Q1 2025 American Eagle Outfitters Inc Earnings Call

May 29, 2025

Got it.

Yes.

Okay.

Great.

Right.

Yes.

Sure.

[music].

Bob.

Yes.

Okay.

[music].

[Company Representative] (American Eagle Outfitters): Stay. I'm picturing you walking around in your new jeans. Try. Imagine maybe I should've stayed. Imagine if I would've stayed. Maybe you would have called back. You got your ways and I just can't explain. How my emotions start racing. Every time that you are close to me, yeah. I get this feeling I keep chasing. Now that we're almost there. Stop thinking. Wonder what's keeping you from not seeing. You got me considering the third eye for you. Yeah. 'Cause I want you to. Take my time. Take my time. Take my time. Oh, baby. Do something for once. 'Cause I want you to. Take my time. Oh my time. Take my time. Oh, baby. Do something for once. Wasn't prepared for you to tie me up. All your ways have got me feelin' fine. None of it matters if you don't come in.

Uh huh.

[music].

Okay.

[music], Michigan.

Keeping you from <unk>.

[music] Gummy <unk>.

Yes.

Okay.

Thanks.

Thank you.

Okay.

Thanks.

Thank you.

Thanks.

Okay.

I think to use.

<unk>.

Although you'll raise a family.

Yes.

No no no no.

This is Don.

Yes.

[Company Representative] (American Eagle Outfitters): See what I've been hiding just for you and I. Now that we're almost there. Stop thinking. Wonder what's keeping you from not seeing.

They only have been hurting.

Thank you.

[music].

Thank you.

Operator: Good day, and welcome to the AEO Incorporated First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day and welcome to the AEO Incorporated Q1 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Miss Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead, ma'am.

Operator: Good day and welcome to the AEO Incorporated Q1 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Miss Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead, ma'am.

Good day and welcome to the E O incorporated first quarter 2025 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad, and to withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad and Swift draw. Your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Judy Meehan Hayden Investor Relations and corporate Communications. Please go ahead ma'am.

Judy Meehan: I would now like to turn the conference over to Ms. Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead, ma'am.

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Judy Meehan: Good afternoon, everyone.

Judy Meehan: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer. Jennifer Foyle, President, Executive Creative Director for American Eagle and Aerie. Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis.

Judy Meehan: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer. Jen Foyle, President, Executive Creative Director for American Eagle and Aerie. Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis.

Speaker Change: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Foyle, President Executive Creative Director for American Eagle, and Aerie, and Mike Matthias Chief Financial Officer before we begin todays call I need to remind you that we will make certain forward looking.

Judy Meehan: Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Foyle, President, Executive Creative Director for American Eagle and Aerie, and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs.

Speaker Change: <unk>.

These statements are based upon information that represents the companys current expectations or beliefs.

Judy Meehan: The results actually realized may differ materially based on risk factors included in our SEC The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www.aeo-inc.com in the investor relations section.

Speaker Change: The results actually realized may differ materially based on risk factors included in our SEC filings.

Speaker Change: The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.

Speaker Change: Also please note that during this call and in the accompanying press release certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www dot.

Judy Meehan: Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www.aeo-inc.com in the Investor Relations section. Here you can also find the Q1 investor presentation. Now I will turn the call over to Jay.

Speaker Change: E O Dash, Inc. Dot com in the Investor Relations section here you can also find the first quarter investor presentation, and now I will turn the call over to Jay.

Judy Meehan: Here you can also find the first quarter investor presentation.

Jay Schottenstein: And now I will turn the call over to Jay. Thanks, Judy, and good afternoon, everyone. As described in our preliminary release earlier this month, we were disappointed with our first quarter performance. The margin impact, together with the $75 million inventory write-down, contributed to a $68 million adjusted operating loss for the Corps. At the brand level, American Eagle comps were down 2%, and Aerie comps declined 4%. While the broader macro environment and cold spring weather presented challenges, we did not execute to our potential. We have some product misses in our spring and summer floors. At Aerie in particular, merchandise came in with higher design and transportation costs, and we were not able to realize pricing to support a healthy margin.

Jay Schottenstein: Thanks, Judy, and good afternoon, everyone. As described in our preliminary release earlier this month, we were disappointed with our Q1 performance. The margin impact, together with the $75 million inventory write-down, contributed to a $68 million adjusted operating loss for the quarter. At the brand level, American Eagle comps were down 2% and Aerie comps declined 4%. While the broader macro environment and cold spring weather presented challenges, we did not execute to our potential. We had some product misses in our spring and summer floor sets. At Aerie in particular, merchandise came in with higher design and transportation costs, and we were not able to realize pricing to support a healthy margin. Altogether, this resulted in higher than expected promotions and the inventory write-down we took on spring and summer merchandise.

Jay: Thanks, Judy and good afternoon, everyone.

As described in our preliminary released earlier this month, we were disappointed with our first quarter performance.

Jay: <unk> impact together with the $75 million inventory write downs contributed to a $68 million adjusted operating loss for the quarter.

Jay: At the brand level American Eagle comps were down, 2% and aerie comps declined 4%, while the broader macro environment and cold spring weather presented challenges, we did not execute to our potential.

Jay: We had some product misses in our spring and summer floor sets at Aerie and particular merchandize came in with higher design and transportation costs, and we were not able to realize pricing to support a healthy margin.

Jay Schottenstein: All together, this resulted in higher-than-expected promotions and the inventory write-down we took on spring and summer merchants. In reviewing this season, our execution needs to be better and the entire team is hard at work to ensure that it is.

Speaker Change: Altogether. This resulted in higher than expected promotions and the inventory write down we took on spring and summer merchandise.

Jay Schottenstein: In reviewing this season, our execution needs to be better and the entire team is hard at work to ensure that it is. We have been busy correcting and planning fall 2025 and spring 2026 seasons with all of our learnings top of mind. With the write-down behind us, we entered the Q2 with inventory for the season better aligned with recent sale trends. Additionally, we have implemented increased rigor into our buying process, which includes greater cross-functional partnership and oversight. We also remain focused on optimizing our operations consistent with our long-term strategic framework. In the Q1, we accelerated plan actions to further strengthen our supply chain network, which included closing two of our edge fulfillment centers. This was the majority of the $17 million non-GAAP charge in the Q1. It's expected to generate annualized savings of approximately $5 million.

Speaker Change: In reviewing this season, our execution needs to be better and the entire team is hard at work to ensure that it is.

Jay Schottenstein: We have been busy correcting and planning Fall 2025 and Spring 2026 seasons with all of our learnings top of mind. With the write-down behind us, we entered the second quarter with inventory for the season better aligned with recent sale trends. Additionally, we have implemented increased rigor into our buying process, which includes greater cross-functional partnership and oversight. We also remain focused on optimizing our operations, consistent with our long-term strategic framework. In the first quarter, we accelerated plan actions to further strengthen our supply chain network, which include a closing two of our Edge Fulfillment Center. This was the majority of the $17 million non-GAAP charge in the first quarter, and it's expected to generate annualized savings of approximately $5 million.

Speaker Change: We have been busy correcting and planning for 2025 and spring 2026 seasons with all of our learnings top of mind.

Speaker Change: With the write down behind US we entered the second quarter with inventory for the season better align with recent sales trends. Additionally, we have implemented increased rigor into our buying process, which includes greater cross functional partnership and oversight.

Speaker Change: We also remain focused on optimizing our operations consistent with our long term strategic framework in the first quarter, we accelerated our planned actions to further strengthen our supply chain network, which included closing two of our edge fulfillment centers.

Speaker Change: This was the majority of the $17 million non-GAAP charge in the first quarter.

Speaker Change: And is expected to generate annualized savings of approximately $5 million.

Jay Schottenstein: We continue to take steps to mitigate the impact of tariffs, using all levers at our disposal, as it makes sense for our business. Additionally, we are continuing on our strategic path to move business to ensure we are manufacturing with best-in-class partners in countries that make sense for us. Although we continue to face challenges and near-term uncertainty, I believe we are making progress. While annual guidance remains paused until we have greater visibility, I'm confident that we will see improvement as the year progresses.

Jay Schottenstein: We continue to take steps to mitigate the impact of tariffs using all levers at our disposal as it makes sense for our business. We are continuing on our strategic path to move business to ensure we are manufacturing with best-in-class partners in countries that make sense for us. We continue to face challenges and near-term uncertainties, I believe we are making progress. While annual guidance remains paused until we have greater visibility, I'm confident that we will see improvement as the year progresses. This is further underscored by the meaningful opportunities we see to continue to amplify our brands. Two of the most beloved brands in retail in American Eagle and Aerie, as well as our active sub-brand, OFFLINE. The team is focused on fueling growth and reach, and we remain confident in the strategic initiatives we have laid out to drive this.

Speaker Change: We continue to take steps to mitigate the impact if tariffs using all levers at our disposal as it makes sense for our business.

Speaker Change: Additionally, we are continuing on our strategic path to move business to ensure we are manufacturing with best in class partners in countries that makes sense for us.

Speaker Change: Although we continue to face challenges in near term uncertainties I believe we are making progress.

Speaker Change: While annual guidance remains paused until we have greater visibility I am confident that we will see improvement as the year progresses.

Jay Schottenstein: This is further underscored by the meaningful opportunities we see to continue to amplify our brand. two of the most beloved brands in retail, in American Eagle and Aerie, as well as our active sub-brand, Offline. The team is focused on fueling growth and reach, and we remain confident in the strategic initiatives we have laid out to drive growth.

Speaker Change: This is further underscored by the meaningful opportunities, we see to continue to amplify our brands two of the most beloved brands in retail and American Eagle and Aerie as well as our active sub brand offline.

Speaker Change: The team is focused on fueling growth in reach and we remain confident in the strategic initiatives, we have laid out to drive this.

Jay Schottenstein: Our Capital Allocation Priorities, Balance Investments, to support our long-term growth agenda while making sure we return capital to shareholders. On that note, in the first quarter, this included the initiation of a $200 million Accelerated Share Repurchase Program, as well as $31 million in Open Market Shares Repurchase. Additionally, we paid out $22 million in cash dividends in the first quarter.

Jay Schottenstein: Our capital allocation priorities balance investments to support our long-term growth agenda while making sure we return capital to shareholders. On that note, in Q1, this included the initiation of a $200 million accelerated share repurchase program, as well as $31 million in open market shares repurchases. Additionally, we paid out $22 million in cash dividends in Q1. Before I turn the call to Jen, I want to underscore that we are working with urgency to reignite our performance. We expect to be well-positioned heading into the important back-to-school season and are confident that results will follow. We've been through challenges in the past and always emerge stronger, and that is our goal.

Speaker Change: Our capital allocation priorities <unk> investments.

Speaker Change: To support our long term growth agenda, while making sure we return capital to shareholders on that note in the first quarter. This included the initiation of a $200 million accelerated share repurchase program as well as $31 million in open market repurchases. Additionally, we paid out <unk>.

