growing, and well positioned. Our new fall collection is doing well and I'm pleased with our performance so far in August.
Speaker Change: I'm excited about upcoming collections which include fun collaborations and marketing events to delight our customers.
Speaker Change: We are making fantastic progress across our strategic initiatives. I remain incredibly confident that we are on the right path to unlock the tremendous potential we see across our brands.
Speaker Change: Thanks to the teams for delivering once again, and I look forward to the continued momentum. And with that, I'll turn the call over to Mike.
Michael Mathias: And with that, I'll turn the call over to Mike. Thanks, Jen. Good morning, everyone. Our strong second quarter result speaks to the power of our brands and the work behind our power and profitable growth plan announced back in March. Foundational improvements to our cost structure are driving nice leverage across the P&L, leading to strong operating profit growth and margin expansion. Baning on a few highlights, consolidated revenue of 1.3 billion was up 8% to last year, given by a 4% increase in comparable sales growth. As discussed last quarter, the shift in the retail calendar contributed approximately $55 million to revenue, reflecting the capture of a higher volume back to school selling week.
Mike: Thanks, Jen, and good morning, everyone.
Mike: Our strong second quarter result speaks to the power of our brands, and the work behind our power and profitable growth plan announced back in March.
Mike: Foundation improvements to our cost structure are driving nice leverage across the PNL, leading to strong operating profit growth and margin expansion.
Banning: Banning on a few highlights, consolidated revenue of 1.3 billion was up 8% to last year, driven by a 4% increase in comparable sales growth.
Scott: As the Scott's last quarter, the shift in the retail calendar, contributed approximately $55 million to revenue, reflecting the capture of a higher volume back to school selling week.
Michael Mathias: Operating income was 101 million, increasing 55% to last year. This includes a contribution of approximately 20 million related to the calendar shift. The operating margin rose 240 basis points to 7.8%. Rose profit dollars of 499 million rose 10%, the gross margin expanded 90 basis points to a rate of 38.6%. merchandise margins were healthy and up to last year, led by favorable product costs. Additionally, we maintained strict cost discipline, leveraging BOW costs by 40 basis points, driven by rent, individual delivery, where we saw lower cost per order. Police and services, supplies and maintenance also leverage. I'm pleased with the progress the teams are making across key focus areas.
Scott: Operating income was 101 million increasing 55% to last year.
Scott: This includes a contribution of approximately 20 million related to the calendar shift.
Scott: The operating margin rose 240 basis points to 7.8%
Scott: Rose Profit Dollars, $499 million, rose 10%, Rose Martin expanded 90 basis points to a rate of 38.6%.
Scott: Merchandell smartens were healthy and up to last year led by favorable product cost.
Scott: Additionally, we maintain strict cost discipline, leveraging the AW costs by 40 basis points, given by rent and digital delivery, where we saw lower cost or order.
Scott: That's an extent of 35 million with up 4% to last year, consisting with our guidance.
Scott: S.E.A. of the rate of sales decline 90 basis points driven by leverage across compensation, including Senate's store in corporate payroll.
Scott: Professional Fees and Services, Supply, the maintenance also leverage.
Michael Mathias: We're challenging how we work and driving efficiencies and how we operate every day and remain on track to leverage SGNA over the balance of the year. The appreciation was down year by year, leveraging 60 basis points. The second quarter tax rate was 25% in line with guidance. We continue to expect the tax rate to be in the mid to high 20s for the remainder of the year. Earnings for share for the second quarter was 39 cents per share, rising 56% to last year. Consolidated ending inventory costs was up 4% year by year. The inventory levels remain healthy across brands as we maintain buying discipline and continue to chase.
Speaker Change: I'm pleased with the progress the teams are making across key focus areas. We're challenging how we work and driving efficiencies and how we operate every day and remain on track to leverage SGNA over the balance of the year.
Speaker Change: The appreciation was down year-to-year leveraging 60 basis points. The second quarter tax rate was 25% in line with guidance. We continue to expect the tax rate to be in the mid to high 20s for the remainder of the year.
Speaker Change: earnings per share for the second quarter was 39 cents per share, rising 56% to last year. Consolidated ending inventory cost was up 4% year of a year. Payment for a level of remain healthy across brands, as we maintain buying discipline and continue to chase.
Michael Mathias: As Jay noted, we generated healthy cash flow, allowing us to fuel investments in our business as well as return cash to shareholders. Second quarter capex total $61 million in the quarter and $97 million year to date. We continue to expect full year spend to be in the range of 200 to 250 million. In addition to paying out a quarterly dividend, we repurchased 4.5 million shares in the quarter, amounting to $96 million, bringing year-to-date cherry purchases to 6 million shares and $131 million. We ended the quarter with a strong balance sheet with approximately 192 million in cash and over 800 million of total liquidity, including our revolver.
Speaker Change: As they noted, we generated healthy cats flow allowing us to fuel investments in our business, as well as return cats to shareholders.
Speaker Change: 2nd quarter CapEx total $61 million in the quarter and $97 million in your today.
Speaker Change: We continue to expect four years spend to be in the range of 200 to 250 million.
Speaker Change: And this is depending on our quarterly dividend, we repurchased $4.5 million shares in the quarter, amounting to $96 million, for being here today's series purchases to $6 million shares, and $131 million dollars.
Speaker Change: We ended the quarter with a strong balance sheet with approximately 190 million in cash, and over 800 million of total equities including our revolver.
Michael Mathias: Second quarter results are a good demonstration of our ability to deliver strong results under our new strategy. Feeling growth across our brands while driving efficiencies to improve profit flow through. This operating discipline is now ingrained in our organization as we move our business forward, continue creating shareholder value.
Speaker Change: Second quarter results are a good demonstration of our ability to deliver strong results under our new strategy.
Speaker Change: Ealing growth across our brands while driving efficiency to improve profit flow through.
Speaker Change: This operating discipline is now in grain and organization as we move our business forward, continue creating shareholder value.
Michael Mathias: Which leads me to our outlook. So the third quarter we expect operating income to be in the range of 120 to 125 million. This reflects approximately 20 million of profit that shifted into the second quarter from the third quarter due to the retail calendar. We expect third quarter comparable sales to grow in the range of 3 to 4%, with revenue flat to up slightly, reflecting 45 million of revenue shifting out to the retail calendar as previously discussed. For the full year, we have updated our operating income outlook to 455 to 465 million at the high end of our prior guidance.
Speaker Change: which leads me to our outlook.
Speaker Change: The third quarter we expect operating income to be in the range of 120 to 125 million. This reflects approximately 20 million of profit that shifted into the second quarter from the third quarter due to the retail calendar.
Speaker Change: The expected third quarter comparable sales to growing the range of three to four percent, with revenue flat to up slightly, reflecting 45 million of revenue shifting out due to the retail calendar as previously discussed.
Speaker Change: For the full year, we have updated our operating income outlook to 455 to 455 million at the high end of our prior guidance. This reflect income growth of 21 to 24% to adjusted operating income of 375 million last year.
Michael Mathias: This reflected income growth of 21 to 24% to adjusted operating income of 375 million last year. We expect comparable sales growth to approximately 4% with revenue up in the range of 2 to 3%, including the impact of one less selling week, as previously discussed. We remain on track to leverage SGNA for the year, with the bulk of the second half benefit coming in the fourth quarter due to the timing incentive and other expenses, as well as ongoing profit improvement initiatives. Third quarter SG&A is expected to be down slightly. The NA remains at $220 million and our projections for weighted average share count remaining the high 190.
Speaker Change: We expect comparable sales growth approximately 4% with revenue up in the range of 2-3% including the impact of one less selling week as previously discussed.
Speaker Change: We remain on-track to leverage SCNA for the year, but the bulk of the second half benefit coming in the fourth quarter due to the timing and incentive and other expenses as well as ongoing profit improvement initiatives.
Speaker Change: Third quarter of last teenage expected to be down slightly.
Speaker Change: DNA remains a $220 million dollar and our projections for weighted average share counter made in the high-19
Michael Mathias: Before I open up for questions, I want to underscore the confidence I have in the direction of our business. Business. With the clarity of our new strategy, we're moving our brand and business forward in line with our long-term agenda.
Speaker Change: Foyle opened up for questions. I want to underscore the competence I have in the direction of our business.
Speaker Change: With the clarity of our new strategy, we're moving our brands and business forward in line with our long-term agenda.
Operator: And with that, we'll open it up for questions. Thank you.
Speaker Change: and with that we'll open up for questions.
Adrienne Yih: We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your questions from the queue. For participants using bigger equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we call for questions. Thank you. Our first question is from Adrienne Yih, with Barclays. Please proceed with your question. Great. Thank you very much.
Speaker Change: Thank you, and we'll now be conducting a question and answer session.
Speaker Change: If you would like a second question, please press star 1 on your telephone keypad. The confirmation tunnel in the case of your line is in the question queue.
Speaker Change: You need to press star 2 if you'd like to remove your questions from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your hands at the forecast in the star keys. One moment please while we call for questions.
Speaker Change: to
Speaker Change: We'll meet you later
Speaker Change: Thank you, our first question is from Adrian and E with Park Lays, who is pursuing their question.
Jay Schottenstein: I was wondering you had mentioned that you were happy with the early reason I'm back to school sort of quarter to date, month to date. I was wondering if you can go a little bit deeper into that between kind of airy versus American Eagle. And if you're seeing some of the silhouette shift impact thus far. And then, following up, how do you think about the duration of back to school in terms of having a second wind after September, after Labor Day? And then Mike, can you talk about the estimated down slightly? Is that a change from kind of last quarter, if so?
Adrian: Great, thank you very much, makes us to the progress.
Jen: Jenna, I was wondering if you would mention that you were happy with the early reason I'm back to school, sort of quarter to date, month to date. I was wondering if you could go a little bit deeper into that between kind of aery versus American Eagle, and if you're seeing some of the, you know, silhouette shift impact thus far, and then following up, like, how do you think about the duration of back to school in terms of having a second wind after September , after Labor Day?
Jen: and then Mike, can you talk about the estimate down slightly? Is that a change from kind of last quarter if so? What has shifted there? Because you are up against a pretty big up 15% last year for that same quarter. Thank you very much.
Jay Schottenstein: What has shifted there? Because you are up against a pretty big up 15% last year for that same quarter. Thank you very much. Sure. You are really pleased with second quarter results. And really we're delivering on this strategy. I am so pleased with our results. And as we look ahead, very excited about the acceleration in the back to school. As you know, when we think about denim, it's our main state. Jeans are a rite of passage for American Eagle. We have an incredible denim business. We're number one for 15 to 25 year olds and number one for women of all ages.
Jen: [inaudible]
Jenna: Sure, you've really pleased with 2nd quarter results and really we're delivering on this strategy, I am
Speaker Change: So, please, with our results, and as we look ahead, very excited about the acceleration and the back to school. As you know, when we think about denim, it's our main state. Jeans are a right of passage for American Eagle. We have an incredible denim business. We're number one for 15 to 25-year-olds, and number one for women of all ages. So, we're really leaning to women's particularly.
Jay Schottenstein: So we're really leaning on women's particularly. Denim is our mainstay. I'm going to reiterate, and we love the new trends that are emerging. We are not just the ones that brand anymore. Women are so nimble these days, and we are leaning into all the new silhouettes. Feel really good about lower and looser silhouette. And we're seeing really nice results there. And as we think about the future, we're modifying our trends that we're seeing. We're making sure that we're leaning in. As we go into the back half of Q3 and Q4 and we're ready to play going into Airy.
