Q4 2025 American Eagle Outfitters Inc Earnings Call

March 4, 2026

Operator: Good afternoon, everyone. Welcome to the AEO Inc. Q4 2025 Earnings Conference Call. All participants will be in 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 Judy Meehan, head of Investor Relations and Corporate Communications. Please go ahead.

Speaker #1: Good afternoon, everyone. Welcome to the AEO Inc. fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0.

Speaker #1: 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.

Speaker #1: To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn Turn the conference over to Judy Meehan , head of investor relations and corporate communications Please go ahead Good afternoon everyone .

Judy Meehan: Good afternoon, everyone. Today, we issued our Q4 and fiscal year 2025 press release. Note that included in the release and during this call, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www.aeo-inc.com in the Investor Relations section. Here, you can also find our Q4 investor presentation. During today's call, 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.

Speaker #1: Today we issued our fourth quarter and fiscal year 2025 press release Note that included in the release and during this call , certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis Reconciliation of adjusted results to GAAP results are available in the tables attached to the earnings release , which is posted on our corporate website at In the Investor Relations section here , you can also find our fourth quarter investor presentation during today's call , we will make certain forward looking statements .

Speaker #1: These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings.

Speaker #1: 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 #1: Today, we have a change to our conference call format. Due to the passing of Jay Schottenstein's mother, he is unable to join the question and answer section of the call.

Judy Meehan: Today, we have a change to our conference call format. Due to the passing of Jay's mother, he is unable to join the question-and-answer section of the call. We extend our deepest condolences to Jay and the Schottenstein family. Today's call will include Jay's overview and highlights, which were pre-recorded. Joining me for the call are Jennifer Foyle, President, Executive Creative Director for American Eagle and Aerie, and Mike Mathias, Chief Financial Officer. Now we will begin the call.

Speaker #1: We extend our deepest condolences to J and the Schottenstein family Today's call will include J's overview and highlights , which were pre-recorded Joining me for the call are Jen Foyle , president , Executive Creative Director for American Eagle and Aerie , and Michael Mathias chief financial officer And now we will begin the call

Speaker #2: Thanks to the hard work of the team , we made meaningful progress this year and delivered a strong fourth quarter following a tough start to the year .

[Company Representative] (American Eagle Outfitters): Thanks to the hard work of the team, we made meaningful progress this year and delivered a strong Q4. Following a tough start to the year, I am extremely proud of how the team course-corrected with a deliberate action plan that ignited growth, improved profitability and cash flow, fueling a strong finish to 2025. Initiatives across merchandising, operations, and marketing continue to strengthen our company and position our brands for long-term success. We remain committed to driving enduring profitable growth and strong cash flow for our shareholders. Let me walk you through the highlights of the quarter, Mike will go through the numbers in detail. We delivered double-digit sales growth in Q4 ahead of plan. This represented an acceleration from Q3 to produce our best quarter of the year.

Speaker #2: I'm extremely proud of how the team course-corrected with a deliberate action plan that ignited growth, improved profitability and cash flow, fueling a strong finish to 2025.

Speaker #2: Initiatives across merchandising , operations and marketing continue to strengthen our company and position our brands for long term . We remain committed to driving enduring , profitable growth and strong cash flow for our shareholders .

Speaker #2: Let me walk you through the highlights of the quarter, and Mike will go through the numbers in detail. We delivered double-digit sales growth in the fourth quarter, ahead of plan. This represented an acceleration from the third quarter to produce our best quarter of the year.

Speaker #2: We also achieved record breaking results during the Thanksgiving and holiday season , building on the approved trends that began last summer Margin performance was solid and drove enhanced operating efficiencies We were thrilled to see the remarkable momentum at Aerie and offline , which delivered 23% comp growth , robust demand was broad based across categories and channels .

[Company Representative] (American Eagle Outfitters): We also achieved record-breaking results during the Thanksgiving and holiday season, building on the approved trends that began last summer. Margin performance was solid and drove enhanced operating efficiencies. We were thrilled to see the remarkable momentum at Aerie and OFFLINE, which delivered 23% comp growth. Robust demand was broad-based across categories and channels. By leveraging our stronger market position and heightened demand, we exited the quarter with record brand awareness, and customer acquisition was up in the double digits. With successful expansion underway across a number of categories, we see significant runway to continue to build Aerie and OFFLINE and capture new audiences in the years ahead. I am also pleased by the consistent and steady progress we've seen at American Eagle. Comps grew 2%, accelerating from Q3 with growth across genders. Product initiatives are delivering more newness and fresh trends, right collections.