Speaker Change: $2 million in cash dividends in the first quarter.

Jay Schottenstein: Before I turn the call to Chen, I want to underscore that we are working with urgency to reignite our performance. We expect to be well-positioned heading into the important back-to-school season and are confident that results will follow. We've been through challenges in the past and always emerge stronger, and that is our goal. We are grateful for the continued commitment and support of our associates and partners as we work to capitalize on the meaningful shareholder value, creation, and opportunity in front of us.

Speaker Change: Before I turn the call over to Jan I wanted to underscore that we are working with urgency to reignite our performance.

Jan: We expect to be well positioned heading into the important back to school season and are confident that results will follow we've been through challenges in the past and always emerged stronger and that is our goal.

Jay Schottenstein: We are grateful for the continued commitment support of our associates and partners as we work to capitalize on the meaningful shareholder value, creation, and opportunity in front of us. Now I will turn the call over to Jen.

Chad: We are grateful for the continued commitment and support of our associates and partners as we work to capitalize on the meaningful shareholder value creation opportunity in front of US now I would turn the call over to Chad.

Jay Schottenstein: Now I will turn the call over to Jay. Thanks and good afternoon everyone. Clearly this was a tough quarter. We had misses on the merchandising front and a handful of key categories. This was compounded by a cool spring and a slow start to the quarter in February. As the quarter progressed, we saw improvement and met our sales guidance. However, promotion activity was up, resulting in lower AUR. We also took an inventory write-down, altogether driving significant margin pressure.

Jennifer Foyle: Thanks, and good afternoon, everyone. Clearly, this was a tough quarter. We had misses on the merchandising front in a handful of key categories. This was compounded by a cool spring and a slow start to the quarter in February. As the quarter progressed, we saw improvement and met our sales guidance. However, promotional activity was up, resulting in lower AURs. We also took an inventory write-down, altogether driving significant margin pressure. Reviewing our performance by brand, starting with Aerie. Issues were concentrated in soft apparel, particularly in fleece tops and shorts, where some of our big fashion ideas for the season simply did not resonate with our customer. We also had higher product costs, and we were not able to realize the pricing to get an acceptable margin.

Jen Foyle: Thanks, and good afternoon, everyone. Clearly, this was a tough quarter. We had misses on the merchandising front in a handful of key categories. This was compounded by a cool spring and a slow start to the quarter in February. As the quarter progressed, we saw improvement and met our sales guidance. However, promotional activity was up, resulting in lower AURs. We also took an inventory write-down, altogether driving significant margin pressure. Reviewing our performance by brand, starting with Aerie. Issues were concentrated in soft apparel, particularly in fleece tops and shorts, where some of our big fashion ideas for the season simply did not resonate with our customer. We also had higher product costs, and we were not able to realize the pricing to get an acceptable margin.

Chad: Thanks, and good afternoon, everyone. Clearly this was a tough quarter, we had misses on the merchandising front and a handful of key categories. This was compounded by a cool spring and a slow start to the quarter in February.

Chad: As the quarter progressed, we saw improvement and met our sales guidance. However, promotional activity was up resulting in lower AUR.

Chad: We also took an inventory write down altogether driving significant margin pressure.

Jay Schottenstein: Reviewing our performance by brand.

Chad: Reviewing our performance by brand.

Jen Foyle: Starting with Aerie. Issues were concentrated in soft apparel, particularly in fleece tops and shorts, where some of our big fashion ideas for the season simply did not resonate with our customers. We also add higher product costs and we are not able to realize the pricing to get an acceptable margin.

Chad: Starting with aerie issues.

Chad: Issues are concentrated in the soft apparel, particularly lease tops and shorts, where some of our big fashion ideas for the season simply did not resonate with our customer.

Chad: We also had higher product costs, and we were not able to realize the pricing to get an acceptable margin.

Jennifer Foyle: We did see areas of strength, which we are leaning into as we move through the quarter and the balance of the year. In addition to certain fashion categories, we saw intimates improve sequentially as we gain share. Newness in fabrication and design, as well as refreshed marketing emphasizing our unique value offering, is resonating well. OFFLINE by Aerie demonstrated positive growth. This continues to be such an exciting opportunity for us. We are gaining market share, expanding customer awareness, and building a community around our truly unique take on activewear. Looking ahead, Aerie collections are more cohesive and balanced between basics and fashion items. Tariffs aside, product costs are favorable. Despite the near-term challenges, I am excited as ever about Aerie and OFFLINE's long-term growth opportunities. We have a powerful and strong platform we will continue to build upon.

Jen Foyle: We did see areas of strength, which we are leaning into as we move through the quarter and the balance of the year. In addition to certain fashion categories, we saw intimates improve sequentially as we gain share. Newness in fabrication and design, as well as refreshed marketing emphasizing our unique value offering, is resonating well. OFFLINE by Aerie demonstrated positive growth. This continues to be such an exciting opportunity for us. We are gaining market share, expanding customer awareness, and building a community around our truly unique take on activewear. Looking ahead, Aerie collections are more cohesive and balanced between basics and fashion items. Tariffs aside, product costs are favorable. Despite the near-term challenges, I am excited as ever about Aerie and OFFLINE's long-term growth opportunities. We have a powerful and strong platform we will continue to build upon.

Chad: We did see areas of strength, which we are leaning into as we move through the quarter and the balance of the year. In addition to sharing fashion categories intimates improves.

Chad: Actually as we gained share newness in fabrication and design as well as refreshed marketing emphasizing our unique value offering is resonating well.

Chad: I've run by Aerie demonstrated positive growth. This continues to be such an exciting opportunity for us we are gaining market share expanding customer awareness and building a community around our truly unique take on activewear.

Jen Foyle: This continues to be such an exciting opportunity for us. We are gaining market share, expanding customer awareness, and building a community around our truly unique take on activewear.

Jen Foyle: Looking ahead, jewelry collections are more cohesive and balanced between basics and fashion items. And tariffs aside, product costs are favorable. Despite the near-term challenges, I am excited as ever about Aerie and Offline's long-term growth opportunity. We have a powerful and strong platform we will continue to build upon. Our dedication to our customer is at the center of every decision we make, and we are committed to delighting them every day.

Chad: Looking ahead very collections are more cohesive and balance between basics and fashion items and tariffs aside product cost are favorable.

Chad: Despite the near term challenges I'm excited as ever about <unk> long term growth opportunities.

Chad: We have a powerful and strong platform, we will continue to build upon.

Jennifer Foyle: Our dedication to our customer is at the center of every decision we make, and we are committed to delighting them every day. Let's turn to American Eagle. Although disappointing in total, we saw a nice improvement as spring breaks got underway during the March period. As discussed last quarter, we experienced out of stocks in some core denim styles, which constrained our performance in this quarter. Overall, we saw weakness in shorts and pants. On the positive side, we were pleased to see comp growth in several areas in our women's business, in particular, categories that have been a strategic focus around our social casual dressing initiative. At the same time, we continue to elevate our everyday casual offering. We achieved our best quarter ever in fleece. Additionally, we came back in stock in women's denim, and then we saw improvement.

Jen Foyle: Our dedication to our customer is at the center of every decision we make, and we are committed to delighting them every day. Let's turn to American Eagle. Although disappointing in total, we saw a nice improvement as spring breaks got underway during the March period. As discussed last quarter, we experienced out of stocks in some core denim styles, which constrained our performance in this quarter. Overall, we saw weakness in shorts and pants. On the positive side, we were pleased to see comp growth in several areas in our women's business, in particular, categories that have been a strategic focus around our social casual dressing initiative. At the same time, we continue to elevate our everyday casual offering. We achieved our best quarter ever in fleece. Additionally, we came back in stock in women's denim, and then we saw improvement.

Chad: Dedication to our customer is at the center of every decision, we make and we are committed to delighting them everyday.

Jen Foyle: Let's turn to American Eagle. Although disappointing in total, we saw nice improvement as spring breaks got underway during the Marple period. As discussed last quarter, we experienced out-of-stocks and some core demisciles, which constrained our performance in this quarter. Overall, we saw weakness in shorts and pants. On the positive side, we are pleased to see comp growth in several areas in our women's business. In particular, categories that have been a strategic focus around our social casual dressing initiative. At the same time, we continued to elevate our everyday casual offering. We achieved our best quarter ever in fleece.

Speaker Change: Let's turn to American Eagle.

Speaker Change: Although disappointing in total we saw a nice improvement as spring breaks got underway during the marble period.

Speaker Change: As discussed last quarter we.

Speaker Change: Out of stocks in some core denim styles, which constrained our performance in this quarter overall, we saw weakness in shorts and pants.

Speaker Change: On the positive side, we were pleased to see comp growth in several areas in our women's business.

Speaker Change: In particular categories that have been a strategic focus around our social casual dressing initiatives.

Speaker Change: At the same time, we continue to elevate our everyday casual offering we achieved our best quarter ever in fleece and.

Jen Foyle: And additionally, we came back in stock in women's denim, and then we saw improvement. Although we continue to see pressure amends, two notable positives were tops in our activewear franchise 24-7.

Speaker Change: And Additionally, we came back in stock in women's Denim and then Lisa improvement.

Jennifer Foyle: Although we continue to see pressure in men's, two notable positives were tops in our activewear franchise 24/7. Looking ahead, I am confident we can build on these wins while addressing the opportunities that came to light over the past few months. Additionally, we have some very exciting campaigns planned for back to school, which we believe will elevate the brand and build greater customer engagement. Before I turn the call over to Mike, I want to reiterate my confidence in the long-term growth potential for American Eagle and Aerie. We have powerful brands, strength in our selling channels, and a dedicated customer base that continues to grow with us. We are working with urgency to make the right improvements to realize our full potential. Thank you all. I'll turn the call over to Mike.

Jen Foyle: Although we continue to see pressure in men's, two notable positives were tops in our activewear franchise 24/7. Looking ahead, I am confident we can build on these wins while addressing the opportunities that came to light over the past few months. Additionally, we have some very exciting campaigns planned for back to school, which we believe will elevate the brand and build greater customer engagement. Before I turn the call over to Mike, I want to reiterate my confidence in the long-term growth potential for American Eagle and Aerie. We have powerful brands, strength in our selling channels, and a dedicated customer base that continues to grow with us. We are working with urgency to make the right improvements to realize our full potential. Thank you all. I'll turn the call over to Mike.

Speaker Change: Although we continue to see pressure meant two notable positives were tops and our activewear franchise 24, 7%.

Jen Foyle: Looking ahead, I am confident we can build on these wins while addressing the opportunities that came to light over the past few months. Additionally, we have some very exciting campaigns planned for Back to School, which we believe will elevate the brand and build greater customer engagement.

Speaker Change: Looking ahead I am confident we can build on these wins, while addressing the opportunities that came to light over the past few months.