Speaker Change: Jennam is our mainstay. I'm going to reiterate and we love the new trends that are emerging. We are not just the ones that brands anymore. Women is so nimble these days and we are leaning into all the needs of a lab. Feel really good about lower and looser still a lab.
Speaker Change: and we're seeing a really nice results there and as we think about the future we're modifying our trends that we're seeing, we're making sure that we're leaning in as we go into the back half of Q3 and Q4 and we're ready to play. Going into Aery, I mentioned it right, little softness in swimming Q2 but we're seeing really nice results as we head into August.
Jay Schottenstein: I mentioned it, right? A little softness and swimming Q2. But we're seeing really nice results as we head into August. Still many weeks ahead of us, but very similar to what we saw outside of swim. In fact, we're seeing some nice growth in our categories, including soft dressing. Really amazing results there. We launched Sleep. I don't know if you saw it, but early on in July, and we are chasing that business. It's done fantastic for us. And also, of course, offline offline is our business right now. We are not seeing any slowness in the athletic category.
Speaker Change: Still many weeks ahead of us, but very similar to what we saw outside of swim. In fact, we're seeing some nice growth in our categories, including soft dressing. Really amazing results there. We watched sleep. I don't know if you saw it, but early on in July, and we are chasing that business. It's done fantastic for us.
Speaker Change: and also of course offline, offline is our business right now. We are not seeing any slowness in the athletic category. In fact, we were high double digits on last year's double digit increase and we are going to continue to lean into that category.
Michael Mathias: In fact, we were high double digits on last year's double digit increase, and we're going to continue to lean into that category. So we've, you know, a great result here in the second quarter. We guided the mid single-digit increase in FTA. We came in on the low side of that guidance, just an indication of how our expense initiative has taken hold. And we're continuing to strengthen that month even further. And then for the, you know, the remainder of the year, we're expecting us to be down slightly in the third quarter, down in the fourth quarter, leveraged for the rest of the year.
Speaker Change: on SNA, so we've, you know, a great result here in the second quarter. We got a bit of a single digit increase in SNA. We came in on the low side of that guidance.
Speaker Change: Just an indication of how our expansion initiative is to take an hold and we're continuing to strengthen that muscle even further and then forward the...
Speaker Change: The remainder of the year, we're expecting if she may be down slightly in the third quarter, down in the fourth quarter
Matthew Boss: And that's really consistent with the previous guidance we've given. And then your question on just the elongation of the back of school season. We have seen that in recent years where, especially in the Northeast, I think as you get into Labor Day and into the early September period, have seen, I think, the main stretch a little bit or swimming similar type, you know, something similar happened this year. So. Thank you very much. That's a lot. Thank you. Our next question is from Matthew Boss with J.P. Morgan. Please proceed with your question. Great, thanks. So, Jen, maybe could you speak to the poor consumer relative to new customer acquisition?
Speaker Change: Leveraged for the rest of the year and that's really consistent with the previous guidance we've given.
Speaker Change: and then your question on just the elongation of the back of full season. We have seen that in recent years where especially in the Northeast, I think, is to get into labor day and into a bit early September period, have seen, I think, the Mayan stretch a little bit, we're assuming similar type.
Speaker Change: and something similar to happen this year, so...
Dury: Dury, thank you very much, that's a lot.
Speaker Change: Thank you.
Speaker Change: Thank you, our next question is from Matthew Boss, the JPMorgan, please proceed with your question.
Matthew Boss: Great, thanks. So, Jen, maybe could you speak to the poor consumer relative to new customer acquisitions? I think you talked about expanding the customer file and American Eagle by double digits, actually across both brands.
Jennifer Foyle: I think you talked about expanding the customer file at American Eagle by double digits, actually across both brands. So, maybe what are you seeing from your existing customer? What do you think is driving new customer acquisition? And how best to think about where we stand today on assortments relative to where you see a sort of opportunity as a year progresses? Sure. We're really leaning into our marketing campaigns, for sure. If I think about American Eagle and we're amplifying our strategy growth initiatives and, you know, we have new categories in American Eagle. We have 24-7. We have 7-8-E-77.
Speaker Change: So, maybe what are you seeing from your existing customer, what do you think is driving new customer acquisition? And how best to think about where we stand today on a sort means relative to where you see a sort of opportunity as a year progresses?
Operator: for Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone sure to apply our operator's assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: Sure, we're really leaning into our marketing campaigns for sure if I, you know, think about American Eagle and we're amplifying our strategy growth initiatives.
Operator: A brief question and answer session will follow the formal presentation. As a reminder, this call is being recorded.
Speaker Change: We have new categories in American Eagle. We have 24-7, we have 877, we're getting nice early reads on those businesses, and we're offering new categories that we're not in existence from prior years. So we're leaning into social casual. I think we're going to own this category, we're doing it better than other competition out there, and this is what we do best, right? Quality and value. And I want to highlight quality for our brands. We are quality is like no other, and we spend a lot of time leaning in and ensuring that we have the best quality out there at the best price.
Jennifer Foyle: We're getting nice early reads on those businesses, and we're offering new categories that we're not in existence from prior years. So, we're leaning into social casual. I think we're going to own this category. We're doing it better than other competition out there. And this is what we do best, right? Quality and value. And I want to highlight quality for our brands. We are quality is like no other. And we spend a lot of time leaning in and ensuring that we have the best quality out there at the best price. And, you know, I missed your second question.
Judy Meehan: I would now like to turn the call over to Judy Meehan, Senior Vice President, Corporate Communications and Investor Relations. Thank you, Judy. You may begin. Good morning, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Dan Foyle, President, Executive Creative Director for AE&Ari, and Mike Matthias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements.
Judy Meehan: These statements are based upon information that represents the company's current expectations or beliefs. The results actually realize may differ materially based on risk factors included in our SEC filing. 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 accept as required by law. Consistent with the retail calendar and the 53rd week last year, second quarter, 2024 results, and today's discussion are presented for the 13 weeks ended August 3, 2024. Compared to the 13 weeks ended July 29, 2023, comparable sales metrics are presented for the 13 weeks ended August 3, 2024, compared to the 13 weeks ended August 5, 2023.
Michael Mathias: Can you just please reiterate that, please? Just a new customer acquisition and relative to opportunities within the assortment of the year. And it's not just acquisition. It's also retention in both brands. We thought, you know, in past years, honestly, that our customer dumped out, you know, really when you think of both 21. And now, just with these assortments in both brands, that we're really able to keep that customer with us. And they're growing with us. Such an important key factor for us as we grow these businesses. Great. And then Mike, just on gross margin, how best to think about third quarter relative to fourth quarter expectations relative to the 90 basis points of expansion you saw in the second quarter?
Speaker Change: and you know, I missed your second question. Can you just please reiterate that please?
Speaker Change: Just a new customer acquisition and relative to opportunities within the store for business safety.
Speaker Change: [inaudible]
Speaker Change: Yeah, and it's not just acquisition, it's also retention in both brands. We saw, you know, in past years, honestly, that our customer dumped out, you know, really when you think of post 21. And now, just with these assortments in both brands, that we're really able to keep that customer with us, and they're growing with us, such an important key factor for us as we grow these businesses.
Speaker Change: Great, and then Mike, just an ungrossed margin, how best to think about third quarter relative to fourth quarter expectations, relative to the 90 basis points of expansion you saw in the second quarter?
Judy Meehan: Additionally, you can find the second quarter investor presentation posted on our corporate website at www.aio-nc.com and the investor-relation section.
Jay Sole: Yeah, that I think with the revenue shift in the calendar, when I expect in gross margin to expand as much as we've seen in the first half, really because of the leverage of the expenses in gross margin, nothing tied to product margin. We still see favorability in our initial markup, and we're managing promotions and markdowns as we always have. So it's really just about with the revenue shift, not leveraging those expenses. So we're not looking for the margin improvement like we've seen in the first quarter and the second quarter. Great. That's the point. Thank you.
Speaker Change: I think what's the revenue shifts in the calendar when we're expecting Gross Martin to expand as much as we've seen the first half really because of the leverage of the expenses in Gross Martin.
Jay Schottenstein: And now I'll turn the call over to Jay. Thanks, Judy, and good morning, everyone. During the second quarter, we continued executing on our strategy plan, powering profitable growth, removing our iconic brands forward and strengthening our operating capabilities to continue driving shorter value. Our second quarter results were strong proof. Consolidating financial results showed improvement across the majority of our key performance metrics. We delivered our six consecutive quarter of record revenue, while also achieving meaningful operating income growth.
Speaker Change: Nothing tied to product margin. We still see favorability in our initial markups and we're managing commotions and markdowns as we always have. So it's really just about what the revenue shift, not leveraging those expenses. So we're not looking for the margin agreement like we've seen in the first quarter in the second quarter.
Speaker Change: Great best of luck!
Michael Mathias: Our next question is from Jay Sol with UBS. Please proceed with your question. Great. Thank you so much. Just to maybe expand on that a little bit on the gross margin. Like, are you, what are you expecting from the emotional environment? The mother of the retailer just talked about maybe two promotions take up. I mean, is that, are you expecting a more competitive environment? Is that different from what you're expected 90 days ago? Yeah, it's always competitive. Jay, I think it's a good question. But, you know, I think we've been managing things consistently for multiple years now.
Speaker Change: Thank you. Our next question is from Jay Seoul with UBS. Please be seated with your question.
Jay Seoul: Great, thank you so much. Just to maybe expand on that a little bit on the gross margin. Like, what do you expect from the motion on fireman? Some other stuff to retailers is my job maybe to motion to take out the means that are you expecting a more competitive environment is that different from what you expected 90 days ago.
Jay Schottenstein: Second quarter results built on our strong first quarter performance, locking in a solid first half. We make consistent progress across our strategic priorities and line with our multi-year plan. As a reminder, our three key pillars are first amplify our brands, second optimize our operations, and third execute with financial discipline. Touching on the strategic and financial highlights for the quarter. To start, second quarter revenue of $1.3 billion was a new record for the company.
Speaker Change: Yes, it's always competitive today, I think it's a good question, but you know, I think we've been managing things consistently for multiple years now, we manage markdowns intelligently, we compete when we need to compete in peak periods.
Michael Mathias: We manage markdowns intelligently. We compete when we need to compete in peak periods. We've refined, you know, how the depth of our discounts or the length of our promotions to just maintain a very disciplined approach to markdowns. So we don't see that changing at all based on kind of what we're seeing in the business right now. And then on gross margin in general, I think it's, you know, the year here's a great equalizer because in these shifts creates a nuance is that we don't want to get into details around. So, on the year, we are seeing a total gross margin improvement based on what we've seen so far in the first half.
Speaker Change: We've refined you know how a depth of our discounts or the length of our promotions.
Speaker Change: to just maintain a very disciplined approach to the markdown, so we don't see that changing.
Speaker Change: at all based on kind of what we're seeing in the business right now.
Jay Schottenstein: We achieved 4% growth and a total revenue increase of 8% for the quarter, notably both brands and channels posted nice growth. We have two of the most we love brands in retail, American Eagle and Erie. Each with their own exciting roadmap for expansion. AE has defined American casual fashion for countless generations. I love seeing it come to life in new ways as we leverage our powerful legacy and execute on our growth initiatives.
Speaker Change: and then on Chris Martin in general I think the year here is a great equalizer because of these ships.
Speaker Change: Creightened nuances that we don't want to get into details around, so on the year we are seeing a total gross margin improvement.
Michael Mathias: And the color I just gave Matt a minute ago. And we are tracking toward, you know, our longer term goal is 39 to 40% for gross margin. And we're seeing nice improvement on a four-year basis toward that goal. And so I think the other piece of it is the value equation on promotions as well. So we know our price quality equation is in a great spot in the industry. So even if there's more deeper or more aggressive promotions from other retailers, we're managing things intelligently. With that price value equation, is a great starting point. Thank you.