Speaker #2: By leveraging our stronger market position and heightened demand, we exited the quarter with record brand awareness, and customer acquisition was up in the double digits, with successful expansion underway across a number of categories. We see significant runway to continue to build area and offline and capture new audiences in the years ahead. I'm also pleased by the consistent and steady progress we've seen at American Eagle.

Speaker #2: Com's grew 2% from the third quarter , with growth across genders , product initiatives are delivering more newness and fresh trends . Right collections following impactful partnerships with Sydney Sweeney and Travis Kelce , Martha Stewart's holiday campaign reinforce ease , cross-generational appeal as the ultimate gift giving destination .

[Company Representative] (American Eagle Outfitters): Following impactful partnerships with Sydney Sweeney and Travis Kelce, Martha Stewart's holiday campaign reinforced AE's cross-generational appeal as the ultimate gift-giving destination. Customer counts and retention rates are proof points of success. This year, we look forward to creating more culture-defining moments with newly announced partnerships with Lin-Manuel, Ella Langley, and Bailey Zimmerman, and more to come. In terms of the numbers, total revenue hit an all-time high for Q4, increasing 10% to $1.8 billion. Overall, comp sales grew 8%. Adjusted operating income of $180 million was up 27% from the $142 million last year. Notably, we achieved these results despite significant tariff pressure. Successful tariff mitigation efforts centered on cost savings, greater efficiencies, and strategic management across our sourcing operations.

Speaker #2: Customer counts and retention rates are proof points of success . This year . We look forward to creating more culture defining moments with newly announced partnerships with the Mania Mill , Langley and Bailey , Zimmerman and more to come .

Speaker #2: In terms of the numbers , total revenue hit an all time high for the fourth quarter , increasing 10% to $1.8 billion . Overall , comp sales grew 8% .

Speaker #2: Adjusted operating income of $180 million was up 27% from the $142 million last year Notably , we achieved these results despite significant tariff pressure Successful tariff mitigation efforts centered on cost savings , greater efficiencies and strategic management across our sourcing operations For year 2025 , annual revenue reached a record $5.5 billion , of 3% to last year , and adjusted operating income was $328 million .

[Company Representative] (American Eagle Outfitters): Full year 2025 annual revenue reached a record $5.5 billion, up 3% to last year, and adjusted operating income was $328 million. We ended 2025 in a strong financial position with nearly $240 million in cash and no debt. Our capital allocation strategy remained focused on investing in the business while returning cash to shareholders. We completed $256 million in share buybacks while paying $85 million in dividends last year. Looking ahead, we remain confident in our strategy and our ability to build on our second half. As part of the continued effort to drive efficiencies and prioritize initiatives with the highest impact and strongest returns, we made the decision to exit Quiet Logistics during the quarter.

Speaker #2: We ended 2025 in a strong financial position with nearly $240 million in cash and no debt. Our capital allocation strategy remained focused on investing in the business while returning cash to shareholders.

Speaker #2: We completed $256 million in share buybacks while paying 85 million in dividends last year Now , looking ahead , we remain confident in our strategy and our ability to build on our second half As part of the continued effort to drive efficiencies and prioritize initiatives with the highest impact and strongest returns , we made the decision to exit quiet logistics during the quarter This move keeps our focus and investment dollars on our core brands as we exit the third party business .

[Company Representative] (American Eagle Outfitters): This move keeps our focus and investment dollars on our core brands. As we exit the third-party business, we are left with a significantly enhanced logistics function, including much-improved warehousing systems and technology, regionalized distribution capabilities, excellent speed to customer, and a network that will support growth for several years. We enter 2026 from a position of strength and positive sales trends continuing. We have significant opportunities ahead, and our teams are energized and committed to executing on our plans. I am fully confident in our path forward and our strategies to drive long-term profitable growth and free cash generation, which in turn will create value for shareholders.

Speaker #2: We are left with a significantly enhanced logistics function, including much improved warehousing systems and technology, regionalized distribution capabilities, excellent speed to customer, and a network that will support growth for several years. We enter 2026 from a position of strength, with positive sales trends continuing.