Speaker Change: Additionally, we have some very exciting campaigns planned for back to school, which we believe will elevate the brand and greater customer engagement.

Jen Foyle: Before I turn the call over to Mike, I want to reiterate my confidence in the long-term growth potential for American Eagle and Aerie. We have powerful brands, strength in our selling channels, and a dedicated customer base that continues to grow with us. We are working with urgency to make the right improvements to realize our full potential.

Speaker Change: Before I turn the call over to Mike I want to reiterate my confidence in the long term growth potential for American Eagle and Aerie, we have past experience strengthen our selling channels and a dedicated customer base that continues to grow with us.

Speaker Change: We are working with urgency to make the right improvements to realize our full potential and thank you all I'll turn the call over to Mike.

Jen Foyle: And thank you all.

Jen Foyle: I'll turn the call over to Marni. Thanks, Jen.

Jay Schottenstein: Thanks, Jen, and good afternoon, everyone. Beginning with our Q1 review.

Mike Mathias: Thanks, Jen, and good afternoon, everyone. Beginning with our Q1 review. As shared earlier this month, Q1 consolidated revenue of $1.1 billion declined 5% to last year. This included a 1-point headwind from adverse currency and another 1 point from moving our Hong Kong operations to a licensed model last year. Comparable sales decreased 3%. As Jen said, February is particularly difficult, with some improvement in the March-April time period. Of note, traffic was up across brands and channels. Comp pressure came through lower AURs and conversion. Gross profit dollars were $322 million and included approximately $75 million in inventory write-downs on spring and summer goods, as previously disclosed. The gross margin was 29.6%. Our merchandise margin decreased 960 basis points, driven by a 680 basis point impact from inventory write-downs.

Mike Mathias: Good afternoon, everyone. beginning with our first quarter review. First quarter consolidated revenue of $1.1 billion, Included a one-point headwind from adverse currency and another point from moving our Hong Kong operations to a licensed model last year. Comparable sales decreased three percent. As Jen said, February is particularly difficult, with some improvement in the March-April timeframe. Of note, traffic was up across brands and channels. Cop pressure came through lower AURs and conversions. Gross profit dollars were $322 million and included approximately $75 million in inventory write downs on spring and summer goods, as previously disclosed. The gross margin was 29.6%.

Mike: Thanks, Jeff and good afternoon, everyone.

Mike: Beginning with our first quarter review.

Mike Mathias: As shared earlier this month, Q1 consolidated revenue of $1.1 billion declined 5% to last year. This included a 1-point headwind from adverse currency and another 1 point from moving our Hong Kong operations to a licensed model last year. Comparable sales decreased 3%. As Jen said, February is particularly difficult, with some improvement in the March-April time period. Of note, traffic was up across brands and channels. Comp pressure came through lower AURs and conversion. Gross profit dollars were $322 million and included approximately $75 million in inventory write-downs on spring and summer goods, as previously disclosed. The gross margin was 29.6%. Our merchandise margin decreased 960 basis points, driven by a 680 basis point impact from inventory write-downs.

Mike: As shared earlier this month first quarter consolidated revenue of $1 1 billion declined 5% to last year.

Mike: This included a one point headwind from adverse currency and another point from moving our Hong Kong operations to a license model last year.

Mike: Comparable sales decreased 3%.

Mike: As Jen said February was particularly difficult with some improvement in the March April time period.

Mike: Of note traffic was up across brands and channels comp pressure came through lower AUR and conversion.

Mike: Gross profit dollars were $322 million and included approximately $75 million in inventory write downs on spring and summer goods as previously disclosed.

Mike: Gross margin was 29, 6%.

Mike Mathias: Our merchandise margin decreased 960 basis points, driven by a 680 basis point impact from inventory right. In addition, higher in-season markdowns, higher product costs, and increased freight as we chased into goods pressured margins. Buying occupancy and warehousing expenses de-leveraged 140 basis points due largely to rent and delivery in light of a comp... SG&A dollars increased 2% as a result of higher advertising where we made investments to support our brands with a partial offset from lower competition. Appreciation was down year over year to $52 million and we recorded an adjusted first quarter operating loss of $68 million.

Mike: Our merchandize margin decreased 960 basis points, driven by a 680 basis point impact from inventory write downs.

Mike Mathias: In addition, higher in-season markdowns, higher product costs, and increased freight as we chased into goods pressured margins. Buying occupancy and warehousing expenses deleveraged 140 basis points, due largely to rent and delivery in light of the comp decline. SG&A dollars increased 2% as a result of higher advertising, where we made investments to support our brands with a partial offset from lower compensation. Depreciation was down year-over-year to $52 million, and we recorded an adjusted Q1 operating loss of $68 million. An adjusted loss per share was $0.29. Consolidated ending inventory cost was down 5% following the write-down, with units also down 5%. In the Q1, as Jay noted, we continued to make long-term investments in our business while returning cash to shareholders. Q1 CapEx totaled $62 million.

Mike: In addition, hiring season markdowns higher product costs and increased freight as we chase into goods pressured margins.

Mike: Buying occupancy and warehousing expenses, Deleveraged 140 basis points due largely to rent and delivery in light of the comp decline.

Mike: SG&A dollars increased 2% as a result of higher advertising, where we made investments to support our brands with a partial offset from lower compensation.

Mike: Depreciation was down year over year to $52 million and we recorded an adjusted first quarter operating loss of $68 million.

Mike Mathias: The adjusted loss per share was $0.29. Consolidated ending inventory costs was down 5% following the write-down, with units also down 5%.

Mike: And adjusted loss per share was <unk> 29.

Mike: Consolidated ending inventory at cost was down 5% following the write down with units also down 5%.

Mike Mathias: In the first quarter, as Jay noted, we continued to make long-term investments in our business while returning cash to shareholders. First Quarter CapEx totaled $62 million. With the open market buybacks and the accelerated share repurchase program, our share count comes down to approximately $175 million moving forward, and we remain on track to complete the program in the second quarter. We ended the quarter with approximately $88 million in cash and investments and over $620 million of total liquidity, including our revolver.

Mike: In the first quarter as Jay noted, we continued to make long term investments in our business, while returning cash to shareholders.

Mike: First quarter Capex totaled $62 million.

Mike Mathias: With the open market buybacks and the accelerated share repurchase program, our share count comes down to approximately $175 million moving forward. We remain on track to complete the program in Q2. We ended the quarter with approximately $88 million in cash investments and over $620 million of total liquidity, including our revolver. Now turning to our outlook. While we have paused full year guidance until we have greater visibility, we wanted to share our expectations for Q2 as well as some incremental color on the actions we're taking to strengthen performance. Jen and team remain focused on improving product performance with fresh back-to-school merchandise hitting shelves in July. As mentioned, we've taken actions on inventory, including leaving fall and holiday season buys open to maintain flexibility in our merchandising strategy.

Mike: With the open market buybacks and the accelerated share repurchase program our share count comes down to approximately $175 million moving forward and we remain on track to complete the program in the second quarter.

Mike: We ended the quarter with approximately $88 million in cash and investments and over $620 million of total liquidity, including our revolver.

Mike Mathias: Now turning to our outlook, while we have paused for your guidance until we have greater visibility. We wanted to share our expectations for the second quarter, as well as some incremental color on the actions we're taking to strengthen performance. Jen and team remain focused on improving product performance with fresh back-to-school merchandise hitting shelves in July. As mentioned, we've taken actions on inventory, including leaving fall and holiday season buys open to maintain flexibility in our merchandising strategy. As we continue to navigate tariffs, we're implementing various mitigation strategies, including partnering with our sourcing vendors to reduce costs.

Mike: Now turning to our outlook, while we have paused full year guidance until we have greater visibility, we wanted to share our expectations for the second quarter as well as some incremental color on the actions were taken to strengthen performance.

Mike: The <unk> team remains focused on improving product performance with fresh back to school merchandise hitting shelves in July.

Mike: As mentioned, we've taken actions on inventory, including leaving fall and holiday season buys open to maintain flexibility in our merchandising strategy.

Mike Mathias: As we continue to navigate tariffs, we're implementing various mitigation strategies, including partnering with our sourcing vendors to reduce costs. Additionally, we're further diversifying our supply chain and on track to reduce our sourcing exposure to China to under 10% this year, with fall and holiday season down to low single digits. We're pursuing efficiencies across capital spend with full year CapEx now expected to be approximately $275 million as we recadence some investments over the coming years. As noted last quarter, we expect currency pressure to alleviate in the second half as we lap headwinds from last year. Altogether, this positions us to deliver improved growth, profitability, and cash flow as the year progresses. For Q2 specifically, we expect the top line to trend similar to Q1, with revenue down 5% and comparable sales down approximately 3%.

Mike: As we continue to navigate tariffs, we're implementing various mitigation strategies, including partnering with our sourcing vendors to reduce costs. Additionally.

Mike Mathias: Additionally, we're further diversifying our supply chain and on track to reduce our sourcing exposure to China to under 10% this year, with fall and holiday season down to low single digits. We're pursuing efficiencies across capital spend with four-year CapEx, now expected to be approximately $275 million as we recadence some investments over the coming And as noted last quarter, we expect currency pressure to alleviate in the second half as we lap headwinds from last Altogether, this positions us to deliver improved growth, profitability, and cash flow as the year progresses. For the second quarter specifically, we expect the top line to trend similar to the first quarter with revenue down 5% and comparable sales down approximately 3%.

Mike: Additionally, we are further diversifying our supply chain and on track to reduce our sourcing exposure to China is under 10% this year with fall and holiday season down to low single digits.

Mike: We're pursuing efficiencies across capital spend with full year Capex now expected to be approximately $275 million as we re cadence of investments over the coming years.

Mike: And as noted last quarter, we expect currency pressure to alleviate in the second half as we lap headwinds from last year.

Mike: Altogether this positions us to deliver improved growth profitability and cash flow as the year progresses.

Mike: For the second quarter, specifically, we expect the top line to trend similar to the first quarter with revenue down, 5% and comparable sales down approximately 3%.

Mike Mathias: Operating income is expected to be in the range of $40 to $45 million. We expect gross margins to be down to last year, driven primarily by higher in-season markdowns and BOW constancy levers on the comp to clock. SG&A dollars are expected to be roughly flat with DNA at approximately $54 million. The tax rate is expected to be approximately 25%, and the weighted average share count will be approximately $175 million.

Mike Mathias: Operating income is expected to be in the range of $40 to $45 million. We expect gross margin to be down to last year, driven primarily by higher in-season markdowns and BOW cost delevers on the comp decline. SG&A dollars are expected to be roughly flat, with D&A at approximately $54 million. The tax rate is expected to be approximately 25%, and the weighted average share count will be approximately 175 million. Overall, we are committed to re-accelerating performance from here and to taking the necessary actions to achieve that goal. We are better positioned entering Q2, and our teams are laser-focused on execution to strengthen our performance. With that, we'll open up for questions.