Speaker Change: Based on what we've seen so far in the first half, and the color I just gave Matt a minute ago, and we are tracking toward, you know, our longer-term goal is 39 to 40 percent Progress margin and we've seen nice and proven on a full-year basis toward that goal.
Speaker Change: and so...
Speaker Change: I think the other piece of it is the value equation on promotions as well so we know our price quality equation is in a great spot in the industry.
Speaker Change: So, even if there's more deeper or more aggressive promotions from other retailers, we're managing things intelligently with that right value equation as a great starting point.
Dana Telsey: Thank you so much. Thank you. Our next question is from Dana Telsey, with the Telsey Advisor Group. Let me pursue your question. Hi, good morning, everyone. As you think about the stores channel versus the digital channel, what are you seeing in each? I mean, you had mentioned in terms of the stores business, some of the new formats, how you're seeing traffic and stores versus digital, and then just expanding on the gross margin, the puts and takes in terms of the components and what you're seeing also with break costs and also cotton costs as we move through the back half of the year.
Jay Schottenstein: And we are seeing great results between the model of stores outperforming the balance of the fleet. Erie is a very special brand, anchored and body positivity and woman empowerment. As we build brand awareness and expanded to new categories, we are reaching new heights. In the second quarter, Erie achieved another record revenue result with cops increasing 4% given by strength and apparel and our offline active sub brand. New Erie and offline stores are performing very well, expanding our reach and bringing in new customers.
Speaker Change: Go, thank you so much.
Speaker Change: Thank you. Our next question is from Dana Telsey with the Telsey Advisory Group. Please proceed with your question.
Dana Telsey: Good morning, everyone. As you think about the stores channel versus the digital channel, what are you seeing in H, I mean you had mentioned in terms of the stores business, some of the new formats, how are you seeing traffic and stores versus digital, and then just expanding on the gross margin, the puts and takes in terms of...
Speaker Change: The Components and what you're seeing also was break costs and also cotton costs as we move through the back half of the year. Thank you.
Michael Mathias: Thank you. Yes, if it's second quarter, Dana, we saw strength across both brands as we've outlined and channels. So both stores and digital were positive in the quarter. We're seeing the same thing continue into the third quarter here with a nice start or a good back-to-school peak season and strength in August that we're seeing both channels or positives still. With traffic being healthy in both stores and on the digital side. Gross margin puts and takes are similar. I think we're seeing flow through of initial product margin benefits. There have been some breaks in the industry, but our teams have gotten ahead of that.
Jay Schottenstein: Second, in line with our focus on delivering profitable growth, we also continue to realize efficiency across key focus areas. This rose significant leverage in our cost phase as we cemented new operating principles across the business and delivered 55% growth and operating income year over year. Third, we exit at the quarter with our balance sheet and excellent shape with $192 million in cash and no debt. During the second quarter, we leverage healthy cash flow to fuel long-term investments in our brands and operations. We also return $120 million in cash to our shareholders through a combination of dividends and share repurchases. This brings year-to-date returns to $180 million, consistent with our commitment to delivering value to our shareholders.
Speaker Change: Yes, if a second quarter of Daniel, we saw strength across both brands as we've outlined and channels, so both stores and digital were positive in the quarter, we're seeing the same thing continuing to the third quarter here and with a nice start.
Speaker Change: or a great, good, back to school peak season and strengths and august that we're seeing both channels or positives still.
Speaker Change: with traffic being healthy in both stores and on the digital side. Grace margin puts in takes, or similar, I think we're seeing flow through a financial product margin benefits.
Speaker Change: I have been some great districts to structure in the industry, but our teams have gotten ahead of that. We're just changing timelines and over-dates.
Paul Lejuez: It's just changing timelines and over dates so that we've mitigated any issues there with some of the recent disruption. And again, it just comes down to quarterly with the revenue shifts how we're leveraging the expenses in gross margin tracking nicely to a full year improvement in our gross margin rate as planned. Thank you. Our next question is from Paul Lesway, the city. Please proceed with your question. Hey guys, maybe give a little bit more specifics on what you're seeing in quarter to date by brand, also just how you're thinking about the composition for each in terms of what assumptions you bake in to the second half, and then separately we'll see some S&A improvements down in the back half.
Speaker Change: So that we've mitigated any issues there with some of the recent disruption and again it just comes down to quarterly with the revenues shifts how we're leveraging the expenses and growth margin tracking nicely to a full year improvement in our growth margin rate as planned.
Jay Schottenstein: And lastly, in the second quarter, we are very excited to welcome a new board member, Stephanie Poluli-SA. Stephanie brings a strong track record as a proven strategist with over three decades of brand-building experience in the consumer sector. She'll compliment our outstanding board, which is always bringing strong expertise and invaluable advice through our organization. Now as I look forward, I'm pleased with the positive customer response to new fall collections, new product innovations combined with our unique formula about standing quality and style offered at great value as a cornerstone of our brands.
Michael Mathias: and Michael Meehan, Michael Mathias, Michael Mathias, Michael Mathias,
Michael Mathias: and thank you.
Speaker Change: Thank you. Our next question is from Paul Ledgeway, Mr. D. Please proceed with your question.
Paul Ledgeway: You guys, huh?
David: David, give a little bit more specifics on what you're seeing in court of the date by brand also to say you're thinking about the composition for each in terms of what you're making for the second half and then separately.
Speaker Change: and we'll see some S&A improvements down in the back gap. How to be thinking about S&A Dollar Group for S-25?
Michael Mathias: How should we be thinking about S&A dollar growth for F25? Thanks. Thanks, Paul. You're changed by brand. We've, you know, second quarter both brands were positive as we've outlined. Jen mentioned area was plus seven without swim. So, as we've entered August, this trend has been consistent. So he was sort of maintaining the trend from the second quarter, and area has picked up in total similar to that result without swim. So happy to see that you know start with beginning in a quarter here and some strong performance through the back of the school peak weeks here in August.
Jay Schottenstein: Position us perfectly for today's consumers. Across brands, I'm optimistic that we will continue to deliver great experiences for our customers in the upcoming seasons. At the same time, we recognize the importance of inventory and expense discipline in this dynamic macro environment, and that will remain a core focus across the organization.
Speaker Change: Thanks for your change of our brand, we've...
Speaker Change: 2nd quarter, both friends were positive as a表 line, Jen mentioned area was plus 7 without squim.
Speaker Change: So as we've entered August here, that has been consistent, so 80 is sort of maintaining the trend from the second quarter, an area that has picked up in total, similar to that result without the whim.
Speaker Change: Happy to see that, you know, starting at the beginning of a quarter here and some strong problems through the back-to-school peak week here in August.
Jay Schottenstein: In closing, the second quarter results lock in a solid first half for AEO and our powering profitable growth strategy. Energy. As Michael will review, we are attracted to liver operating profits at $455 to $465 million at the high end of our previous outlook. Looking beyond this, I am confident we have the right plan in place to further expand our brands of delivery sustainable profit growth over the long term.
Michael Mathias: And then next G&A I think we're basically saying we're going to leverage the rest of the year. Dollars are relatively flat on the low end of our guy, maybe up slightly on the high end of the guy this year, and then for 25 we are in the middle of those plans. So you know we've got our muscles built around managing every single expense line item. We've got targets for every expense line item. All the decisions we're making managing things for the short term have a 25 lens toward them to make sure we're pathing to the targets we need for 2025.
Speaker Change: and then next year, we're basically saying we're going to leverage the rest of the year.
Speaker Change: Scholars are relatively flat on the low end of our guide, maybe up slightly on the high end of guide this year.
Speaker Change: and every 25 we are in the middle of this plan, so...
Speaker Change: We've got our muscles built around managing every single expense line item, we've got targets for every expense line item
Speaker Change: All the decisions were made and managing things with short-term, have a 25 lens toward them to make sure we're...
Jennifer Foyle: Our focus on greater efficiencies is yielding results and we remain steadfast in making the venue progress to drive shareholder value, now over to Jen. Thanks Jay and good morning everyone. I'm really pleased with our second quarter performance. Our brand strategies are guiding us in delivering strong results. Across brands we offered trend rate collections and exciting new marketing. We stayed disciplined on inventory and chased into fan favorites profitably, which contributed to higher merchandise margins. And we are actively engaging with our customers more than ever. Both AE and Ari sought double digit growth in their customer files further demonstrating the widening appeal of our brand.
Jenna Kim: I think in general you know as we talk about a 3 to 5% total revenue growth rate that we want that we're going after a year over a year as $8 will be planned and managed down or below that growth rate. That's that's what the line set we have for 25 right now. Thank you. Our next question is from Jenna Kim with T.D. Talon. Please proceed with your question. Thank you for taking my question. Could you talk about this monthly cadence during the quarter or how each month performed, and also just calling on the consumer health if you saw anything notable there.
Speaker Change: Mathias, I think to the targets we need for 2025, I think in general, you know, as we talk about a 3 to 5% total revenue growth rate that we won't never go in the afternoon over year, that $9 will be planned and managed down or below that growth rate. That's what the lines said we have for 2025 right now.
Speaker Change: and thank you for watching.
Speaker Change: Thanks for watching.
Speaker Change: And do our next question is from John the Tim with 2D talent. Please proceed with your question.
Speaker Change: Thank you for taking my questions. Could you talk about just monthly cadence during the quarter or how each month performs and also just call in on the consumer health if you saw anything notable there and then we'd love any color on how you're planning for the holiday as well. Thank you.
Jennifer Foyle: Let me start today with American Eagle. As Jay noted, AE is a mainstay in casual fashion that has brought joy to generations of customers. And one incredible journey we've been on over the past year, modernizing AE's legacy of optimism and individual style anchored in an exciting new growth agenda. In fact, this was the fourth consecutive quarter of revenue and profit growth for AE with revenue rising 8% and concept 5%. Operating profit also continues to rise with every quarter we are making steady progress amplifying American Eagle with exciting collections.
Michael Mathias: And we'd love any color on how you're planning for the holiday as well. Thank you. So for Q2, you know, May and June were the stronger months. We did see July moderate a bit. I think that's been in the industry topic. The day of traffic data and other indicators, their work July did slow down a bit. But again, August has kind of accelerated right back to the pre-July trend. And our guidance for the rest of this quarter coming off of August. We are planning for the middle periods between peak selling periods and peak traffic periods between back to school and holiday.
Speaker Change: So, for Keith to, you know, may and June were the stronger months. We did see July moderate a bit. I think that's been an industry topic.
Speaker Change: The data traffic data and other claim indicators, their work July did slow down a bit, but again August is kind of a re-celerator right back to the pre-gel I trend.
Speaker Change: and our guidance for the rest of this quarter, coming out in August, we are planning for the middle periods between peak-selling periods and peak traffic periods between back to school on holiday, we're using the assumption that things might moderate again within our three to four percent compounds for the full quarter.
Janet Kloppenburg: We're using the assumption that things might moderate again within our three to four percent confidence for the full quarter. Thank you. Our next question is from Janet Klavinberg with JJK Research. Please proceed with your question. Good morning, everyone. I have a question for everyone. Jay, we've been hearing from a lot of CEOs about their outlook on the consumer as we move forward and these uncertain times, and with the election coming up. So I'd love to hear your thoughts there. Jen, I was wondering about the source of true effect, just true effect. I was wondering about areas opportunity to accelerate now that swim has become seasonally less important and also on the men's denim business at AE.