Speaker #2: We have significant opportunities ahead and our teams are energized and committed to executing on our plans I am fully confident in our path forward and our strategy to drive long term profitable growth and free cash generation , which in turn will create value for shareholders .

Speaker #3: Good afternoon everyone . I want to begin by underscoring how pleased I am with the fourth quarter performance . Our commitment to product leadership continues to be a key engine that's driving our business , and that's true across all brands .

Jennifer Foyle: Good afternoon, everyone. I want to begin by underscoring how pleased I am with the Q4 performance. Our commitment to product leadership continues to be a key engine that's driving our business, and that's true across all brands. As I'll share, we saw a widespread improvement in the majority of our categories. There has been a clear acceleration in demand in certain segments as our customers respond to newness, color, and trend-right fashion. Compelling new collections in fleece, tees, and knits, coupled with a growing accessories business within AE and Aerie, are together supporting our layering and outfitting strategy. As you've heard, following the Q1 2025, we initiated a number of process changes and a reorganization of the teams and talent. We began to see the results of this work mid-year.

Speaker #3: As I'll share, we saw a widespread improvement in the majority of our categories. There has been a clear acceleration in demand in certain segments as our customers respond to newness, color, and trend, right?

Speaker #3: Fashion , compelling new collections , and fleece teas and knits , coupled with a growing accessories business with Nike and Aerie , are together supporting our layering and outfitting strategy As you've heard , following the first quarter 2025 , we initiated a number of process changes and a reorganization of the teams and talent We began to see the results of this work mid-year .

Speaker #3: I'm proud of the quick execution and we are excited to carry this momentum forward . I'm confident that we remain very well positioned for profitable growth in 2026 and beyond Now let's review our wins and opportunities by brand .

Jennifer Foyle: I'm proud of the quick execution. We are excited to carry this momentum forward. I'm confident that we remain very well positioned for profitable growth in 2026 and beyond. Now, let's review our wins and opportunities by brand. Turning to Aerie first, where we have experienced strong acceleration and demand, strength has been broad-based across all categories, including intimates, soft dressing, and OFFLINE activewear. Fresh flows of new and exciting collections, coupled with category expansions in areas like sleepwear, kept the customer engaged throughout the season. We grabbed our community's attention with must-have products and positioned them in the most relevant ways. Aerie apparel was strong across both tops and bottoms as a result of great fabrication, on-trend fun prints, and winning color stories.

Speaker #3: Turning to Aerie first where we have experienced strong acceleration and demand . Strength has been broad based across all categories , including intimate , soft dressing and offline activewear .

Speaker #3: Fresh flows of new and exciting collections, coupled with category expansions in areas like sleepwear, kept the customer engaged throughout the season. We grabbed our community's attention with must-have products and positioned them in the most relevant ways.

Speaker #3: Area parallel was strong across both tops and bottoms, as a result of great fabrication on-trend, fun prints, and winning color stories.

Speaker #3: I am particularly encouraged by the continued momentum in intimates recording . Some of our best ever results in the quarter , with matched back sets fueling demand offline had another incredible quarter with steady sales and active bottoms and double digit growth in sports bra tops and fashion bottoms Offline signature cloud fleece remains a customer favorite , and we continue to have significant opportunities to leverage the success of this key franchise Our focus on new fashion silhouettes and fresh color drops are also contributing to strong growth across categories .

Jennifer Foyle: I am particularly encouraged by the continued momentum in intimates, recording some of our best ever results in the quarter, with matchback sets fueling demand. OFFLINE had another incredible quarter with steady sales in active bottoms and double-digit growth in sports bras, tops, and fashion bottoms. OFFLINE's signature Cloud Fleece remains a customer favorite, and we continue to have significant opportunities to leverage the success of this key franchise. Our focus on new fashion silhouettes and fresh color drops are also contributing to strong growth across categories. As we look to accelerate the OFFLINE business in 2026, we will be focused on expanding our footprint, engaging more customers, and delivering great product. OFFLINE's brand awareness is rising and the brand has a long runway ahead.

Speaker #3: As we look to accelerate the offline business in 2026, we will be focused on expanding our footprint, engaging more customers, and delivering great product. Offline brand awareness is rising, and the brand has a long runway ahead.