Mike: Operating income is expected to be in the range of $40 million to $45 million.

Mike: We expect gross margin to be down to last year, driven primarily by higher in season markdowns and BMW cost deleverage on the comp decline.

Mike: SG&A dollars are expected to be roughly flat with DNA approximately $54 million.

Mike: The tax rate is expected to be approximately 25% and a weighted average share count will be approximately $175 million.

Mike Mathias: Overall, we're committed to re-accelerating performance from here and to taking the necessary actions to achieve that goal. We are better positioned entering the second quarter and our teams are laser focused on execution to strengthen our performance.

Mike: Overall, we are committed to re accelerating performance from here and to taking the necessary actions to achieve that goal.

Mike: We are better positioned entering the second quarter and our teams are laser focused on execution to strengthen our performance.

Operator: And with that, we'll open it up for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. And if you're using a speakerphone, please pick up your handset before pressing the key. and to withdraw your questions. Please press star, then.

Mike: And with that we'll open up for questions.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. The first question will come from Matthew Boss with JP Morgan. Please go ahead.

Mike: We will now begin the question and answer session.

Mike: To ask a question you May press Star then one on your telephone keypad.

Mike: If youre using a speakerphone please pick up your handset before pressing the keys.

Mike: And to withdraw your question. Please press Star then two.

Operator: And at this time, we'll pause momentarily to assemble our roster.

Mike: And at this time, we'll pause momentarily to assemble our roster.

Matthew Boss: And the first question will come from Matthew Boss with J.P. Morgan. Please go ahead. Great, thanks. So Jay, maybe larger picture. What's your view of the consumer today? How do you see this impacting the retail landscape into the back half? And maybe across your brands, how much of the recent performance do you see as macro driven, maybe relative to execution related?

Matthew Boss: And the first question will come from Matthew Boss with Jpmorgan. Please go ahead.

Matthew Boss: Great, thanks. Jay, maybe larger picture, what's your view of the consumer today? How do you see this impacting the retail landscape into the back half of the year? Maybe across your brands, how much of the recent performance do you see as macro-driven, maybe relative to execution-related, and how can you best respond?

Matthew Boss: Great. Thanks.

Speaker Change: So Jay maybe larger picture, what's your view of the consumer today, how do you see this impacting the retail landscape into the back half of the year and maybe across your brands how much of the recent performance do you see as macro driven maybe relative to execution related and how can you best respond.

Jay Schottenstein: And how can you best All right, with the macro, macro situation, look. We're optimistic. We're hoping that this tax plan gets passed sooner than later. I think that will give a lot of optimism, and it may even stimulate the economy, as far as the second half goes. As far as the back row, as far as the first half, I think at the beginning of the year, it did have a little influence on us, between people worried about the immigration issue, they're worried about the government cuts, they're worried about tariffs. I think people are getting more settled down now on it, and it's not as prominent as it was before.

Jay Schottenstein: All right. With the macros, macro situation, look, we're optimistic. You know, we're hoping that this, you know, tax plan gets passed sooner than later. I think that'll give a lot of optimism, and it may even stimulate the economy as far as the second half goes. As far as the macro, as far as the first half, I think at the beginning of the year, you know, it did have a little influence on us between people worried about the immigration issue, they're worried about the government cuts, they're worried about tariffs. I think people are getting more settled down now on it, and it's not as prominent as it was before.

Mike: Alright, with the macro macro situation look.

Mike: We're optimistic.

Mike: We're hoping that this tax plan gets passed sooner than later and and I think that will give a lot of optimism and maybe even stimulate the economy as far as the second half goes.

Mike: As far as the as far as the back row.

Mike: Part as far as the first half I think in the beginning of the year, we did have little influence on us between people worried about the.

Mike: About the immigration issue they are worried about.

Mike: About the government cuts and worried about tariffs, but I think people are getting more settled down now on it.

Mike: And it's not as prominent as it was before.

Mike: Okay.

Matthew Boss: Great. maybe Mike, on the Q2 operating income

Matthew Boss: Great. maybe Mike, on the Q2 operating income I guess, could you help break down or break apart your embedded assumption for gross margin and just promotional activity needed and the timeline to return to a clean inventory position across brand?

Mike Mathias: and then maybe Mike on the second quarter operating income.

Mike Matthias: Great and then maybe Mike.

Mike Matthias: Second quarter operating income I guess could you help break down or break apart your embedded assumption for gross margin and just promotional activity needed and the timeline to return to a clean inventory position across brands.

Dana Telsey: I guess, could you help break down or break apart your embedded assumption for gross margin and just promotional activity needed and the timeline to return to a clean inventory position across brand?

Mike Mathias: Could you help break down or break apart your embedded assumption for gross margins and just promotional activity needed and the timeline to return to a clean inventory position across Yeah, I can hit the inventory piece first. We've been hard at work, really. It's hard to see this trend in the first half, then with the tariff news on April 2nd, to really reset plans for the rest of the year, especially in the back half, the write down obviously, to get our total inventory right set for this entire first six months, spring and summer. So our inventory, we feel, is a better place for the back half, very much in line with sales expectations.

Mike Mathias: Yeah, I can hit the inventory piece first. You know, we've been hard at work, really, started to see this trend in the 1st half with the tariff news on 2 April to really reset plans for the rest of the year, especially in the 2nd half. The write-down, obviously, to get our total inventory right set for this entire 1st 6 months, spring and summer goods. Our inventory, we feel is in a better place for the 2nd half, very much in line with sales expectations. We'll talk about we're not providing full guidance or full year guidance, we'll talk about that more on the next call.

Mike Matthias: Yeah, I can hit the inventory piece first.

Mike Matthias: Yeah, we've been hard at work really just.

Mike Matthias: Starting to see this trend in the first half than what the tariff.

Mike Matthias: <unk> on April 2nd to really reset plans for the rest of the year, especially in the back half.

Mike Matthias: Write down obviously to get our total inventory rate set for the entire first six months, bringing this up in the spring and summer goods sorry.

Mike Matthias: Tori we feel better.

Mike Matthias: Better place for the back half.

Speaker Change: Much in line with sales expectations I will talk about we're not providing full guidance with our full year guidance, we will talk about that more on the next call.

Mike Mathias: We're not providing full year guidance, but we'll talk about that more on the next call. And for Q2 specifically, yeah, we're still embedding on what is a negative 3 comp expectation similar to the first quarter at the moment, down 5 total revenue with still some currency and other, you know, the currency Hong Kong, you know, point or two headwinds there continuing for the second quarter until we lap both those things starting in the third quarter. And still embedding some promotional activity that we believe we. will probably need during the summer season here to get through the inventory and be clean going into the back.

Mike Mathias: For Q2 specifically, we are still embedding on what is a negative 3 comp expectation similar to Q1 at the moment, down 5 total revenue with stores and currency and other, the currency, Hong Kong, 1 or 2 headwinds there continuing for Q2 until we lap both those things starting in Q3. Still embedding some promotional activity that we believe we will probably need during the summer season here to get through the inventory and be clean going into the back-to-school season.

Speaker Change: For Q2, specifically, yes, we are still embedding on what is the negative three comp expectation similar to the first quarter at the moment.

Speaker Change: <unk> total revenue was still concurrency and other currency Hong Kong.

Speaker Change: A point or two headwinds that are continuing for the second quarter until we lap both of those things starting in the third quarter.

Speaker Change: Still embedding some promotional activity that we believe we will probably need.

Speaker Change: During the during the summer season here to get through the inventory and to be clean going into the optical season.

Mike Mathias: And then with the down five total revenue, pressure on the expenses and gross margin, rent and delivery specifically, I would expect to see de-leverage on those lines again, similar to what we saw in the first quarter.

Mike Mathias: On, you know, with the down 5 total revenue pressure on the expenses and gross margin, rent and delivery specifically, I would expect to see deleverage on those lines, again, similar to what we saw in Q1.

Speaker Change: And then on.

Speaker Change: With the down five total revenue pressure on the expenses and gross margin rent and delivery specifically.

Speaker Change: Expect to see deleverage on those lines again similar to what we saw in the first quarter.

Dana Telsey: Great. That's the one.

Matthew Boss: Great. That's the one.

Speaker Change: Great Best of luck.

Jennifer Foyle: Thanks, guys.

Jen Foyle: Thanks, Mat.

Jay Sole: The next question will come from Jay Sole with UBS. Please go ahead. Great, thank you so much.

Speaker Change: Thanks.

Operator: The next question will come from Jay Sole with UBS. Please go ahead.

Speaker Change: Our next question will come from Jay sole with UBS. Please go ahead.

Jay Sole: Great. Thank you so much. Jen, my question's for you. Just talk about some of the merchandising issues. Do you feel like that maybe there was a little bit of a misread of where the consumer was going, or was it perhaps, you know, your identification of trends was good, but maybe competition had the trends a little bit better or sooner than you did? Then secondly, you know, how fast do you think you can get back on the trend where the merchandising is where you want it to be to perhaps drive stronger comp growth in the back to school and holiday seasons? Thank you.

Speaker Change: Great. Thank you so much Jim My question is for you just talk about some of the merchandising issues do you feel like maybe there was a little bit of a misread of where the consumer was going or was it perhaps.

Jen Foyle: Jen, my question's for you. Let's talk about some of the merchandising issues. Do you feel like that maybe there was a little bit of a misread of where the consumer was going? Or was it perhaps, you know, your identification of trends was good, but maybe competition had the trends a little bit better or sooner than you did? And then secondly, you know, how fast do you think you can get back on the trend where the merchandising is where you want to be to perhaps drive stronger comp growth in the back to school and holiday seasons?

Speaker Change: In addition of trends is good but maybe competition had the trends a little bit better or sooner than you did and then secondly, how fast you think you can get back on the trend where the merchandising, it's where you want it to be to perhaps drive.

Speaker Change: Stronger comp growth in the <unk>.

Jen Foyle: Thank you. Sure. To reiterate, we came off of a really solid Q4. We were expecting more as we moved into February, and obviously that didn't happen. I will tell you that these teams are working very swiftly to repair what our learnings are, and there's always green shoots, right? And we definitely had product issues across brands, but there were product categories at work. So what the team's been up to since February is repairing and looking forward ahead. Of course, you know, we needed to lean into moving our inventory, ensuring that we're clean. That is our approach.

Speaker Change: Back to school and holiday season. Thank you.

Jennifer Foyle: Sure. Yeah. To reiterate, you know, we came off of a really solid Q4. We were expecting more as we moved into February, and obviously, that didn't happen. I will tell you that these teams are working very swiftly to repair what our learnings are. There's always green shoots, right? We definitely had product issues across brands, but there were product categories that worked. What the team's been up to since February is repairing and looking forward ahead. Of course, you know, we needed to lean into moving our inventory, ensuring that we're clean. That is our approach. We wanna be clean and lean for back to school. It's our Super Bowl season, and that's what we're working on. We have categories like OFFLINE. OFFLINE's been great.