Jennifer Foyle: I am particularly pleased with the momentum in women, which once again led growth for the quarter. We continue to drive cops a category that has now seen six consecutive quarters of growth. As I reviewed in March, completing the outfit is a huge focus for us. And I love seeing new fashion check across nits, tees and shirts. Shirts, dresses and shorts were also very strong. We have seen a great response to new looks targeting social casual occasions and our widening age demo, both of which are key growth opportunities.
Speaker Change: Can I take you home or take you there?
Speaker Change: Our next question is from Janet Klobber with J.J. K. Research, please proceed with your question.
Janet Klobber: Good morning, everyone. I have a question for everyone. Jay, we've been hearing from a lot of, um...
Jennifer Foyle: In men, we were very pleased with improving trends in tops and strengths in 12 bottoms. Additionally, our active wear collection 24-7 is gaining traction, offering a new active casual option defined by high quality, sharp design and great value. We look forward to continuing to use our learnings to read and react to new trends.
Speaker Change: C.A.O.O. is about the outlook on a consumer, as we move forward and these uncertain times and with the election coming up.
Speaker Change: So I'd love to hear your thoughts later, Jen, I was wondering about your, the source of two effects, just two effects. I was wondering about areas.
Jennifer Foyle: In the second quarter, we were also excited to reintroduce our marketing platform, Live Your Life. Built on AE's legacy of individuality and optimism, it's a powerful anthem that inspires every generation to live life to the fullest. Our fall campaign features US Open Champion Coco Gough and Star Quarterback Trevor Lawrence. Just last week, we introduced the limited edition product collaboration with Coco, designed to highlight denim-forward styles. We look forward to building on our platform as we move ahead.
Speaker Change: Opportunity to accelerate. Now that swim is become seasonally less.
Speaker Change: and important.
Jay Schottenstein: I mean, the silhouette looks great to me, but you're not calling it out. And Michael, I was just wondering on the merchandise margin, you know, whatever puts in takes there as we go forward, maybe with the AUC levels normalizing and also perhaps with some pressure on the price side. So maybe you could address that, and the inventory levels look really good to me. Do they keep improving? Thanks so much. Hey, Janet. Hi. Well, first of all, you know, we see a lot of opportunity out there. We have great brands in American Eagle. We have great sub-rans.
Jen: and also on the men's denim business at AE, I mean, they still arrest the great to me, but you're not calling it out.
Michael Mathias: and Michael, I was just wondering on the much of that margin, you know, what other puts and takes there as we go forward, maybe with the AUC levels.
Speaker Change: Normalizing and also perhaps with
Jennifer Foyle: And now, moving on to Ari, we continue to see a terrific response to this amazing brand. Our soft dressing categories and the expansion into active wear with offline has been simply incredible. The second quarter marks yet another record for Ari with revenue up 9% to last year fueled by a 4% increase in comps. And as we continue to scale, profit flow through is improving with margins that are expanding. Soft to parallel and active where are two of Ari's hottest categories and where we see the most growth potential in the coming years.
Speaker Change: You know, some pressure on the play side so maybe you could address that and end the inventory levels with really good to me today. Keep improving. Thanks so much.
Speaker Change: In Jennifer Foyle, Judy Meehan,
Speaker Change: Hi, first of all.
Speaker Change: Well, first of all, you know, we say a lot of opportunity out there, but if we have great brands in American Eagle, we have great sub-rands.
Jennifer Foyle: And as Jen has emphasized, we've worked very hard on giving great value to our customers. We now, now, now we now only are we proud of our quality. We're also proud of our fits, our comfort, and what we've developed, you know, in all the years I've been in this business. I probably see the greatest opportunity in the history of the company because number one, we've got an American Eagle growing the right way. We have Erie growing the right way. We have a hot brand in the athletic area with off line, which is just getting started.
Speaker Change: and as Jen is episodes, we work very hard on giving great value to you.
Speaker Change: To our customers, now we are only proud of our quality, we are also proud of our fits, our comfort and what we've developed. And all the years I've been in this business.
Jennifer Foyle: I love how we delivered here in the second quarter with both categories comping in the double digits. And soft to parallel strength was led by T's, tanks and pants and shorts as our customers reach for our tried and true cozy favorites. Offline continues to be outstanding. We came to market with a stellar assortment that captured key summer active looks, driving strength and sports fraud, shorts and active tops. As we transitioned back to school, we are seeing a very positive customer response to newness and categories, including sleepwear, as well as strongholds like fleece and leggings.
Speaker Change: I probably see the greater soccer tune in the history of the company, because everyone got American Eagle growing the right way.
Speaker Change: We have Eric during the right way. We have a hot brand in Mathletic area with ball flying, which is just getting started. We're only in a few states. We see great opportunity, even with Eric. We're only in half the country. We see great opportunity there to grow this business.
Jay Schottenstein: We're only in a few states. We see great opportunity. Even with Erie, we're only in half the country. We see great opportunity there to grow this business. We develop great sub-rans in our 24-7, which is like Erie, West 10 years ago. Which has great potential to be a great brand within its own and within offline. At the same time, we have Erie, 77, which is our better, more sophisticated, appealing to a more sophisticated customer and more mature customer. So, we will have an ability in the future not only to take the customer from the 15 to 25, but to keep that customer at 25 plus.
Speaker Change: We developed great submarines in our 24-7, which is like Harry Westend years ago, which has great potential to be a great brand within itself and within offline.
Jennifer Foyle: We are also amping up our influencer strategy to expand the power and the exposure of very real. In July, we launched Get Real with me featuring 30 prominent tick tockers, sharing what makes them real and the campaign has been a huge success to date. As we continue to build buzz around offline, we are unveiling new activewear, focused marketing for the first time in this fall, highlighting our breath of fabrications with a tagline moved away.
Speaker Change: and at the same time we have a 877 which is our better, more sophisticated, appealing to a more...
Speaker Change: to investigate a customer and more mature customer. So we will have the ability in the future, not only to take the customer from the 15 to 25, but to keep that customer in 25 plus.
Jay Schottenstein: So, from our standpoint, today, we're $5 billion. We think in the next few years, we can be a $10 billion business. And we are... That's really exciting. We're going to emphasize this. We are committed to making the investment to become that business. We're putting together our plans now, which is going to take what we have to add, because we're going for it. We see the opportunity. We're excited about our business. You can walk in the mall today, and I'll put my stores as the best looking stores in the malls. The best shopping experience. We believe we have the best experience between the online, where we make a clean list, the customer, whether they're online, or whether they walk in the store, if they're seeing this experience.
Speaker Change: So, from our standpoint, today we're $5 billion, we think in the next few years we could be a $10 billion business And we are...
Jennifer Foyle: In summary, our brands are healthy, growing and well positioned. Our new fall collection is doing well and I'm pleased with our performance so far in August. I'm excited about upcoming collections, which include fun collaborations and marketing events to delight our customers. We are making fantastic progress across our strategic initiative. I remain incredibly confident that we are on the right path to unlock the tremendous potential we see across our brands. Thanks to the teams for delivering once again, and I look forward to the continued momentum.
Speaker Change: We are committed to making the investment to become that business, we're putting together our plans now, what's going to take, but we have to add, because we're going for it, we see it an opportunity.
Speaker Change: We're excited about our business. You can walk in the malls today and I'll put my stores as the best looking stores in the malls. The best shopping experience. We believe we have the best experience between the online where we make it seamless, the customer whether they're online or whether they walk in the store if they're seeing this experience.
Michael Mathias: And with that, I'll turn the call over to Mike. Thanks, Jen.
Jay Schottenstein: The last couple of years, we have the best of money and innovation. When I could play second fiddle with anybody, my goal is to have the best experience, shopping experience, whether online or in the stores. Now, I know everybody goes quarter to quarter. I can't ride business quarter to quarter. I'm looking for the future. And I've committed to do whatever it takes to build a thing, to where it deserves to be built. And we put together a world-class cy. I cannot emphasize the quality of our designers, of our merchants that we put together, and I'm very pleased.
Michael Mathias: Good morning, everyone. Our strong second quarter result speaks to the power of our brands and the work behind our power and profitable growth plan announced back in March. Foundational improvements to our cost structure are driving nice leverage across the PNL leading to strong operating profit growth and margin expansion. Baning on a few highlights, consolidated revenue of 1.3 billion was up 8% to last year, driven by a 4% increase in comparable sales growth.
Speaker Change: The last couple years, we've best in money and innovation.
Speaker Change: We're not going to play second fiddle to anybody, if my goal is to have the best experience shopping experience, whether online or in the stores. Now, I know if anybody goes quarter quarter, I can't ride business quarter in the world. I'm looking for the future.
Speaker Change: In a minute to do whatever it takes to build this thing, to where it deserves to be built, and we put together a world-class key. I cannot emphasize the quality of our designers, our merchants, and we put together, and very please, please, I'm very proud of what we have.
Michael Mathias: As discussed last quarter, the shift in the retail calendar contributed approximately $55 million to revenue, reflecting the capture of a higher volume back to school selling week. Operating income was 101 million, increasing 55% to last year. This includes a contribution of approximately 20 million related to the calendar shift. The operating margin rose 240 basis points to 7.8%. Rose profit dollars of $409 million rose 10%. The gross margin expanded 90 basis points to a rate of 38.6%, merchandise margins were healthy and up to last year led by favorable product costs.
Jennifer Foyle: Please, I'm very proud of what we have. Wow, that's a hard one to have. Top J, thanks. As I think of Ari, the best thing is we've run 17 quarters of record revenue in Ari. And on top of it, the profits are exceeding even the top line. So, really focused on a profitable, healthy business. As we look forward, look, we get our early reads in July, and we react to the business for the back half. The new reads are looking very strong in some of our new businesses, including sleep, as I mentioned. Offline was outstanding in Q2, so this is just about building on innovation there and owning that business.
Speaker Change: Wow, that's a hard one too, I'll talk Jay, thanks as I think the best thing is
Speaker Change: We've run 17 quarters of record revenue in airy and on top of it, the profits are exceeding even the top line. So, really focused on a profitable, healthy business. As we look forward, look, we get our early reads in July, and we react to the business for the back half. The new reads are looking very strong in some of our new businesses, including sleep as I mentioned. Offline was outstanding in Q2, so this is just about building on innovation there and owning that business. And by the way, our legging business, we have a cornerstone and market share there, we're the number one number four in sports bras, actually. And think about how young this business is and offline. So lots of opportunity to grow that business and compete with the likes of higher end competitors. So, I'm very excited.
Michael Mathias: Additionally, we maintained strict cost discipline leveraging BOW cost by 40 basis points driven by rent, individual delivery where we saw lower cost per order. Police and services supplies and maintenance also leverage. I'm pleased with the progress the teams are making across key focus areas. We're challenging how we work and driving efficiencies and how we operate every day and remain on track to leverage SGNA over the balance of the year. Appreciation was down year by year leveraging 60 basis points.
Michael Mathias: And by the way, our legging business, we have a cornerstone and market share there, where the number one, number four in sports broads, actually, and think about how young this business is in offline. So, lots of opportunity to grow that business and compete with the likes of, you know, higher-end competitors. So, I'm very excited about that business. Men's denim. First of all, I'm going to work with my marketing team, and we're going to make sure that that sign looks amazing in stores. Because we deserve it. The business is starting to turn around, particularly on the top side.
Speaker Change: Wright about that business. Men's denim, first of all, I'm going to work with my marketing team and we're going to make sure that that sign is looks amazing in storage because we deserve it.