Speaker #3: Our share is still small, but growing, and I'm confident that we have only just begun to scratch the surface of this brand's massive and long-term potential.

Jennifer Foyle: Our share is still small but growing, and I'm confident that we have only just begun to scratch the surface of this brand's massive and long-term potential. The powerful re-acceleration of the Aerie brand, coupled with the explosive trajectory of OFFLINE, is cementing our position as a leader in the space. With our brand positioning as relevant and strong as ever, we look to continue to expand our reach to more customers. New Aerie customers grew 14% and brand awareness climbed 12% year-over-year. We know these customers are sticky, and we are focused on maintaining this healthy and engaged customer base. As we kick off 2026, expect to see significant increase in buzz for Aerie as we launch a highly visible brand campaign rooted in purpose and mission.

Speaker #3: The powerful re-acceleration of the Aerie brand , coupled with the explosive trajectory of offline , is cementing our position as a leader in the space and with our brand positioning as relevant and strong as ever , we look to continue to expand our reach to more customers New Aerie customers grew 14% and brand awareness climbed 12% year over year We know these customers are sticky and we are focused on maintaining this healthy and engaged customer base .

Speaker #3: As we kick off 2026 , expect to see significant increase in buzz for Aerie as we launch a highly visible brand campaign rooted in purpose and mission .

Speaker #3: And as you've heard, we're just getting started here, and I'm excited for what's ahead. Now, moving on to American Eagle, which achieved a solid 2% increase in the quarter.

Jennifer Foyle: As you've heard, we're just getting started here, and I'm excited for what's ahead. Now, moving on to American Eagle, which achieved a solid 2% increase in the quarter. Positive results were driven by men's, women's tops, and our signature AE jeans across genders. The men's business continued to improve in Q4, delivering the third consecutive quarter of growth. Positive results were seen across nearly every category, with sweaters, shirts and tees, and sweatshirts emerging as favorites, and graphics leading the way as the hero. Our strategy to recapture the men's business is on track as we gain market share and expand our customer base. AE women's comp was flat in the quarter. Strength in jeans and tops, including knits, sweaters, and fleece, was offset by a slower demand in dresses and non-denim bottoms.

Speaker #3: Positive results were driven by men's and women's tops and our signature jeans across genders. The men's business continued to improve in the fourth quarter, delivering the third consecutive quarter of growth. Positive results were seen across nearly every category, with sweaters, shirts and tees, and sweatshirts emerging as favorites, and graphics leading the way as the hero.

Speaker #3: Our strategy to recapture the men's business is on track, as we gain market share and expand our customer base. Aerie Women's comp was flat in the quarter.

Speaker #3: Strength in jeans and tops, including knits, sweaters, and fleece, was offset by a slower demand in dresses and non-denim bottoms.

Speaker #3: Driving ongoing progress is a top priority, and we are working to ensure that we have the best styles and quality, together with more frequent flows to support growth.

Jennifer Foyle: Driving ongoing progress is a top priority, and we are working to ensure that we have the best styles and quality together with more frequent flows to support growth. Work is underway, and we are focused on investing in depth of key items and size integrity to drive sales. We expect to see continued improvements as we move through 2026. As Jay reviewed, AE brand marketing has been a clear strategic focus and is expanding brand awareness and driving purchase intent. In addition to talent-focused campaigns, we recently relaunched AE's creator community to bring together a network of passionate trendsetters and brand advocates to drive re-revenue and digital content.

Speaker #3: Work is underway, and we are focused on investing in depth of key items and size integrity to drive sales. We expect to see continued improvements as we move through 2026.

Speaker #3: As J reviewed , a brand marketing has been a clear strategic focus and is expanding brand awareness and driving purchase intent . In addition to talent focused campaigns , we recently relaunched AES Creator Community to bring together a network of passionate trendsetters and brand advocates to drive revenue and digital content .

Speaker #3: And just last week , we announced our partnership with Stagecoach , joining countries . Country music's biggest stage and connecting with a new generation of artists and fans .