Jen Foyle: Sure. Yeah. To reiterate, you know, we came off of a really solid Q4. We were expecting more as we moved into February, and obviously, that didn't happen. I will tell you that these teams are working very swiftly to repair what our learnings are. There's always green shoots, right? We definitely had product issues across brands, but there were product categories that worked. What the team's been up to since February is repairing and looking forward ahead. Of course, you know, we needed to lean into moving our inventory, ensuring that we're clean. That is our approach. We wanna be clean and lean for back to school. It's our Super Bowl season, and that's what we're working on. We have categories like OFFLINE. OFFLINE's been great.

Speaker Change: Sure Yeah to reiterate we came up with a really solid Q4.

Speaker Change: <unk> more as we moved into February and obviously that didn't happen I will tell you that these teams are.

Speaker Change: Working very swiftly to repair what our learnings are and Theres always green shoots right.

Speaker Change: And we definitely had product issues across brands, but there were there were product categories that works so what.

Speaker Change: What the team has been up to since February is repairing and looking forward ahead of course.

Speaker Change: We needed to lean into moving our inventory ensuring that we're clean that is our approach we wanted to be clean immune for back to school. It is our Super Bowl season, and Thats what were working on.

Jen Foyle: We want to be clean and mean for back to school. It's our Super Bowl season, and that's what we're working on. We have categories like offline. Offline's been great. We had solid strength and growth there, and we're leaning into that category when we think about the Aerie brand. There are misses, but look, we're looking into back to school. I'm proud of what the team's working through. We have new members on the team, too, and we have new talent, and I think this team is a winning recipe, including moving some tenure teams into new businesses, i.e.

Speaker Change: Categories like offline offline has been great we had solid strength and growth there and we're leaning into that category. When we think about the aerie brand.

Jennifer Foyle: We had solid strength and growth there, and we're leaning into that category when we think about the Aerie brand. There are misses, but look, we're looking into back to school. I'm proud of what the team's working through. We have new members on the team too, and we have new talent. I think this team is a winning recipe, including moving some tenure teams into new businesses, i.e. direct. I'm really excited about what's to come, but we have work to do. That's for sure.

Jen Foyle: We had solid strength and growth there, and we're leaning into that category when we think about the Aerie brand. There are misses, but look, we're looking into back to school. I'm proud of what the team's working through. We have new members on the team too, and we have new talent. I think this team is a winning recipe, including moving some tenure teams into new businesses, i.e. direct. I'm really excited about what's to come, but we have work to do. That's for sure.

Speaker Change: This is Bert look we're looking into back to school I am proud of what the team is working through.

Speaker Change: New members on the team too and we have new talent and I think this team is the winning recipe including moving some.

Speaker Change: 10 year teams into new businesses I E. Direct so im really excited about what's to come but we have work to do that's for sure.

Jen Foyle: direct. So I'm really excited about what's to come, but we have work to do, that's for sure. Got it. Thank you so much.

Jay Sole: Got it. Thank you so much.

Speaker Change: Got it thank you so much.

Dana Telsey: The next question will come from Dana Telsey with Telsey Advisory Group. Please go ahead. Hi. Good afternoon, everyone.

Operator: Your next question will come from Dana Telsey with Telsey Advisory Group. Please go ahead.

Dana Telsey: The next question will come from Dana Telsey with Telsey Advisory Group. Please go ahead.

Dana Telsey: Hi. Good afternoon, everyone. As you think about capital allocation and the CapEx expenditure, I think came in a little bit, how are you thinking about your physical footprint? What's changing in openings and closings versus what you had previously expected? As you think about the merchandise assortment going into the back half of the year, category-wise, Jen, where do you expect to see the biggest improvement and what will take a little bit longer in order to address? Thank you.

Dana Telsey: Hi, Good afternoon, everyone. As you think about capital allocation and the Capex expenditure I think came in a little bit how you're thinking about your physical footprint, what's changing and openings and closings versus what you had previously expected and then if you think about the merchandise assortment going into the back half of the year.

Dana Telsey: As you think about capital allocation and the cap expenditure, I think came in a little bit, how are you thinking about your physical footprint? What's changing in openings and closings versus what you had previously expected? And then if you think about the merchandise assortment going into the back half of the year, category-wise, Jen, where do you expect to see the biggest improvement and what will take a little bit longer in order to address? Thank you.

Dana Telsey: Category Wise, Jim where do you expect to see the biggest improvement and what will take a little bit longer and order towards that.

Dana Telsey: Thank you.

Jen Foyle: I'll start with the product. The good news is our seasonal products were tough, right? Shorts across all three brands were tough. Interestingly enough, Denim's been very, very strong for us and giving us nice, solid indications as we think about back-to-school, so it's interesting how we've been able to lean into that category and make sure we're prepared for the back-to-school season, particularly, obviously, in AE. I mentioned Offline. Offline's been a strong category for us. We're winning in that area, and we're going to continue to lean into that category in Aerie. And look, Intimates. We still have our – we have – you know what's interesting, as I think about all three brands, is we're holding our market share, okay?

Jennifer Foyle: I'll start with the product. Look, good news is, our seasonal products were tough, right? Shorts across all three brands were tough. Interestingly enough, denim's been very, very strong for us and giving us nice, solid indications as we think about back to school. It's interesting how we've been able to lean into that category and make sure we're prepared for the back to school season, particularly obviously in AE. I mentioned OFFLINE. OFFLINE's been a strong category for us. We're winning in that area, we're gonna continue to lean into that category in Aerie. Look, intimates, we still have our. We have share. You know what's interesting as I think about all three brands, is we're holding our market share, okay? We're gaining in areas like, i.e.

Jen Foyle: I'll start with the product. Look, good news is, our seasonal products were tough, right? Shorts across all three brands were tough. Interestingly enough, denim's been very, very strong for us and giving us nice, solid indications as we think about back to school. It's interesting how we've been able to lean into that category and make sure we're prepared for the back to school season, particularly obviously in AE. I mentioned OFFLINE. OFFLINE's been a strong category for us. We're winning in that area, we're gonna continue to lean into that category in Aerie. Look, intimates, we still have our. We have share. You know what's interesting as I think about all three brands, is we're holding our market share, okay? We're gaining in areas like, i.e.

Dana Telsey: I'll start with the product the good news is our seasonal products are tough right shorts across all three brands were tough.

Dana Telsey: Certainly in that element.

Dana Telsey: Very strong for us and giving us nice solid indications as we think about back to school. So.

Dana Telsey: It's interesting how we've been able to lean into that category and make sure. We're prepared for the back to school season, particularly obviously in AE I mentioned offline offline has been a strong category for us we're winning in that area and we're going to continue to lean into that category and aerie and look intimates, we still have our.

Dana Telsey: Sure. It's interesting as I think about all three brands is we're holding our market share okay, and we're gaining in areas like E Intimates Ware.

Jen Foyle: And we're gaining in areas like IE Intimates, where that whole share has been down across the industry, and we're gaining share. So thinking about Intimates for Aerie, we're excited about that category. Undies has been accelerating for us. And again, we're going to lean into these green shoots that we've been seeing, and we're prepared for back-to-school.

Jennifer Foyle: intimates, where that whole share has been down across the industry and we're gaining share. Thinking about intimates for Aerie, we're excited about that category. Undies has been accelerating for us. Again, we're gonna lean into these green shoots that we've been seeing, and we're prepared for back to school.

Jen Foyle: intimates, where that whole share has been down across the industry and we're gaining share. Thinking about intimates for Aerie, we're excited about that category. Undies has been accelerating for us. Again, we're gonna lean into these green shoots that we've been seeing, and we're prepared for back to school.

Dana Telsey: That whole share it's been down across the industry and we're gaining share so thinking about intimates for aerie. We're excited about that category on these has been accelerating for us and again, we're going to lean into these green shoots that we've been seeing and we're prepared for back to school.

Dana Telsey: Yes.

Mike Mathias: On capital allocation and CapEx, Dana, yeah, we reduced the guidance for the year to $275 million in CapEx. We're really just recadencing projects. I think our initial guidance for the AU remodel program was around 100 locations. We're still going to do about 60 to 70 this year. So just recadencing them to preserve a little bit of cash in the environment, and really reaction to our own business, but the tariff impact initially in April, we decided to recadence some capital projects to Preserve some cash to remodel program, recadencing, airy stores. We're still looking about 30 openings.

Mike Mathias: On capital allocation and CapEx, Dana, yeah, reduced the guidance for the year to $275 million in CapEx. We're really just recadencing projects. I think our initial guidance for the AE remodel program was around 100 locations. We're still gonna do about 60 to 70 this year. Just recadencing them to, you know, preserve a little bit of cash in the environment, and really a reaction to our own business. The tariff impact initially in April, we decided to recadence some capital projects to preserve some cash. The remodel program recadencing, Aerie stores, we're still looking at about 30 openings. We also just recadenced some technology spend as well on a multi-year basis.

Dana Telsey: On capital allocation and Capex Dana you have reduced the guidance for the year to $275 million in Capex, We're really just retaining projects I think our initial guidance for the remodel program was around 100 locations, we're still going to about 60 to 70. This year. So just re cadence in them.

Dana Telsey: Preserved a little bit of cash in the environment and really a reaction to our own business, but the tariff impact initially in April we decided to retain some capital projects to.

Dana Telsey: To preserve some cash.

Dana Telsey: The remodel program retaining thing Aerie stores were still looking about 30 openings and then we also just cadence of technology spend as well.

Mike Mathias: And then we also just recadence of technology spend as well on a multiyear basis.

Dana Telsey: On a multiyear basis and then you know.

Mike Mathias: And then, you know, when we prepared remarks, we talked about the dividend. first quarter and the ASR being completed here during the second quarter. And then further outlook we'll provide later in terms of... We have continued plans. We know the remodel program will continue into next year. Area openings will provide additional color. As we get further into this...

Mike Mathias: You know, when we prepared remarks, we talked about the dividend the Q1 and the, you know, ASR being completed here during the Q2. Further outlook, we'll provide later in terms of continued plans. We know the remodel program will continue into next year. Aerie openings will provide additional color, as we get further into this year as well.

Dana Telsey: <unk> prepared remarks, he talked about the dividend and the <unk>.

Dana Telsey: First quarter and the ASR being completed here during the second quarter.

Dana Telsey: And then further further outlook I will provide later in terms of.

Dana Telsey: Continued plans, we know that remodel program will continue into next year.

Dana Telsey: Reopening who will provide additional color.

Dana Telsey: As we get further into this year as well.

Operator: Thank you.

Jonna Kim: Thank you.

Dana Telsey: Thank you.

Speaker Change: Thank you.

Jennifer Foyle: Thanks, Anna.

Jen Foyle: Thanks, Dana.

Speaker Change: Thank you Sir.