Michael Mathias: I will say we have some more work to do in denim, but we like the fits that are coming through. We like our nimble mist to impact the business, and other bottoms are really checking too. As a reminder, men's, that business, we tend to sell shorts a little bit deeper into the Q3 side of the business. So, more to come on long legs, but we have a lot of read and react, and we're here to deliver. Janet, on the margin, puts and takes, consistently been describing our, we're managing markdowns intelligently; we'll compete when we need to.
Speaker Change: Starting to turn around, particularly on the top side. I will say we have some more work to do in denim, but we like the fits that are coming through. We like our nimbleness to impact the business, and other bottoms are really checking too. As a reminder, men's, that business. We tend to sell shorts a little bit deeper into the Q3 side of the business, so more to come on long legs, but we have a lot of
Michael Mathias: The second quarter tax rate was 25% in line with guidance. We continue to expect the tax rate to be in the mid to high 20s for the remainder of the year. Earnings for share for the second quarter was 39 cents per share, rising 56% to last year. Consolidated ending inventory costs was up 4% year by year. Inventory levels remain healthy across brands as we maintain buying discipline and continue to chase. As Jay noted, we generated healthy cash flow allowing us to fuel investments in our business as well as return cash to shareholders.
Speaker Change: and we're here to deliver.
Janet Klobber: Janet, on the margin to put some takes, consistent with you can describe it or if we're managing markdowns intelligently, we'll be able to compete when we need to.
Michael Mathias: We are seeing; we have line of sighted to our initial margins that are positive and up over last year for the rest of this year, so looking to flow through that benefit and then line of sight into early initial buys for the spring season and the first half of next year look favorable as well. I know there's some freight disruption and some conversations around freight. Right now we're not seeing we're managing that and we're not seeing any impact or decline to last year. We've got line of sighted to improvements for the remainder of this year and in the early next, and you're right, and we feel great about the plus four at the end of the quarter in good position, where we want it between a and a and a and categories that are driving the business. And as we look at our inventory plans for the rest of the year here, we feel the same about the remainder of this quarter and Q4.
Michael Mathias: Second quarter cap X total $61 million in the quarter and 97 million year to date. We continue to expect full year spend to be in the range of 200 to 250 million. In addition to paying out a quarterly dividend, we repurchased 4.5 million shares in the quarter, amounting to $96 million, bringing year to date cherry purchases to 6 million shares and $131 million. We ended the quarter with a strong balance sheet with approximately 192 million in cash and over 800 million of total liquidity, including our revolver.
Janet Klobber: We are saying we have decided to our initial margins that are positive and up over last year for the rest of this year.
Janet Klobber: So looking to float through that benefit and then line a fight entirely, initial buys for the spring season and the next year looks favorable as well.
Janet Klobber: some freight disruption and conversations around freight right now when not seeing we're managing that.
Janet Klobber: Um...
Janet Klobber: and we're not seeing any impact or decline due last year. We've got line of sight into improvements for the remainder of this year and in the early next year. And you're right, I mean, we've all great about the plus four at the end of the quarter.
Michael Mathias: Second quarter results are a good demonstration of our ability to deliver strong results under our new strategy. Feeling growth across our brands while driving efficiencies to improve profit flow through. This operating discipline is now ingrained in our organization as we move our business forward, continue creating shareholder value.
Janet Klobber: I think a good position where we want it between a and aary and categories that are driving the business and as we look at our inventory plans for the rest of the year here, we feel the same about the remainder of this quarter and two-four.
Chris Mardon: Thank you. Thank you all. Thank you. Our next question is from Chris Mardon with Bank of America. Please proceed with your question. Hi guys. Can you talk to the moving pieces of your updated sales guidance for the full year relative to how you were planning the business last quarter? It was like you took down the high end of the range. You've also talked extensively about strong quarter-day trends, so I'm just trying to tie it all together. And then one quick follow-up on your store growth plans. Can you re-confirm what the plans are for net store openings for both you go on air this year?
Speaker Change: Thank you, thank you all.
Michael Mathias: Which leads me to our outlook. So the third quarter we expect operating income to be in the range of 120 to 125 million. This reflects approximately 20 million of profit that shifted into the second quarter from the third quarter due to the retail calendar. We expect third quarter comparable sales to grow in the range of 3 to 4% with revenue flat to up slightly, reflecting 45 million of revenue shifting out to the retail calendar as previously discussed.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is from Chris Mardone with Bank of America. Please participate with your question.
Chris Mardone: Hi guys.
Chris Mardone: Can you talk through the moving pieces that you have to do to sell guidance for the full year relative how you were planning the business last quarter, was like you took down the high end of the range. You've also talked extensively about strong quarter-to-date trends, so I'm just trying to tie it all together.
Michael Mathias: For the full year, we have updated our operating income outlook to 455 to 465 million at the high end of our prior guidance. This reflected income growth of 21 to 24% to adjusted operating income of 375 million last year. We expect comparable sales growth to approximately 4% with revenue up in the range of 2 to 3%, including the impact of one less selling week as previously discussed. We remain on track to leverage SGNA for the year with the bulk of the second half benefit coming in the fourth quarter due to the timing incentive and other expenses as well as ongoing profit improvement initiatives. Third quarter SGNA is expected to be down slightly. The NA remains at $220 million and our projections for weighted average share count remaining the high 190.
Speaker Change #101: and then one quick follow up on your store group plan. Can you really confirm what the plan is? They are for next door openings for both you go and area this year.
Michael Mathias: Yes, short Chris. Full year sales guidance. We really I think the fitting to focus on is the plus the approximately the proximate for comp for the year. Narrowing the, we've narrowed our range on the high end of our earnings guidance 4545 million to 465 million. That's, you know, tied to that 4 proximate 4% comp, and then with the expense efficiencies we're seeing come through the business, feel good about kind of narrowing to that high end. And then the 2 to 3 for narrowing from 2 to 4 to 2 to 3 nothing to do with our A&A core business are obviously out of 4 comp.
Chris: Yes, sure Chris, Foyle your tail's got in, we really I think the thing to...
Speaker Change #103: Focus on it's approximately the Proxima IV Com for the Year.
Speaker Change #104: Maryland, we've narrowed our range on the high end of our earnings guidance, 455, 455, million of 406,000, million that tied to that poor approximate 4% comp and then with the expense of efficiencies we're seeing come through the business, feel good about narrowing to that high end.
Speaker Change #104: and then the two to three, so we're narrowing from two to four to two to three, nothing to do with our A&A core business, obviously, at a forecom, she's other revenue components that we have some line of sight to and just tightening some of those components up.
Michael Mathias: Other revenue components that we have some line of play to and just tightening some of those components up for store plans. We've got 25 to 30 areas offline still planned for this year. Around 20 is 2580 closing, so kind of net neutral on total stores. On the remodel front, they mentioned some of that in his comments leading into the call. We're doing 70 to 88 remodel. There's been great results from those initial stores. We got over 30 open as at the end of the second quarter. We're consistently seeing a lift across those stores, which is creating a lift for the brand.
Michael Mathias: Before I open up for questions, I want to underscore the confidence I have in the direction of our business. Business. With the clarity of our new strategy, we're moving our brand and business forward in line with our long-term agenda.
Speaker Change #104: For store plans.
Speaker Change #104: We've got 25 to 30 area offline, still planned for this year around 20, yes, 25 to 80 closing, so kind of net neutral on total stores
Operator: And with that, we'll open it up for questions. Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your questions from the queue. For participants using bigger equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we call for questions. Thank you.
Speaker Change #105: on the remodel front, Jay mentioned some of that in his comments, leading into the call.
Jay Seoul: We're doing 70-88, you remodel, there's being great results from those initial stores. We've got over 30 open at the end of the second quarter, and we've got consistently seeing a lift across those stores, which is creating a lift for the brand.
Michael Mathias: So excited about where that is heading. Will be at about 70 to 80 by the end of the year. So we're executing quite a few more of those during the third quarter and will be minimally doing that number next year, even talking about kind of accelerating that maybe more, which, you know, based on a lift we're seeing to the brand, has an exciting excited about what that could mean to next year in 2026. And the area needs work. Yeah, really, each of those results. Yeah. Okay, next question. Thank you. Our next question is from Marni Shapiro, with Retail Trackers.
Jay Seoul: So excited about where that is heading. We'll be at about 70 to 80 by the end of the year, so we're executing.
Adrienne Yih: Our first question is from Adrienne Yih, with Barclays. We have a specific question. Great.
Jay Seoul: I'm quite a few more of those doing the third quarter, and we'll be minimally doing that number next year, or you're talking about accelerating that, maybe more, which based on the lift we're seeing to the brand and how they're exciting, excited all what that could mean to next year in 2026.
Jay Schottenstein: Thank you very much. I was wondering, you had mentioned that you were happy with the early reason I'm back to school sort of quarter to date month to date. I was wondering if you can go a little bit deeper into that between kind of airy versus American Eagle. And if you're seeing some of the silhouette shifts impact thus far. And then following up, how do you think about the duration of back to school in terms of having a second wind after September, after Labor Day?
Speaker Change #106: and the eight of the very news.
Speaker Change #107: Yeah, I'm really pleased with those results, yeah
Speaker Change #108: Okay, next question.
Marni Shapiro: Please proceed with your question. Hey guys, congrats on a great quarter, and I will echo Janet's comments. Jen, the story was amazing. So could I just have a couple more questions to you and Jay, one for you. You are a fashion on, especially on the women's side and American Eagle, is turning very quickly. You drafted some of your fashion tops. So I'm curious where you guys stand on chasing, or you pulling forward deliveries. What does that look like from your standpoint? And then you reference some of the extensions of product categories. I'll just use pants like trousers as an example.
Speaker Change #109: and I keep our next question as from Martin A. Shapiro with retail trapper. Please be safe with your questions.
Jay Schottenstein: And then Mike, can you talk about the estimated down slightly? Is that a change from kind of last quarter if so? What has shifted there? Because you are up against a pretty big up 15% last year for that same quarter.
Speaker Change #110: Hey, guys, congrats on a great quarter, and I will echo Janet's comments, Jen, the story was amazing.
Speaker Change #111: So could I have a couple of questions for you and Jay one for you? You are a fashion, especially on the women's side, and American Eagle is turning very quickly. You dress this on your fashion top. So I'm curious where you guys stand on chasing, or are you pulling forward deliveries? What does that look like from your standpoint?
Michael Mathias: Thank you very much. Sure. You're really pleased with second quarter results and really we're delivering on this strategy. I am so pleased with our results. And as we look ahead, I'm very excited about the acceleration into back to school. As you know, when we think about denim, it's our main stage. James are right of passage for American Eagle. We have an incredible denim business. We're number one for 15 to 25 year olds and number one for women of all ages.
Speaker Change #112: and then you reference some of the extensions of product categories. I'll just use pants like trousers as an example. Is that helping you to keep the consumer longer or are you getting a new consumer in? And then Jay, I just want to follow up on the real estate conversation.
Jennifer Foyle: Is that helping you to keep the consumer longer, or are you getting a new consumer in? And then Jay, I just want to follow up on the real estate conversation because you guys are having great success with these new store formats, and you are still a net store, either opener or remodeler. I'm curious what your thoughts are about the real estate environment out there right now. You've been doing this a long time. Do you feel like it's favorable right now, and are you able to get the deals you want? Sure. Regarding Jay, absolutely. This team is very nimble.
Michael Mathias: So we're really leaning into women's particularly denim is our mainstay. I'm going to reiterate and we love the new trends that are emerging. We are not just the ones that brand anymore. Women's is so nimble these days and we are leaning into all the new silhouette feel really good about lower and looser silhouette. And we're seeing really nice results there. And as we think about the future, we're modifying our trends that we're seeing, we're making sure that we're leaning in as we go into the back half of Q3 and Q4 and we're ready to play.