Jennifer Foyle: Just last week, we announced our partnership with Stagecoach, joining country music's biggest stage and connecting with a new generation of artists and fans as we continue to show up at the intersection of culture and fashion. The intention behind these initiatives is to maintain and drive our industry-leading position. Before turning the call over to Mike, I want to recognize the team for a strong finish to 2025. Their ability to drive improvement across multiple processes and to deliver results was impressive. We are incredibly optimistic about the profitable growth potential of our portfolio. We are moving forward decisively, and we know that our brands are uniquely positioned to win, scale, and deliver sustained long-term growth. With that, I'll turn the call over to Mike.

Speaker #3: As we continue to show up at the intersection of culture and fashion, the intention behind these initiatives is to maintain and drive our industry-leading position. Before turning the call over to Mike, I want to recognize the team for a strong finish to 2025.

Speaker #3: Their ability to drive improvement across multiple processes and to deliver results was impressive. We are incredibly optimistic about the profitable growth potential of our portfolio.

Speaker #3: We are moving forward decisively, and we know that our brands are uniquely positioned to win, scale, and deliver sustained long-term growth. And with that, I'll turn the call over to Mike.

Speaker #4: Thanks , Jen , and good afternoon , everyone 2025 results reflect the action we took to strengthen the fundamentals of the business , make operational improvements , introduce new , compelling product collections , and launch strategic marketing initiatives These steps strengthened our foundation for long term success and drove a sharp improvement in trends throughout the year across brands and channels .

Mike Mathias: Thanks, Jen. Good afternoon, everyone. 2025 results reflect the action we took to strengthen the fundamentals of the business, make operational improvements, introduce new compelling product collections, and launch strategic marketing initiatives. These steps strengthened our foundation for long-term success and drove a sharp improvement in trends throughout the year across brands and channels, even as we navigated a dynamic retail industry in an unprecedented tariff backdrop. Our strong performance in Q4 is a testament to this work, with results coming in ahead of expectations across margins and profitability. In Q4, consolidated revenue of $1.8 billion increased 10% to last year, fueled by comparable sales growth of 8%, with Aerie up 23% and American Eagle up 2%. We saw across-the-board improvement in trends with an acceleration from the prior quarter.

Speaker #4: Even as we navigated a dynamic retail industry in an unprecedented tariff backdrop, our strong performance in the fourth quarter is a testament to this work.

Speaker #4: With results coming in ahead of expectations across margins and profitability in the quarter, consolidated revenue of $1.8 billion increased 10% to last year, fueled by comparable sales growth of 8%, with Aerie up 23% and American Eagle up 2%.

Speaker #4: We saw across-the-board improvement in trends within acceleration from the prior quarter. KPIs were favorable, with growth in transactions across brands driven by higher traffic.

Mike Mathias: KPIs were favorable with growth in transactions across brands driven by higher traffic. The average unit retail price was flat to last year. Gross profit dollars of $651 million increased 9%. Gross margin declined 30 basis points to 37% from 37.3% last year, which included net tariff pressure of approximately $50 million. On the positive side, the leverage from strong revenue growth, lower costs, favorable currency, and overall operational efficiencies partially offset tariffs and higher markdowns. Buying occupancy and warehousing leveraged 50 basis points due to higher sales and a continued focus on operational improvements. SG&A increased 4% to $418 million, and as a rate, leveraged 120 basis points to last year, driven by strong revenue growth. Planned investments in advertising were offset by our continued focus on disciplined cost management and lower incentives.

Speaker #4: The average unit retail price was flat to last year. Gross profit dollars of $651 million increased 9%. Gross margin declined 30 basis points to 37% from 37.3% last year, which included net tariff pressure of approximately $50 million.

Speaker #4: On the positive side, leveraged from strong revenue growth, lower costs, favorable currency, and overall operational efficiencies, partially offset by tariffs and higher markdowns.

Speaker #4: Buying , occupancy and warehousing leveraged 50 basis points due to higher sales and a continued focus on operational improvements . SG&A increased 4% to 418 million , and as a rate leveraged 120 basis points to last year , driven by strong revenue growth , planned investments in advertising were offset by our continued focus on disciplined cost management and lower incentives .

Speaker #4: Adjusted operating income of $180 million was above our recent guidance of $167 to $170 million, driven largely by very robust sales and margins at Aerie and Offline.