Marni Shapiro: The next question will come from Marni Shapiro with the Retail Tracker. Please go ahead. Thanks, guys. Can we just talk two things I want to confirm? I think you said denim is still doing well and you had some sellouts. When you saw the weather break, did you also see denim pick up in denim shorts? And is denim doing well in men's and women's?

Operator: Your next question will come from Marni Shapiro with The Retail Tracker. Please go ahead.

Speaker Change: Next question will come from Marni Shapiro with the retail tracker. Please go ahead.

Marni Shapiro: Thanks, guys. Could we just talk two things I wanna confirm? I think you said denim is still doing well, and you had some sellouts. When you saw the weather break, did you also see denim pick up in denim shorts? Is denim doing well in men's and women's? I just have one quick follow-up on your marketing. Is that gonna be weighted towards back to school and any change in the spend there?

Speaker Change: Thanks, guys.

Marni Shapiro: Could you just talk two things I wanted to confirm thank you said denim is still doing well and you had some sellouts. When you saw the weather break did you also see denim pick up in denim shorts, and denim doing well in mens and womens and then I just have one quick follow up on your marketing is that going to be weighted towards back to school and any.

Jen Foyle: And then I just have one quick follow up on your marketing. Is that going to be weighted towards back to school and any change in the spend there? Sure, let me just say in general for men's, men's we've seen some acceleration in all categories as we move into Q2, so really good news there. Shorts has still remained fairly tough for us across, again, all three brands. Hoping when the weather breaks we're going to see some relief there and we can then pulse on that. Denim and women's has been strong. Once we got back in, if you remember back in March, I quoted that we were out of stocks in February.

Marni Shapiro: And the spend there.

Jennifer Foyle: Sure. Let me just say in general for men's. men's we've seen some acceleration in all categories as we move into Q2, really good news there. shorts has still remained fairly tough for us across, again, all three brands. hoping when the weather breaks, we're gonna see some relief there, we can then pulse on that. Denim and women's has been strong. once we got back if you remember back in March.

Jen Foyle: Sure. Let me just say in general for men's. men's we've seen some acceleration in all categories as we move into Q2, really good news there. shorts has still remained fairly tough for us across, again, all three brands. hoping when the weather breaks, we're gonna see some relief there, we can then pulse on that. Denim and women's has been strong. once we got back if you remember back in March.

Speaker Change: Sure. Let me just say in general for men's men's we've seen some acceleration in all categories. As we move into Q2. So really good news. There shorts is still remained fairly tough for us across again, all three brands.

Speaker Change: Hoping when the weather breaks we're going to see some relief there and we can then pulse on that denim and women's has been so once we got back and if you remember back in March.

Marni Shapiro: Yeah.

Jennifer Foyle: I quoted that we were out of stocks in February.

Jen Foyle: I quoted that we were out of stocks in February. When we got back into stocks, we saw the business and the momentum. Really good news there. You know, it's really interesting in denim, and I think I've mentioned this on previous calls. We're seeing all fits work for women. It's great news for us. We have a strong hold in women's denim, and we've gained share. That's the good news. Again, I wanna reiterate our customer file. Our customer file in AE has grown high single digits. Aerie, through this tough challenging time, has grown mid-single digits. We know we have work to do on the product. There were definitely some misses in Aerie. Late goods to the floor. I never like how that shows up, by the way, when you're hearing. Oh, I never. I hate it.

Speaker Change: I quoted that we were out of stocks in February when we got back into stocks, we saw the business and the momentum really good news there and all.

Jen Foyle: When we got back into stocks, we saw the business and the momentum, really good news there. And all, you know, it's really interesting in denim and I think I've mentioned this on previous calls. We're seeing all fits work for women. It's great news for us. We have a strong hold in women's denim and we've gained share, so that's the good news.

Marni Shapiro: Mm-hmm.

Jennifer Foyle: When we got back into stocks, we saw the business and the momentum. Really good news there. You know, it's really interesting in denim, and I think I've mentioned this on previous calls. We're seeing all fits work for women. It's great news for us. We have a strong hold in women's denim, and we've gained share. That's the good news. Again, I wanna reiterate our customer file. Our customer file in AE has grown high single digits. Aerie, through this tough challenging time, has grown mid-single digits. We know we have work to do on the product. There were definitely some misses in Aerie. Late goods to the floor. I never like how that shows up, by the way, when you're hearing. Oh, I never. I hate it.

Speaker Change: Really interesting in denim and I think I've mentioned this on previous calls we're seeing all fits work for women. It's great news for US we have a strong hold in women's denim and we've gained share. So that's the good news.

Jen Foyle: And again, I want to reiterate our customer file. Our customer file in AE has grown high single digits and Aerie through this tough, challenging time has grown mid-single digits. So we know we have work to do on the product. There were definitely some misses in Aerie. Late goods to the floor. I never like how that shows up, by the way, when you're airing goods. Oh, I never. I hate it. It ends up looking like what we all think. We know how that looks. Fantastic.

Speaker Change: And again I want to reiterate our customer file our customer file and AE has grown high single digits in aerie.

Speaker Change: Through this tough challenging time as kind of a mid single digit. So we know we have work to do on the product there were definitely some misses in aerie.

Speaker Change: Great good to the floor I never liked how that shows up by the way.

Speaker Change: I'm good.

Speaker Change: Oh, I never I hate it ends up looking like.

Jennifer Foyle: It ends up looking like what we all, we know how that looks. I know the teams, we, you know, we see what our miss is. Again, starting in February, we've been reacting. We're back to school campaigns start in July and move through the season.

Jen Foyle: It ends up looking like what we all, we know how that looks. I know the teams, we, you know, we see what our miss is. Again, starting in February, we've been reacting. We're back to school campaigns start in July and move through the season.

Speaker Change: We don't have that loves.

Speaker Change: And I know the teams.

Speaker Change: We see what our Mrs and <unk>.

Speaker Change: Again, starting in February we've been reacting so.

Speaker Change: Back to school campaign started in July and move through the season.

Marni Shapiro: Fantastic. Just the marketing, will that be weighted towards back to school? Is that the.

Jen Foyle: And just the marketing, will that be weighted towards back to school? Is that when we should start to see the new campaigns and change the way we spend it? Yes, absolutely.

Speaker Change: Fantastic and just the marketing will that be weighted towards back to school is that.

Jennifer Foyle: No.

Jen Foyle: No.

Marni Shapiro: when we should start to see the new campaigns and...

Speaker Change: Expect to see the new campaigns and.

Jennifer Foyle: Yes.

Jen Foyle: Yes.

Marni Shapiro: changes in any spending?

Speaker Change: James.

Jennifer Foyle: Yes, absolutely. AE had a new floor set recently, and Aerie has a new floor set this week. Again, we wanna continue to bring in the newness. That's so important for our customer. Our real marketing campaigns, you'll see more through July through the, you know, back to school season.

Jen Foyle: Yes, absolutely. AE had a new floor set recently, and Aerie has a new floor set this week. Again, we wanna continue to bring in the newness. That's so important for our customer. Our real marketing campaigns, you'll see more through July through the, you know, back to school season.

Jen Foyle: AE had a new floor set recently and Aria's new floor set this week. So again, we want to continue to bring in the newness that's so important for our customer. But our real marketing campaigns, you'll see more through July through the, you know, back to school Honestly, the new floor set that just went in is stunning and such a big change from what's been there.

Speaker Change: Yes, absolutely AE at a new floor set recently in areas new floor set this week so again we.

Speaker Change: Want to continue to bring in the newness, that's so important for our customer but.

Speaker Change: A real marketing campaigns youll see more through July through that.

Speaker Change: Back to school season.

Marni Shapiro: Honestly, the new floor set that just went in is stunning and such a big change from what's been there. Congrats on that 'cause it honestly looks fantastic.

Speaker Change: Honestly, the new floor set that just went in is stunning and such a big change from whats been there. So congrats on that because it honestly looks fantastic.

Jen Foyle: So congrats on that, because it honestly looks fantastic. Yeah, thank you. Like I said, starting in February, we started to move fast, so that's what we need to do.

Jennifer Foyle: Yes. Thank you. I, like I said, starting in February, we started to move fast, so that's what we need to do.

Jen Foyle: Yes. Thank you. I, like I said, starting in February, we started to move fast, so that's what we need to do.

Speaker Change: Thank you.

Speaker Change: Starting in February we we started to move back so that's what we need to do.

Operator: Thank you, guys.

Marni Shapiro: Thank you, guys.

Speaker Change: Thank you guys.

Jennifer Foyle: Thank you. Thank you.

Jen Foyle: Thank you. Thank you.

Rick Patel: The next question will come from Rick Patel with Raymond James, please go ahead. Thank you. Good afternoon. I'm hoping you could talk about the outlook for promotions. So, you touched on growth improving as the year progresses. What does that embed in terms of promotions? Like, just bigger picture, how are you evaluating the potential to improve conversion with promotions versus protecting gross market? Yeah, I think the outlook for the rest of this quarter, like I talked about, still assuming a little pressure on markdown through promotions. to get ourselves completely clean going into this back-to-school season, as Jen talked about.

Operator: The next question will come from Rick Patel with Raymond James. Please go ahead.

Speaker Change: The next question will come from Rick Patel with Raymond James. Please go ahead.

Rick Patel: Thank you. Good afternoon. Hoping you could talk about the outlook for promotions. You touched on growth improving as the year progresses. What does that embed in terms of promotions? Like, just bigger picture, how are you evaluating the potential to improve conversion with promotions versus protecting gross margins?

Rick Patel: Thank you good afternoon, hoping you could talk about the outlook for promotions. So you touched on growth improving as the year progresses.

Speaker Change: In terms of promotions like just bigger picture how are you evaluating the potential to improve conversion with promotions versus protecting gross margins.

Mike Mathias: Rick, I think, the outlook for the rest of this quarter, like I talked about, still assuming a little pressure on markdown through promotions, to get ourselves completely clean going into this back to school season, as Jen talked about. In the back half, we're still embedding a little more expectation around promotions into our gross margin expectations. Again, we haven't really guided the full year, and we'll provide more color on that in Q3.

Speaker Change: Eric I think the outlook for the rest of this quarter like I talked about.

Speaker Change: Still assuming a little pressure on markdowns through promotions get ourselves completely clean going into this back to school season as John talked about.

Mike Mathias: In the back half, we're still embedding a little more expectation around promotions into our gross margin expectations, but again, we haven't really guided the full year, and we'll provide more color on that in the third quarter. I will say we definitely looked at our, you know, we diagnosed our assortments and where we might have had opportunity in units and opening price points, and the teams have been up to remixing, starting back to school, and even the near end, as I just spoke about.

Speaker Change: In the back half, we are still embedding a little more expectation around promotions into our gross margin expectations, but again, we haven't really guided the full year and we'll provide more color on that in the third quarter.