Jay Seoul: You guys are having great success with
Jay Seoul: These new store formats, and you are still a next store, either opener or remodler. And curious what your thoughts are about the real estate environment out there right now. You've been doing this a long time. Do you feel it gets favorable right now? And are you able to get the deal you want?
Scher: Scher, regarding Jay.
Jennifer Foyle: I mentioned it in my early response. And I do like a fast turn, by the way, because it does bode well for our demand on the brand. So very excited about what we're seeing in women's, and we are double downing on fashion. It's really where we're getting a ton of the growth. And not only are we able to pull in these new items and do it relatively fast, we're also actually creating capsules. So it's not just a random chase. I'm not in that business. What we like to do is focus on the right ideas and pull them together and curate them and deliver a new concept.
Scher: Absolutely, this team is very nimble I mentioned it in my early response and I do like a fast turn by the way because it does build well for our demand on the brand so
Michael Mathias: Going into Aerie, I mentioned it, right, little softness in swimming Q2, but we're seeing really nice results as we head into August. Still many weeks ahead of us, but very similar to what we saw outside of swim. In fact, we're seeing some nice growth in our categories, including soft dressing, really amazing results there. We launched sleep. I don't know if you saw, but early on in July and we are chasing that business.
Speaker Change #114: Very excited about what we're seeing in women's and we are double-downing on fashion, it's really where we're getting a ton of the growth
Speaker Change #114: And not only are we able to pull in these new items and do it relatively fast, we're also actually creating capsules.
Speaker Change #114: So, it's not just random chase, I'm not in that business, what we like to do is focus on the right ideas and pull them together and curate them and deliver a new concept. And I think you're starting to see it, whether it's, well, Coco Gough was a collaboration, but we are bringing in capsules.
Jennifer Foyle: And I think you're starting to see it, whether it's, well, Coco Gough was a collaboration. But we are bringing in capsules by monthly, and they mean something to the business. And they're really resonating with the customer. As far as thinking of new ideas, i.e. Trousers, I think it's both. You know, we're getting new customers certainly with some of these new categories, but then they are sticking around, as I mentioned. Double digit growth in both brands on our customer file. And, you know, we've only just begun. Certainly, we have new tactics on the digital side, which is our bulletin board to the world.
Michael Mathias: It's done fantastic for us. And also, of course, offline offline is our business right now. We are not seeing any slowness in the athletic category. In fact, we were high double digits on last year's double digit increase and we are going to continue to lean into that category. Yes, so we've, you know, a great result here in the second quarter. We guided the mid single digit increase in FTA. We came in on the low side of that guidance.
Speaker Change #114: Five Monthly, and they mean something to the business, and they're really resonating with the customer. As far as thinking of new ideas, I eat trousers, I think it's both. You know, we're getting new customers, certainly, with some of these new categories, but then they are sticking around, as I mentioned. Double digit growth in both brands are in our customer file, and, you know, we've only just begun. Certainly, we have new tactics on the digital side, which is our...
Michael Mathias: Just an indication of how our expense initiative has taken hold and we're continuing to strengthen that month even further. And then for the, you know, the remainder of the year, we're expecting us to be down slightly in the third quarter, down in the fourth quarter, leveraged for the rest of the year. And that's really consistent with the previous guidance we've given. And then your question on just the elongation of the back of school season.
Jay Schottenstein: And we are only spending the surface there, so a lot more to come. Okay, thank you. You know, right now we have a very eye-calfy and chronicable fleet. You know, 80% of our slurs are like ABs of malls. You know, between the combination of VAE, Airy, and now with offline, we're able to go to the mall developers and offer them some fresh products. Everybody wants freshness in the mall. And, you know, I think there'll be a lot of opportunities out there because we have a lot of exciting things. Our new store design at the start from Erickingo goes with a very fresh design, very sharp looking design.
Speaker Change #115: You know, full of timber to the world and we are only spending the surface there so a lot more to come.
Speaker Change #115: Jennifer Foyle, Judy Meehan, Okay.
Speaker Change #116: You know, right now we have a very eye-calthy, and countable fleet, you know, 80% of our stores are like a piece of mulls, you know, between the combination of a very e-ary and now with offline, we're able to go to the mall developers and offer them some fresh products.
Michael Mathias: We have seen that in recent years where, especially in the Northeast, I think as you get into labor day and into the early September period, have seen, I think, the main stretch a little bit, we're assuming similar type, you know, something similar to happen this year.
Speaker Change #116: Everybody wants freshness in the ball, and I think there'll be a lot of opportunities out here because we have a lot of exciting things. Our new store design at this part of Merchandle goes is that we're a fresh design, we're a sharp looking design. I think that the model developers...
Adrienne Yih: Thank you very much. That's a lot.
Unknown Executive: Thank you.
Matthew Boss: Our next question is from Matthew Boss with J.P. Morgan. Please proceed with your question. Great. Thanks. So, Jen, maybe could you speak to the poor consumer relative to new customer acquisition? I think you talked about expanding the customer file at American Eagle by double digits, actually across both brands. So, maybe what are you seeing from your existing customer? What do you think is driving new customer acquisition? And how best to think about where we stand today on assortments relative to where you see a sort of opportunity as a year progresses?
Jay Schottenstein: I think that the mall developers all will want one. Our stand-by stores are great stores where we put American Eagle, Aerie, Offline, all together. So, we have a lot of exciting things to offer to the developer. And now, with the potential of expanding certain categories within our stores and developing certain sub-rends, it keeps us relevant to the developers and makes us one of the important people in the mall. I'm curious if you guys have such success with these new remodels, are you able to take parts of it and put it into some of the other stores in lieu of just a full remodel?
Speaker Change #117: All of the what one.
Speaker Change #117: Our standby stores are a great source, we put American Eagle, Harry, Offline, all together. So we have a lot of exciting things to offer the developer and now with the potential of expanding certain categories within our stores and developing certain sufferings, it keeps us, it keeps us relevant.
Speaker Change #118: To the Valpers, and that's just one of the important people in the mall.
Jennifer Foyle: Sure. We're really leaning into our marketing campaigns, for sure. If I, you know, think about American Eagle and we're amplifying our strategy growth initiatives. And, you know, we have new categories in American Eagle. We have 24, 7. We have 7, 8, 7, 7. We're getting nice early reads on those businesses. And we're offering new categories that we're not in existence from prior years. So, we're leaning into social casual. I think we're going to own this category.
Speaker Change #119: I'm curious if you guys you've had such success with these new remodels, you're able to take part of it and put it into some of the other stores in lieu of just a full remodel.
Speaker Change #120: But you know, we do is when the stormies has come up, it's a perfect time to go, we could go with the fact that the developers, because we like to have prime value, we want to have a look and store in the mall, we want the prime location soon.
Jay Schottenstein: Sometimes we have to wait a little bit in order to get a certain size store that we could put all three together, so we're patient that way. But at the same time, we have a staff that just dedicated to this and that's all they do all day is working on these opportunities. We do have multiple formats, so this new design is different options, so we can go into certain centers with a $25, $30 foot version, keep our lease terms flexible, which gives us advantages; or in centers in these eight centers where we know we're going to be for a long time, we go in and do a full remodel; it could be $125 foot signing up for some longer lease terms, which are favorable.
Speaker Change #121: So sometimes we have to wait a little bit in order to get a certain size store that we could put all three together. So we're patient that way, but at the same time, we have a staff that just dedicated this and that's all they do all day is let it work in all these opportunities.
Jennifer Foyle: We're doing it better than other competition out there. And this is what we do best, right? Quality and value. And I want to highlight quality for our brands. We, our quality is like no other. And we spend a lot of time leaning in and ensuring that we have the best quality out there at the best price. And, you know, I missed your second question. Can you just please reiterate that, please? Just on new customer acquisition and relative to opportunities within the assortment of the year progresses.
Speaker Change #121: and Marty, we do a multiple format, so this new design is in different options, so we can go into certain centers with a $0.25-$30 foot version, keep our lead terms.
Marty: Flexible, which give us advantages or sensors in these eight centers where we know we're going to be for a long time. We go in and do a full remodel.
Jennifer Foyle: Yeah. And it's not just acquisition. It's also retention in both brands. We saw, you know, in past years, honestly, that our customer dumped out, you know, really when you think of post-21. And now, just with these assortments in both brands, that we're really able to keep that customer with us. And they're growing with us. Such an important key factor for us as we grow these businesses. Great.
Michael Mathias: So we do have the option to do multiple versions at different costs, do lighter touches versus full guts and full rebuilds. And just to reiterate, I briefly mentioned it, but the airy new store design, we have a site by side and Tyson's great location right when you come up the escalator, and we love the results here. We're definitely going to roll this out; it's definitely outperforming the average. So really exciting new design, the team really pulled through, and there'll be more to come. Amazing, thanks, guys. Thank you. Our next question is from Corey Tarla, Jeffries.
Marty: It could be under $125 a foot signing up for some longer leased terms, which are favorable. So we do have the option to do multiple versions of different costs, you know, do lighter touches versus, you know, pull guts and pull rebolbs.
Marty: and just to reiterate, thank you for the question that Marneigh, I briefly mentioned it, but the airy new store design, we have a side by side and Tyson's great location right when you come off the escalator and we love the results here. We're definitely going to roll this out and it's definitely help performing the average. So really exciting new design, the team really will go through and they'll be more the kind of...
Michael Mathias: And then Mike, just on gross margin, how best to think about third quarter relative to fourth quarter expectations relative to the 90 basis points of expansion you saw in the second quarter. Yeah. And I think with the revenue shift in the calendar, when I'm expecting gross margin to expand as much as we've seen in the first half, really because of the leverage of the expenses in gross margin, nothing tied to product margin.
Speaker Change #123: Amazing, thank you guys
Speaker Change #123: [inaudible]
Corey Tarlowe: Please proceed with your question. Good morning, thanks for taking my question. Mike, I just wanted to ask on FGNA within the framework that you outlined. How about to think about the different bucket where you see the most opportunity, and how do you stack rank those opportunities relevant to one another. Thank you. Thanks, Corey. We're talking about it just for a little over a year now. The focus on core line items is across the P&L, not just in SG&A, but expenses in gross margin as well, delivery rent distribution costs. In SGNA specifically, I think we talked about 85% of our costs are in compensation lines, so store labor, corporate compensation in related expenses, advertising, services, purchases, maintenance.
Speaker Change #123: Thank you. Our next question is from Corey Tarala, Jeffries. Please proceed with your question.
Michael Mathias: We still see favorability in our initial markup. And we're managing promotions and markdowns as we always have. So it's really just about with the revenue shift not leveraging those expenses. So we're not looking for the margin improvement like we've seen in the first quarter in the second quarter. Great. That's the point. Thank you.
Corey Tarala: Good morning and thanks for taking my question Mike, I just wanted to ask on SG&A within the framework that you outlined how best to think about the different buckets.
Corey Tarala: Where you see the most opportunity and how do you stack rank those opportunities relevant to one another? Thank you.
Jay Sole: Our next question is from Jay Soul with UBS. Let me see with your question. Great. Thank you so much. Just to maybe expand on that a little bit on the gross margin. Like, what are you expecting from the promotion environment? The other top three pillars is markdown. Are you expecting a more competitive environment? Is that different from what you expected 90 days ago? Yeah, it's always competitive. Jay, I think it's a good question.
Speaker Change #125: Thanks for talking about it this year now. The focus on core line items is across the P&L, not just in SGA, but expenses and gross margins as well.