Mike Mathias: Adjusted operating income of $180 million was above our recent guidance of $167 to $170 million, driven largely by very robust sales and margins at Aerie and OFFLINE. The adjusted operating margin of 10.2% increased from 8.9% last year. During the quarter, we recognized restructuring charges totaling approximately $85 million, of which $13 million was cash, primarily related to severance. These charges relate to discontinuation of Quiet Platforms, third-party logistics, store impairments, and a corporate restructuring. Net annual savings from these actions is estimated at about $20 million annually, with a portion of that expected to be realized in 2026. We ended the year with a strong balance sheet with cash of $239 million after returning $341 million to shareholders.

Speaker #4: The adjusted operating margin of 10.2% increased from 8.9% last year . During the quarter , we recognized restructuring charges totaling approximately 85 million , of which 13 million was cast , primarily related to severance .

Speaker #4: These charges relate to discontinuation of quiet platforms , third party logistics , store impairments , and a corporate restructuring . Net annual savings from these actions is estimated at about 20 million annually , with a portion of that expected to be realized in 2026 .

Speaker #4: We ended the year with a strong balance sheet with cash of 239 million . After returning 341 million to shareholders at year end , total liquidity was approximately 930 million consolidated , ending inventory cost was up 10% , with units up 3% .

Mike Mathias: At year-end, total liquidity was approximately $930 million. Consolidated ending inventory cost was up 10%, with units up 3%. Cost inventory reflects the impact of tariffs. Q4 CapEx totaled $59 million, bringing year-to-date spend to just over $260 million. As we look ahead to next year, we expect similar levels of CapEx in the range of $250 to $260 million, reflecting investments in technology upgrades, general corporate maintenance, as well as 35 new Aerie offline store openings and about 60 store remodels. In 2026, we expect to close another 25 to 30 lower productivity AE stores. Turning to our 2026 outlook, Q1 is off to a good start. Comp sales are positive across brands, with notable strong performance continuing at Aerie and OFFLINE.

Speaker #4: Cost inventory reflects the impact of tariffs . Fourth quarter CapEx totaled 59 million , bringing year to date spend to just over 260 million .

Speaker #4: As we look ahead to next year , we expect similar levels of CapEx in the range of 250 to 260 million , reflecting investments in technology upgrades , general corporate maintenance , as well as 35 new area offline store openings and about 60 store models .

Speaker #4: In 2026, we expect to close another 25 to 30 lower productivity stores. Turning to our 2026 outlook, the first quarter is off to a good start.

Speaker #4: Comp sales are positive across brands with notable strong performance continuing at area and offline . For the first quarter , we expect comparable sales growth in the high single digits with American Eagle comps in the positive low single digits and area offline comps into double digits .

Mike Mathias: For Q1, we expect comparable sales growth in the high single digits, with American Eagle comps in the positive low single digits and Aerie offline comps in the double digits. Our operating income expectation is in the range of $20 to $25 million, which includes tariff headwinds of approximately $30 million and incremental advertising investment, which will drive total SG&A expense up approximately 10% versus last year. For the full year, we expect operating profit in the range of $390 to $410 million based on consolidated comparable sales growth in the mid-single digits. Guidance reflects the incremental tariffs that were put in place in 2025, which primarily impacts the first half of the year. Our outlook does not incorporate developments related to the recent Supreme Court decisions and subsequent actions.

Speaker #4: Our operating income expectation is in the range of 20 to 25 million , which includes tariff headwinds of approximately 30 million and incremental advertising investment , which will drive total expense up approximately 10% versus last year .

Speaker #4: For the full year, we expect operating profit in the range of $390 to $410 million, based on consolidated comparable sales growth in the mid-single digits.

Speaker #4: Guidance reflects the incremental tariffs that were put in place in 2025, which primarily impact the first half of the year. Our outlook does not incorporate developments related to the recent Supreme Court decisions and subsequent actions.

Speaker #4: For modeling purposes, please note that we expect approximately 80% of our annual operating profit to be generated in the second half of the year.

Mike Mathias: For modeling purposes, please note that we expect approximately 80% of our annual operating profit to be generated in the second half of the year. This weighting reflects pressures from tariffs and incremental advertising spend, which will impact Q1 and Q2. In the second half of the year, we will cycle tariffs and the investments in advertising, which began mid-year 2025. To wrap it up, we ended the year on a strong note and remain confident in our forward trajectory. In 2026, we look forward to building on the significant progress we made last year to generate continued growth and enhanced value for our shareholders. With that, we'll open up for questions.