Jennifer Foyle: I will say, we definitely looked at our, you know, we diagnosed our assortments and where we might have had opportunity in units and opening price points. The teams have been up to remixing starting with back to school and even the near in, as I just spoke about.

Jen Foyle: I will say, we definitely looked at our, you know, we diagnosed our assortments and where we might have had opportunity in units and opening price points. The teams have been up to remixing starting with back to school and even the near in, as I just spoke about.

Speaker Change: I will say and we definitely look at are we you know we diagnosed our assortments and where we might have had opportunity in units and opening price points.

Speaker Change: And the teams have been up to Remixing, starting them back to school and even the Nir and I just spoke about.

Mike Mathias: You also unpack your outlook for SG&A. So it grew 2% in Q1, two Q's planned flat. Just curious what you're pulling back on and how you're posting the back half given expectations for better growth. Curious if you lean into that improvement or if you keep spending pretty tight. Yeah, I'll actually give a little color on the four-year SG&A. So, yes, we're estimating or projecting about flat SG&A in the second quarter, and that's true for the year, too. As of right now, I'd expect SG&A to be relatively flat in the year, but where we're leaning into is customer-facing spend.

Rick Patel: Can you also unpack your outlook for SG&A? It grew 2% in Q1. Q2 planned flat. Just curious what you're pulling back on and how you're approaching the back half given expectations for better growth. Curious if you lean into that improvement or if you keep spending pretty tight here.

Speaker Change: And you also unpack your outlook for SG&A grew 2% in Q1 <unk> planned flat just curious what youre pulling back on and how youre approaching the back half given.

Speaker Change: Expectations for better growth curious, if you've been into that improvement or if you keep spending pretty tight here.

Mike Mathias: Yeah. I'll actually give a little color on the full year SG&A. Yes, we're assuming around, or we're estimating or we're projecting about flat SG&A in the Q2, and that's true for the year too. As of right now, I'd expect SG&A to be relatively flat on the year, but where we're leaning into is customer-facing spend to, you know, the earlier question. Advertising will be up on the year. We have some exciting things coming for the back to school season Jen will elaborate on later. There's some incremental spend in the Q3. All other SG&A is down on the year, including compensation lines. Advertising is where we are increasing spend, and that's resulting in roughly a flattish outlook for the year.

Speaker Change: Yeah, I'll actually give a little color on the full year SG&A. So yes, we are.

Speaker Change: Assuming around estimate are protecting about flat and the <unk>.

Speaker Change: Second quarter and Thats true for the year to as of right now expect SG&A to be relatively flat on the year, but where we're leaning into is customer facing spend to the earlier question advertising will be up.

Mike Mathias: You know, the earlier question, advertising will be up on the year. We have some exciting things coming for the back-to-school season, Jen will elaborate on later. So, we are, there's some incremental spend in the third quarter. So, all other SG&A is down on the year, including compensation lines. Advertising is where we are increasing spend, and that's resulting in roughly a flattish outlook for the year. Thanks very much.

Speaker Change: On the year.

Speaker Change: Some exciting things coming for the back to school season General elaborate on later. So we are there are some of the incremental spend in the third quarter.

Speaker Change: So all other SG&A is down on the year, including compensation lines advertising is where we are increasing spend.

Speaker Change: And thats, resulting in roughly a flattish outlook for the year.

Rick Patel: Thanks very much.

Speaker Change: Thanks very much.

Jonna Kim: The next question will come from Jonna Kim with TD Cowan. Please go ahead. Thank you for taking my question. Could you explain more color on how the digital performs versus stores during the quarter and what you're seeing quarter to date there?

Operator: Your next question will come from Jonna Kim with TD Cowen. Please go ahead.

Speaker Change: Your next question will come from John Kim with TV Cowen. Please go ahead.

Jonna Kim: Thank you for taking my question. Could you just provide more color on how the digital performed versus stores during the quarter and what you're seeing quarter to date there? As you think about sort of mitigating the tariff impact, how are you thinking about the pricing strategy as you flow through the good set at a higher price? Thank you very much.

John Kim: Thank you for taking my question could you provide more color on how the digital form versus stores during the quarter and what you're seeing quarter to date, there and as you think about mitigating the tariff impact how you're thinking about the pricing strategy as well here's a good stat that thank you very much.

Jen Foyle: And as you think about sort of mitigating the tariff impact, how are you thinking about the pricing strategy as you flow through the goods at a higher price? Thank you very much. We definitely saw an uptick on the digital channel, and we leaned in there during the quarter. I will say, it was a very interesting quarter. You know, the traffic was very tumultuous, whether it was going to stores or digital. It was, we navigated to the best of our ability, and we leaned into the digital channel, for sure. And we saw a nice uptick on the AE side, particularly.

Jennifer Foyle: We definitely saw an uptick on the digital channel, and we leaned in there during the quarter. I will say it was a very interesting quarter. You know, the traffic was very tumultuous, whether it was going to stores or digital. We navigated to the best of our ability, and we leaned into the digital channel for sure, and we saw a nice uptick on the AE side particularly. Again, we're gonna continue to take those learnings and move forward. I think I missed your latter half of the promotional question. You phased out.

Jen Foyle: We definitely saw an uptick on the digital channel, and we leaned in there during the quarter. I will say it was a very interesting quarter. You know, the traffic was very tumultuous, whether it was going to stores or digital. We navigated to the best of our ability, and we leaned into the digital channel for sure, and we saw a nice uptick on the AE side particularly. Again, we're gonna continue to take those learnings and move forward. I think I missed your latter half of the promotional question. You phased out.

John Kim: We definitely saw an uptick on the digital channel and we leaned in there during the quarter I will say it was a very interesting quarter. The traffic was very tumultuous, whether it was going to stores or digital.

John Kim: It was we navigated to the best of our ability and we leaned into the digital channel for sure and we saw a nice uptick on the AE side, particularly.

Jen Foyle: So, again, we're going to continue to take those learnings and move forward.

John Kim: So again, we're going to continue to take those learnings and move forward I think I missed your router half of the promotional question phase.

Jen Foyle: I think I missed your latter half of the promotional question. You phased out, so. Yeah, just as you think about tariffs and mitigating that impact, how are you sort of using pricing as a lever there? How are you sort of balancing promotions and raising pricing in the current environment? Yeah, as Jay mentioned, and as, you know, earlier, we definitely saw some impact of air and cost of goods, particularly in Aerie. So, when we looked forward and we, again, took our learnings, we're making sure that our cost of goods is in line, including the tariffs. And I have to give a call out to the teams. We were well in front of the tariffs.

John Kim: Phased out so yeah.

Jonna Kim: Yeah, just as you think about tariffs and mitigating that impact, how are you sort of using pricing as a, as a lever there? How are you sort of balancing promotions and raising pricing in the current environment?

Speaker Change: Yes, it does.

Speaker Change: Just as you think about parents and mitigating that impact and how you sort of using pricing as a lever there how are you sir.

Speaker Change: Balancing promotions and raising pricing.

Speaker Change: In the current environment right yeah.

Jennifer Foyle: Yeah. As Jay mentioned in his, you know, earlier, we definitely saw some impact of air and cost of goods, particularly in Aerie. When we looked forward, and we again took our learnings, we're making sure that our cost of goods is in line, including the tariffs. I have to give a call out to the teams. We were well in front of the tariffs. We worked hard to make sure we were mitigating this risk, between production, merchandising, planning. They did an outstanding job, and we feel like we're very well positioned for back to school and ready to compete.

Jen Foyle: Yeah. As Jay mentioned in his, you know, earlier, we definitely saw some impact of air and cost of goods, particularly in Aerie. When we looked forward, and we again took our learnings, we're making sure that our cost of goods is in line, including the tariffs. I have to give a call out to the teams. We were well in front of the tariffs. We worked hard to make sure we were mitigating this risk, between production, merchandising, planning. They did an outstanding job, and we feel like we're very well positioned for back to school and ready to compete.

Jay Schottenstein: As Jay mentioned in his.

Speaker Change: Earlier, we definitely saw some impact of air and cost of goods, particularly in aerie. So when we look forward.

Speaker Change: Again took our learnings, we're making sure that our cost of goods is in line, including the tariffs and I have to give a call out to the teams we were well in front of the tariffs we worked hard to make sure. We are mitigating this risk.

Jen Foyle: We worked hard to make sure we were mitigating this risk between production, merchandising, planning. They did an outstanding job, and we feel like we're very well positioned for back to school. and Ready2Compete. Thank you.

Speaker Change: Lean production merchandising planning they didn't outstanding job and we feel like we're very well positioned for back to school.

Speaker Change: And ready to compete.

Jonna Kim: All right. Thank you.

Speaker Change: Thank you.

Chris Nardone: The next question will come from Chris Nardone with Bank of America, please go ahead. Pardon me, Mr. Nardone, your line is...

Operator: The next question will come from Christopher Nardone with Bank of America. Please go ahead. Pardon me, Mr. Nardone, your line is open.

Speaker Change: The next question will come from Chris <unk> with Bank of America. Please go ahead.

Speaker Change: Pardon me Mr. <unk> Your line is open.

Jennifer Foyle: Chris, are you on mute?

Jen Foyle: Chris, are you on mute?

Operator: Transcription by Trans-Expert at Fiverr.com We're going to move on.

Speaker Change: Great.

Jonna Kim: Oh, maybe on mute.

Speaker Change: Maybe I mean.

Operator: We're gonna move on. Our next question will come from Alex Straton with Morgan Stanley. Please go ahead.

Speaker Change: We're going to move on to our next question will come from Alex <unk> with Morgan Stanley. Please go ahead.

Alex Stratton: Our next question will come from Alex Stratton with Morgan Stanley. Please go ahead. Perfect. Thanks so much.

Alex Straton: Perfect. Thanks so much. Maybe just on guidance, maybe what would give you confidence there to reinstate it and what are really the KPIs for Q2 that you're watching to ensure that you're making progress from some of the Q1 missteps? Thanks so much.

Alex <unk>: Perfect. Thanks, so much maybe just on on guidance, maybe what would give you confidence there to reinstate it and what are really the kpis for the second quarter that youre watching to ensure that you are making progress from some of the first quarter. Mr. Thanks, So much.

Mike Mathias: Maybe just on on guidance, maybe what would give you confidence there to reinstate it? And what are really the KPIs for the second quarter that you're watching to ensure that you're making progress from some of the first quarter missteps? Thanks so much. Yeah, on guidance, as we said, with, you know, the first quarter results, definitely some uncertainty still on the impact of tariffs for the rest of the year, focusing on getting ourselves right set into this back-to-school season. I'd imagine as we get to the second quarter call, we'll definitely be fighting third quarter color. And if we have a better sense of narrowing down that impact from tariffs to our gross margin, we get back to a four-year number to include a fourth quarter expectation too.