Speaker Change #126: and Delivery Rent Distribution Costs. And FGA specifically, I think we talked about 85% of our costs are in compensation lines, so store labor, corporate compensation in related expenses.
Jay Sole: But I think we've been managing things consistently for multiple years now. We manage markdowns intelligently. We compete when we need to compete in peak periods. We've refined how the depth of our discounts or the length of promotions to just maintain a very disciplined approach to markdown. So we don't see that changing at all based on what we're seeing in the business right now. And then on gross margin in general, I think it's the year here's a great equalizer because these shifts create some nuances that we don't want to get into details around.
Michael Mathias: And so those made this continue to be the key focus areas is where we saw the leverage in the second quarter. We're managing those expenses tightly. So those continue to be the key buckets that the teams are focused on and managing to the targets we set for ourselves, not just this year, but out to the next two years as well. Okay, I think we have time for one more question and cue. Thank you. Our final question comes from Alex Stratton with Morgan. Please proceed with your question. Thanks a lot for taking the question. Just a couple from me here.
Speaker Change #126: Advertising Services Purchase, Maintenance, so those continue to be the key focus areas is where we saw the leverage in the second quarter, where managing those expenses tightly.
Speaker Change #126: So those continue to be the key buckets that the teams are focused on and, you know, managing to the targets we set for ourselves much this year but out to the next two years as well.
Speaker Change #127: Okay, I think we have time for one more question, and Q.
Speaker Change #128: Thank you, our final question comes from Alex Stratton with Morgan Statton. Please proceed with your question.
Michael Mathias: So on the year we are seeing a total gross margin improvement based on what we've seen so far in the first half and the color I just gave Matt a minute ago and we are tracking toward our longer term goal is 39 to 40 percent for gross margin and we're seeing nice improvement on a four-year basis toward that goal. And so I think the other piece of it is the value equation on promotions as well.
Alex Stratton: One just a quick one on the full year revenue guidance. I wanted to follow up on. It sounds like even though you're lowering that it's not reflective of the worst, you know, a year or area backup outlook. It's just tightening up somewhere. Can you just elaborate a little bit on that? And then I just want to make sure I understood the third quarter to fourth quarter operating income cadence. It feels like a bit of a big step down and then a bigger improvement. So just wanted to understand the drivers there. Thanks a lot. So, on four-year revenue, yes, it's nothing to do with our foreground trajectory.
Alex Stratton: Thanks for author taking the question. Just a couple from me here. One just a quick one on the full year revenue guidance I wanted to follow up on. It sounds like even though you're lowering that, it's not reflective of a worse, you know, any year or area back up outlook, it's just tightening up somewhere. Can you just elaborate a little bit on that?
Michael Mathias: So we know our price quality equation is in a great spot in the industry. So even if there's more deeper or more aggressive promotions from other retailers, we're managing things intelligently with that price value equation as a great Thank you. Thank you so much.
Alex Stratton: and then I just want to make sure I understood the third, fourth, fourth, fourth, fourth, operating and conceding, it feels like a bit of a big step down and then a bigger improvement. So just want to understand the drivers there. Thanks a lot.
Unknown Executive: Thank you.
Speaker Change #130: So now it's on four-year revenue, yes, it's nothing to do with our four-brand trajectory, we're talking about the strength we're seeing here in August across the business and what our three to four percent calm guide for the rest of this quarter considers.
Michael Mathias: We're talking about the strength we're seeing here in August across the business and what our three to four percent comp guide for the rest of this quarter considers tightening from two to three percent from two to four. Is other revenue components in our, you know, there's other other other moving parts that we're just seeing a more accurate line of sight to just, you know, narrow those down a bit. So we've got, you know, a license revenue, whether they're the other emerging brands and some other revenue components, that's all that is nothing to do with an ordinary core business.
Dana Telsey: Our next question is from Dana Telsey with the Telsey Advisor Group. Let me pursue your question.
Michael Mathias: Hi, good morning, everyone. As you think about the store's channel versus the digital channel, what are you seeing in each? I mean, you had mentioned in terms of the store's business, some of the new formats, how you're seeing traffic and stores versus digital. And then just expanding on the gross margin, the puts and takes in terms of the components and what you're seeing also with break costs and also cotton costs as we move through the back half of the year.
Speaker Change #131: Planning from to two to three percent from two to four is other revenue components in our, you know, there's other, there's other, other living parts that we're just seeing of, we're at your line of sight to this.
Speaker Change #132: Miller, you know, near those down a bit. So, you've got, you know, license revenue, other emerging brands and some other...
Michael Mathias: And then, yeah, operating rate for the for the remainder of the year, we're guiding Q3 essentially flat revenue and similar income. So we hit about a nine and a half rates, 9.6% operating rate for the third quarter last year. So we're looking at something similar this year impacted by the revenue shift, but we're essentially guiding flat revenue and flat income Q4. On revenue, flat is slightly down. We are going to see, based on FDNA leverage and expense leverage, we're expecting operating rate improvement in the fourth quarter. And then really the grateful either is the year.
Speaker Change #133: Revenue component, it's all that it's nothing to do with A.E. and A.E. Corbusiness.
Speaker Change #133: and then the operating rate for the remainder of the year, we're guiding Q3 for essentially flat revenue and flat similar income, so we had about a 9.6% operating rate for the third quarter last year, so we're looking at something similar this year, impacted by the revenue shift. We're essentially guiding flat revenue and flat income.
Michael Mathias: Thank you. Yes, if it's second quarter, Dana, we saw strength across both brands as we've outlined end channels. So both stores and digital were positive in the quarter. We're seeing the same thing continue into the third quarter here with a nice start or a good back to school peak season and strength in August that we're seeing both channels or positives still with traffic being healthy in both stores and on the digital side.
Lee Down: Q4 on revenue sort of flat this way, Lee Down.
Speaker Change #135: We are going to see based on FDA and A leverage and expense leverage or expecting operating weight improvement in the fourth quarter and then really the great equal ladder is the year. So we are guiding the year to approximately a four-comp.
Michael Mathias: So we are guiding the year to a four, approximately a four comp at the four hundred fifty-five to four hundred sixty-five million dollar range on that two to three percent total revenue growth. We will see nice operating rate expansion as well. I'm the math on that gets you to somewhere around the mid eight, so we'll call it eight and a half percent. That would be a hundred and forty basis points for an improvement to last year as we passed toward our ultimate goal of ten percent. That's a nice improvement on top of last year's improvement.
Michael Mathias: Gross margin puts and takes are similar. I think we're seeing flow through of initial product margin benefits. There have been some breaks and disruptions in the industry but our teams have gotten ahead of that. We're just changing timelines and over dates so that we've mitigated any issues there with some of the recent disruption. And again, it just comes down to quarterly with the revenue shifts, how we're leveraging the expenses and gross margin tracking nicely to a full year improvement in our gross margin rate as planned. Thank you.
Speaker Change #136: at the 455-465 million dollar range on that 2-3% total revenue growth.
Speaker Change #136: and we will see nice operating radio expansion as well.
Speaker Change #136: and Math on that gets you to somewhere around the mid-eight. So we're called a call eight and a half percent. That would be a 140-based point improvement in the last year as we've passed toward our...
Speaker Change #136: Ultimate Gold 10% that's a nice improvement on top of last year's improvement. So we're well on our way to setting ourselves up to achieve those targets.
Michael Mathias: So we're well on our way. You know, setting ourselves up to achieve those targets. Okay. Thank you. There are no further questions at this time. This is including today's conference hall. You may disconnect your lines at this time. Thank you for your participation. Thank you.
Speaker Change #136: Okay?
Speaker Change #137: Thank you. There are no further questions at this time. This blood is included today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Paul Lejuez: Our next question is from Paul Lesway, the city. Please proceed with your question. Hey guys, maybe give a little bit more specifics on what you're seeing in quarter to date by by brand also just how you're thinking about the composition for each in terms of what assumptions you bake in to the second half and then separately we'll see some S&A improvements down in the back half.
Michael Mathias: How should we be thinking about S&A dollar growth for F25? Thanks. Thanks, Paul. You changed by brand. We've, you know, second quarter both brands were positive as we've outlined. Jen mentioned area was plus seven without swim. So as we've entered August here, that trend has been consistent. So A.D, were sort of maintaining the trend from the second quarter and area has picked up in total similar to that result without swim. So happy to see that, you know, start beginning in a quarter here and some strong performance through the back of school peak weeks here in August.
Michael Mathias: And then next DNA, I think we're basically saying we're going to leverage the rest of the year dollars are relatively flat on the low end of our guy and maybe up slightly on the high end of the guy this year. And then for 25 we are in the middle of those plans. So, you know, we've got our muscles built around managing every single expense line item. We've got targets for every expense line item.
Michael Mathias: All the decisions we're making managing things for the short term have a 25 lens toward them to make sure we're pathing to the targets we need for 2025. I think in general, you know, as we talk about a three to five percent total revenue growth rate that we want that we're going after a year over a year, S&A dollars will be planned and managed down or below that growth rate. That's what the line state we have for 25 right now. Thank you.
Jenna Kim: Our next question is from Jenna Kim with T.D. Talon. Please proceed with your question. Thank you for taking my question. Could you talk about this monthly cadence during the quarter, how each month performed, and also just calling on the consumer health, if you saw anything notable there. And I would love any color on how you're planning for the holiday as well.
Michael Mathias: Thank you. So for Q2, you know, May and June were the stronger months. We did see July moderate a bit. I think that's been an industry topic. The day of traffic data and other kind of indicators. There were July did slow down a bit, but again, August is kind of a recelerator right back to the so the pre July trend. And our guidance for the rest of this quarter coming off of August.
Michael Mathias: We are planning for the middle periods between peak selling periods and peak traffic periods between back to school and holiday. We're using the assumption that things might moderate again within our 3 to 4% confidence for the full quarter.
Janet Kloppenburg: Thank you. A lot of CEOs about their outlook on a consumer as we move forward and these uncertain times and with the election coming up. So I'd love to hear your thoughts there. Jen, I was wondering about your the source of true effect, just to effect. I was wondering about areas opportunity to accelerate. Now that swim has become seasonally less important and also on the men's denim business at AE, I mean the silhouette look great to me, but you're not you're not calling it out.
Janet Kloppenburg: And Michael, I was just wondering on the merchandise margin, you know, what are the puts and takes there as we go forward, maybe with the AUC levels normalizing and also perhaps with you know some pressure on the price side. So maybe you could address that and and the inventory levels look really good to me.
Michael Mathias: Do they keep improving.
Jay Schottenstein: Thanks so much. Hey, Janet, hi. Hi, first of all, what first of all, you know, we say a lot of opportunity out there that we have great brands in American Eagle. We have great sub brands and as and as Jen has emphasized, we've worked very hard on giving great value to to our customers. We now now now we now only are we proud of our quality. We're also proud of our fits, our comfort and what we've developed, you know, in all the years, I've been in this business.
Jay Schottenstein: I probably see the greatest opportunity in the history of the company because number one, we've got an American Eagle growing the right way. We have Erie growing the right way. We have a hot brand in the athletic area with off line, which is just getting started. We're only in a few states. We see great opportunity. Even with Erie, we're only in half the country. We see great opportunity there to grow this business.
Jay Schottenstein: We develop great sub-rans in our 24-7, which is like Erie was 10 years ago. Which has great potential to be a great brand within its own and within off line. And at the same time, we have Erie 87, which is our better, more sophisticated, appealing to a more sophisticated customer and more mature customer. So we will have an ability in the future not only to take the customer from the 15 to 25, but to keep that customer at 25 plus.
Jay Schottenstein: So from our standpoint, today we're $5 billion. We think in the next few years, we can be a $10 billion business. And we are... That's really exciting. We're going to emphasize this. We are committed to making the investment to become that business. We're putting together our plans now, what's going to take, what we have to add, because we're going for it. We see the opportunity. We're excited about our business. You can walk in the mall today, and I'll put my stores as the best looking stores in the malls.
Jay Schottenstein: The best shopping experience. We believe we have the best experience between the online, where we make a clean list, the customer, whether they're online, or whether they walk in the store, if they're seeing this experience. The last couple of years, we have the best of money and innovation. We're not going to play second fiddle with anybody. My goal is to have the best experience, shopping experience, whether online, or in the stores.
Jay Schottenstein: Now, I know everybody goes quarter to quarter. I can't ride a business quarter to quarter. I'm looking for the future. I'm not committed to do whatever it takes to build a thing, to where it deserves to be built. We put together a world-classcy. I cannot emphasize the quality of our designers, of our merchants that we put together, and I'm very pleased. Please, I'm very proud of what we have.
Jennifer Foyle: Wow, that's a hard one to have. Top J, thanks. As I think of Ari, the best thing is we've run 17 quarters of record revenue in Ari, and on top of it, the profits are exceeding even the top line. So, really focused on a profitable, healthy business. As we look forward, look, we get our early reads in July, and we react to the business for the back half. The new reads are looking very strong in some of our new businesses, including sleep, as I mentioned.
Jennifer Foyle: Offline was outstanding in Q2, so this is just about building on innovation there and owning that business. And, by the way, our legging business, we have a cornerstone and market chair there where the number one, number four, in sports broads, actually, and think about how young this business is in offline. So, lots of opportunity to grow that business and compete with the likes of higher end competitors, so I'm very excited about that business.
Jennifer Foyle: Men's denim, first of all, I'm going to work with my marketing team, and we're going to make sure that that sign looks amazing in stores, because we deserve it. The business is starting to turn around, particularly on the top side. I will say we have some more work to do in denim, but we like the fits that are coming through. We like our nimbleness to impact the business, and other bottoms are really checking, too.
Jennifer Foyle: As a reminder, men's, that business we tend to sell shorts a little bit deeper into the Q3 side of the business, so more to come on long legs, but we have a lot of read and react, and we're here to deliver. Janet on the margin puts and takes, consistently been describing our, we're managing markdowns intelligently, we'll compete when we need to, we are seeing we have line of sighted to our initial margins that are positive and up over last year for the rest of this year, so looking to flow through that benefit.
Jennifer Foyle: And then line of sight into early initial buys for the spring season and the first half of next year look favorable as well. So now there's some freight disruption and some conversations around freight. Right now we're not seeing we're managing that and we're not seeing any impact or decline to last year, we've got line of sighted to improvements for the remainder of this year and in the early next. And you're right, I mean, we feel great about the plus four at the end of the quarter in good position, it's where we want it between a and a and a and categories that are driving the business. And as we look at our inventory plans for the rest of the year here, we feel the same about the remainder of this quarter and Q4.
Unknown Executive: Thank you, thank you all.
Unknown Executive: Thank you.
Chris Mardone: Our next question is from Chris Mardone with Bank of America, please proceed with your question. Hi guys, can you talk to the moving pieces that you're up to to sales guidance for the full year relative how you were planning the business last quarter? It was like you took down the high end of the range, you've also talked extensively about strong quarter day trends, so I'm just trying to tie it all together.
Michael Mathias: And then one quick follow up on your store growth plans. Can you re confirm what the plans are for net store openings for both you go on air this year? Yes, short Chris. Full year sales guidance, we really, I think, is fitting to focus on as the plus the approximately the proximate for comp for the year. We've narrowed our range on the high end of our earnings guidance, 45, 45 million, 465 million that you know tied to that for approximate 4% comp.
Michael Mathias: And then with the expense efficiencies, we're seeing come through the business feel good about kind of narrowing to that high end. And then the two to three for narrowing from two to four to two to three, nothing to do with our A&A core business are obviously out of four comp. There's other revenue components that we have some line of play to and just tightening some of those components up for store plans. We've got 25 to 30 area offline still planned for this year, around 20, 25 to 80 closing, so kind of net neutral on total stores.
Michael Mathias: On the remodel front, they mentioned some of that in his comments leading into the call. We're doing 70 to 80 A&A remodel, those are seeing great results from those initial stores. We've got over 30 open as at the end of the second quarter, consistently seeing a lift across those stores, which is creating a lift for the brand. So excited about where that is heading will be at about 70 to 80 by the end of the year, so we're executing quite a few more of those during the third quarter.
Michael Mathias: And we'll be minimally doing that number next year, even talking about kind of accelerating that which may be more, which based on a lift we're seeing to the brand has an exciting, excited about what that could mean to next year in 2026.
Marni Shapiro: Okay, next question. Thank you.
Marni Shapiro: Our next question is from Marni Shapiro, with retail tracker. Please proceed with your question. Hey guys, congrats on a great quarter and I will echo Janet's comments, Janet, the story was amazing. So I just have a couple of questions to you and Jay, one for you. You are a fashion on, especially on the women's side and American Eagle is turning very quickly. You drafted some of your fashion tops. So curious where you guys stand on chasing or you pulling forward deliveries.
Marni Shapiro: What does that look like from your standpoint? And then you reference some of the extensions of product categories. I'll just use pants like trousers as an example. Is that helping you to keep the consumer longer or you getting a new consumer in? And then Jay, I just want to follow up on the real estate conversation because you guys are having great success with these new store formats and you are still a net store, either opener or remodeler.
Marni Shapiro: I'm curious what your thoughts are about the real estate environment out there right now. You've been doing this a long time. Do you feel like it's favorable right now and are you able to get the deal you want? Sure. Regarding Jay, absolutely. This team is very nimble. I mentioned it in my early response. And I do like a fast turn, by the way, because it does bowed well for our demand on the brand.
Marni Shapiro: So very excited about what we're seeing in women and we are double downing on fashion. It's really where we're getting a ton of the growth. And not only are we able to pull in these new items and do it relatively fast, we're also actually creating capsules. So it's not just random chase. I'm not in that business. What we like to do is focus on the right ideas and pull them together and curate them and deliver a new concept.
Marni Shapiro: And I think you're starting to see it whether it's, well, Coco Gough was a collaboration, but we are bringing in capsules by monthly and they mean something to the business. And they're really resonating with the customer. As far as thinking of new ideas, IE trousers, I think it's both. You know, we're getting new customers certainly with some of these new categories, but then they are sticking around, as I mentioned. Double digit growth in both brands on our customer file.
Marni Shapiro: And, you know, we've only just begun. Certainly we have new tactics on the digital side, which is our bulletin board to the world. And we are only trying to get the surface there, so a lot more to come. Okay. Thank you. You know, right now we have a very eye-calfy and chronicable fleet. 80% of our stores are like AVs of malls. You know, between the combination of A.E. Airy and now with offline, we're able to go to the mall developers and offer them some fresh products.
Marni Shapiro: Everybody wants freshness in the mall. And, you know, I think there'll be a lot of opportunities out there because we have a lot of exciting things. Our new store design at the start of Merkingo goes with a very fresh design, very sharp all with what one. Our standby stores are great stores where we put American Eagle, Airy, offline, all together. So we have a lot of exciting things to offer to the developer.
Marni Shapiro: And now, with the potential of expanding certain categories within our stores and developing certain sub-brands, it keeps as relevant to developers and makes us one of the important people in the mall. I'm curious if you've had such success with these new remodels, are you able to take parts of it and put it into some of the other stores in lieu of just a full remodel? So sometimes we have to wait a little bit in order to get a certain size store that we can put all three together so we're patient that way, but at the same time we have a staff that just dedicated to this and that's all they do all day is like working on these opportunities.
Marni Shapiro: Marni, we do have multiple formats, so this new design is different options so we can go into certain centers with a $25, $30-foot version, keep our lease terms flexible if which gives us advantages or in centers in these eight centers where we know we're going to be for a long time, we go in and do a full remodel, it could be $125 a foot signing up for some longer lease terms which are favorable. So we do have the option to do multiple versions of different costs, do lighter touches versus full guts and full rebuilds.
Marni Shapiro: And just to reiterate, I briefly mentioned it, but the airy new store design, we have a side by side and Tyson's, great location right when you come up the escalator, and we love the results here. We're definitely going to roll this out, it's definitely outperforming the average, so really exciting new design, the team really pulled through and there'll be more to come. Amazing, thanks guys. Thank you.
Corey Tarlowe: Our next question is from Corey Tarla, Jeffries. Please proceed with your question. Good morning and thanks for taking my question. Mike, I just wanted to ask on SGNA within the framework that you outlined. How about to think about the different bucket where you see the most opportunity? And how do you stack rank those opportunities relevant to one another? Thank you. Thanks, Corey. We're talking about it just for a little over a year now.
Corey Tarlowe: The focus on core line items is across the P&L, not just in SGNA, but expenses in Gross Margin as well, delivery rents, distribution costs. In SGNA specifically, I think we talked about about 85% of our costs are in compensation lines, so store labor, corporate compensation in related expenses, advertising, services purchase, maintenance. And so those made this continue to be the key focus areas is where we saw the leverage in the second quarter, we're managing those expenses tightly.
Michael Mathias: So those continue to be the key buckets that the teams are focused on and managing to the targets we set for ourselves not just this year, but out to the next two years as well. Okay, I think we have time for one more question and cue. Thank you.
Alex Stratton: Our final question comes from Alex Stratton with Morgan Stanley. Please proceed with your question. Thanks a lot for taking the question. Just a couple from me here. One just a quick one on the full year revenue guidance I wanted to follow up on. And it sounds like even though you're you're lowering that it's not reflective of the worst, you know, a year or area backup outlook, it's just tightening up somewhere. Can you just elaborate a little bit on that?
Alex Stratton: And then I just want to make sure I understood the third quarter to fourth quarter operating income cadence. It feels like a bit of a big step down and then a bigger improvement. So just wanted to understand the drivers there. Thanks a lot. So on four-year revenue, yes, it's nothing to do with our foreground trajectory. We're talking about the strength we're seeing here in August across the business and what our three to four percent comp guide for the rest of this quarter considers tightening from to two to three percent from two to four is other revenue components in our, you know, there's other other other moving parts that we're just seeing a more accurate line of sight to just, you know, narrow those down a bit.
Alex Stratton: So we've got, you know, license revenue, other other other emerging brands and some other revenue components. That's all that is nothing to do with a ordinary core business. And then, yeah, operating rate for the for the remainder of the year, we're guiding Q3 essentially flat revenue and similar income. So we hit about a nine and a half rate, 9.6 percent operating rate for the third quarter last year. So we're looking at something similar this year impacted by the revenue shift, but we're essentially guiding flat revenue and flat income Q4.
Alex Stratton: On revenue or flat is slightly down, we are going to see based on FDNA leverage and expense leverage or expecting operating rate improvement in the fourth quarter. And then really the great equal either is the year. So we are guiding the year to a for approximately a four comp at the four hundred fifty five to four hundred sixty five million dollar range on that two to three percent total revenue growth, we will see nice operating rate expansion as well.
Alex Stratton: And the math on that gets you to somewhere around the mid eight. So we call it call it eight and a half percent. That would be a hundred and forty basis for improvement to last year as we passed toward our ultimate goal of ten percent. That's a nice improvement on top of last year's improvement. So we're well on our way. You know, setting ourselves up to see those targets.
Okay. Thank you. There are no further questions at this time. This is including today's conference hall. You may disconnect your lines at this time. Thank you for your participation. Thank you.