Mike Mathias: Yeah. On guidance, as we said, with, you know, the Q1 results, definitely some uncertainty still on the impact of tariffs for the rest of the year, focusing on getting ourselves right set into this back to school season. I'd imagine as we get to the Q2 call, we'll definitely be providing Q3 color. If we have a better sense of narrowing down that impact from tariffs to our gross margin, we get back to a full year number to include a Q4 expectation too. We'll, you know, talk about that on the Q2 call in a few months. As far as metrics go, I think, you know, there are things that we saw in the Q1, were, you know, traffic. Traffic was still relatively healthy in general.

Speaker Change: Yes on guidance as we said.

Speaker Change: The first quarter results definitely some uncertainty still on the impact of tariffs for the rest of the year focusing on getting ourselves right into this back to school season.

Speaker Change: I would imagine as we get to the second quarter call.

Speaker Change: Definitely providing third quarter color and if we have.

Speaker Change: A better sense of narrowing down that impact compares to our gross margin and we get back to a full year number does include a fourth quarter expectation too, but we'll talk.

Mike Mathias: But we'll, you know, talk about that on the second quarter call in a few months. As far as metrics go, I think, you know, the things that we saw in the first quarter were, you know, traffic. Traffic was still relatively healthy in general. Customer counts, still very healthy. You know, AUR and conversion were the drivers of the negative comp. So those are definitely metrics we've got our eyes on here, day-to-day, between both channels. You know, Jen and teams looking at the results every day across those metrics to see what adjustments that could be made promotionally, either in, you know, across stores and digital.

Speaker Change: Talk about that on the second quarter call him in a few months.

Speaker Change: As far as metrics go I think there are things that we saw in the first quarter.

Speaker Change: Traffic traffic was still relatively healthy in general customer counts still very healthy.

Mike Mathias: Customer counts, still very healthy. You know, was, you know, AUR and conversion were the drivers of the negative comp. Those are definitely metrics we've got our eyes on here day to day between both channels. You know, Jen and teams, looking at the results every day across those metrics to see what the adjustments that could be made promotionally, either in, you know, across stores and digital. I'd say those are the metrics. You know, based on the driver of the negative comp that we saw in Q1, we have our eyes on those very closely.

Speaker Change: Yes.

Speaker Change: And conversion were the drivers of the negative comps. So those are definitely metrics, we've got our eyes on here day to day between both channels.

Speaker Change: Jan and teams looking at the results every day across those metrics didn't see what the adjustments that could be made promotional.

Speaker Change: Either.

Speaker Change: Comp stores and digital.

Mike Mathias: So I'd say those are the metrics, you know, based on the driver of the negative comp that we saw in the first quarter. We have our eyes on those.

Speaker Change: So I'd say those are the metrics based on the driver of the negative comps that we saw in the first quarter, we have our eyes on those very closely.

Operator: Great. Good luck.

Speaker Change: Yeah.

Alex Straton: Great. Good luck.

Speaker Change: Alright, good luck.

Operator: Thank you.

Jennifer Foyle: Thank you.

Jen Foyle: Thank you.

Speaker Change: Thank you. Thank you.

Mike Mathias: Thank you.

Chris Nardone: The next question will come from Chris Nardone with Bank of America, please go ahead. Hi, guys. Do you hear me now? Yes. All right. Sorry about that.

Operator: The next question will come from Christopher Nardone with Bank of America. Please go ahead.

Operator: The next question will come from Chris Nardone with Bank of America. Please go ahead.

Speaker Change: The next question will come from Chris <unk> with Bank of America. Please go ahead.

Christopher Nardone: Hi, guys. Do you hear me now?

Chris Nardone: Hi, guys. Do you hear me now?

Speaker Change: Hi, guys can you hear me now.

Mike Mathias: Yes.

Jennifer Foyle: Yes.

Jen Foyle: Yes.

Speaker Change: Yes, yes, alright, sorry about that so first can you just help clarify how both brands are trending so far this quarter relative to the <unk> comp guide of down three.

Christopher Nardone: First, can you just help clarify how both brands are trending so far this quarter relative to the Q2 comp guide of down 3%? I might have missed it.

Mike Mathias: So first, can you just help clarify how both brands are trending so far this quarter relative to the 2Q comp guide of down three? I don't think we said it, so I don't think you missed it, but they're very similar. Okay. Now, AEDOWN2 in the first quarter, AEDOWN4 right now, they're trending very similar to that total guy.

Chris Nardone: First, can you just help clarify how both brands are trending so far this quarter relative to the Q2 comp guide of down 3%? I might have missed it.

Speaker Change: Mr.

Mike Mathias: I don't think we said it. I think you missed it. They're very similar. We were A down 2.

Speaker Change: I think we said it so I think you missed it but.

Speaker Change: Very similar.

Speaker Change: Okay.

Christopher Nardone: Okay. then-

Chris Nardone: Okay. then-

Mike Mathias: A down 2 in Q1, A down 4. Right now they're trending very similar to that total guidance.

Speaker Change: During the first quarter are down for right now they are trending very similar to that.

Speaker Change: Total guidance.

Mike Mathias: Okay, and then just on margins really quick, I think you alluded to product costs becoming the tailwind. Can you just elaborate and help quantify anything around this, and how we should think about phasing in the tariff impact if it's really going to be more of a 3Q onward event, or if you'll see some impact in the second quarter? Yeah, I think we talked about product cost being favorable pre any tariff impact. And then the tariffs, we've got the mitigated impact to this year, a couple million dollars in the second quarter, but the full year number is around $40 million.

Christopher Nardone: Okay. Just on margins really quick. I think you alluded to product costs becoming a tailwind. Can you just elaborate and help quantify anything around this and how we should think about phasing in the tariff impact, if it's really gonna be more of a Q3 onward event, or if you'll see some impact in the Q2?

Chris Nardone: Okay. Just on margins really quick. I think you alluded to product costs becoming a tailwind. Can you just elaborate and help quantify anything around this and how we should think about phasing in the tariff impact, if it's really gonna be more of a Q3 onward event, or if you'll see some impact in the Q2?

Speaker Change: Okay, and then just on margins really quick I think you alluded to product costs, becoming a tailwind can you just elaborate and help quantify anything around this and how we should think about phasing in the tariff impact of its really going to be more of a three Q onward event or if youll see some impact in the second quarter.

Mike Mathias: Yeah. I think we talked about product costs being favorable pre any tariff impact. And then the tariffs, we've got the mitigated impact to this year, couple million dollars in Q2, but the full year number is around $40 million, Chris. Again, a couple million dollars in Q2, that's embedded in our current guidance. The rest of it, you could spread between Q3 and Q4.

Speaker Change: Yeah, I think we talked about product costs being favorable pre any tariff impact.

Speaker Change: And then the tariffs we got the mitigated.

Speaker Change: Impact to this year couple of million dollars in the second quarter, but the full year numbers around $40 million for us.

Mike Mathias: Again, a couple of million dollars in the second quarter that's embedded in our current guidance, the rest of it you could spread between Q3. Understood. Thanks.

Speaker Change: Again, a couple of million dollars in the second quarter, that's embedded in our current guidance the rest of it.

Speaker Change: You could spread between Q3 Q4.

Christopher Nardone: Understood. Thanks.

Chris Nardone: Understood. Thanks.

Speaker Change: Understood. Thanks.

Speaker Change: Okay.

Operator: Our final question will come from Simeon Siegel with BMO Capital Markets. Please go ahead.

Simeon Siegel: Our final question will come from Simeon Siegel with BMO Capital Markets. Please go ahead. Hey, good afternoon. This is Dan on for Simeon. Thanks for taking our question.

Speaker Change: And our final question will come from Simon Siegel with BMO capital markets. Please go ahead.

[Analyst] (BMO Capital Markets): Hey, good afternoon. This is Dan on for Simeon. Thanks for taking our question. Anything you could share in terms of how you're planning inventory for the remainder of the year and maybe what you're planning open to buy for the back half versus historical levels? Thanks.

Speaker Change: Hey, Good afternoon. This is Dan on for Simeon. Thanks for taking our question anything you could share in terms of how you are planning inventory for the remainder of the year and maybe what Youre planning open to buy for the back half versus historical levels.

Dan: Anything you could share in terms of how you're planning inventory for the remainder of the year and maybe what you're planning open to buy for the back half versus historical level? Yeah, as I said earlier, we're planning inventory commensurate with our sales expectations. We made a lot of adjustments through this first few months of the year to right set things for the rest of the year, feel very good about how we're positioned as of right now going into the back half. And we do have about 30% of that open at the moment, with calls coming over these next couple of months as we get into the, you know, around the June, July and August period.

Mike Mathias: Yeah, as I said earlier, we're planning inventory commensurate with our sales expectations. Made a lot of adjustments through this first few months of the year to right set things for the rest of the year. Feel very good about how we're positioned as of right now going into the back half. We do have about 30% of that open at the moment, with calls coming over these next several months as we get into you know, around the June, July into August period. We'll be making very detailed and, you know.

Speaker Change: Yes, as I said earlier, we're planning inventory commensurate with our sales expectations.

Speaker Change: We had a lot of adjustments to this first few months of the year to rightsize things for the rest of the year feel very good about how we're positioned as of right now going into the back half and we do have about 30% of that open at the moment with calls coming over these next several months as we get into the.

Speaker Change: Around the June July and August period, So, we'll be making very very.

Mike Mathias: So we're making very, we're very detailed and The Sites of Conversations together on placing those buys as we see the trend continue over these next several months with our flexibility.

Speaker Change: Detailed and.

Speaker Change: <unk>.

Jennifer Foyle: Decisive.

Jen Foyle: Decisive.

Mike Mathias: Decisive conversations together on placing those buys as we see the trend continue over these next several months, but that flexibility is key.

Speaker Change: The data at this stage.

Speaker Change: Conversations together on placing those buys as we see the trend continue over these next several months, but that flexibility is key.

Operator: Yeah, thanks very much. I think there's no one else left in queue, so that concludes our call for today. Thanks, everyone, for your participation. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

[Analyst] (BMO Capital Markets): Got it. Thanks very much.

Speaker Change: Okay. Thanks very much.

Mike Mathias: Thank you.

Speaker Change: Thank you.

Jennifer Foyle: I think there's no one else left in queue. That concludes our call for today. Thanks everyone for your participation.

Judy Meehan: I think there's no one else left in queue. That concludes our call for today. Thanks everyone for your participation.

Speaker Change: I think there is no one else left in queue. So that concludes our call for today. Thanks, everyone for your participation. Thank you. Thanks, everyone.

Jonna Kim: Thank you.

Jen Foyle: Thank you.

Mike Mathias: Thanks, everyone.

Operator: This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: ♪ I've been feeling like I've known you my whole life ♪ ♪ Oh, take you to the top, and I'll say this once and I won't say goodbye ♪ ♪ Oh... ♪

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Sure.

Q1 2025 American Eagle Outfitters Inc Earnings Call

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