Speaker #4: This weighting reflects pressures from tariffs and incremental advertising spend, which will impact the first and second quarters, and the second half of the year.

Speaker #4: We will cycle tariffs and the investments in advertising, which began mid-year 2025. To wrap it up, we ended the year on a strong note and remain confident in our forward trajectory.

Speaker #4: In 2026, we look forward to building on the significant progress we made last year to generate continued growth and enhanced value for our shareholders.

Speaker #4: With that, we'll open it up for questions.

Speaker #5: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Paul Lejuez with Citi. Please go ahead.

Speaker #5: If you're using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .

Speaker #5: Please limit yourself to one question at this time. We will pause momentarily to assemble our roster. Our first question today comes from Paula Zhou with Citi.

Speaker #5: Please go ahead

Speaker #6: Thanks . Two quick ones . Gross margin . Can you talk about what you expect once you move past the first quarter , where obviously you've got easy comparisons , maybe you could talk to CU through four Q and then you mentioned increased markdowns .

Paul Lejuez: Thanks. Two quick ones. Gross margin, can you talk about what you expect once you move past Q1 where obviously you've got easy comparisons? Maybe if you could talk Q2 through Q4. Then you mentioned increased markdowns again this quarter. I'm curious if you could talk more about which brand you saw the higher markdowns, maybe which categories needed to be promoted to drive sales, and how you think about the promotional outlook for the rest of the year. Thanks.

Speaker #6: Again , this quarter . I'm curious if you could talk more about which which brand you saw . The higher markdowns maybe which categories needed to be promoted to to drive sales and and how you think about the promotional outlook for the rest of the year .

Speaker #6: Thanks .

Speaker #7: Hi , Paul , on gross margin . Yeah , I think we know that last year was a little different with where we broke down inventory in the first quarter , and markdowns forward in the forward .

Mike Mathias: Hi, Paul. On gross margin, I think we know that last year was a little different with where we wrote down inventory in Q1 and pulled markdowns forward. I think as we talked a little bit at different points that if you really look at kind of 2024 gross margin cadence and then the impact of tariffs around that $30 million each quarter, we're looking at gross margin sort of in that mid to high 30% range in Q1, a little lower than that in Q2. If actually, you know, 2024 less tariffs gets you pretty close to what we're expecting for the first half of the year.

Speaker #7: So I think as we talked a little bit different points that if you really look at 2020 for gross margin , cadence and then the impact of tariffs around that $30 million each quarter , we're looking at gross margin sort of in that mid to high 30% range in the first quarter , a little lower than that in the second quarter .

Speaker #7: And you actually , you know , 24 less tariffs would get you pretty close to what we're expecting for the first half of the year .

Speaker #7: Second half. Then we're looking to expand our gross margin performance, having, you know, anniversary tariffs as is. And we're guiding tariffs to essentially the same thing.

Mike Mathias: Second half, we're looking to expand our gross margin performance, having, you know, anniversary-ing tariffs as is, and we're guiding tariffs to essentially the same thing we've been talking about, really the IEPA impact of that $130 million plus per year. We'll know a lot more come May of really what that's gonna look like by quarter. If you start with that as what should be a worst case, we'd look to expand upon the gross margin results we just saw in the Q3 and Q4 of this year at call it like a mid-single-digit comp results. We got some early indications on costing for the Q3 timeframe at this point. The team is doing a great job there and, you know, controlling costs, all the other costs within gross margin.

Speaker #7: We've been talking about really the impact of that $130 million-plus per year. We'll know a lot more come May of really what that's going to look like by quarter.

Speaker #7: But if you start with that as what should be a worst case, then we'd look to expand upon the gross margin results we just saw in the third and fourth quarter of this year. At like a mid-single-digit comp result, we got some early indications on costing for the third quarter timeframe.

Speaker #7: At this point , the teams are doing a great job . They're and you know , controlling costs , all the other costs within gross margin .

Speaker #7: We've been very successful at that to date . And expect to continue that . So we'd look to expand upon gross margin , improve upon gross margin in the back half And on markdown front , yeah , I think we talked about , you know , in that January time frame after at ICR and after our our holiday sales release around being well controlled across categories , for the most part , we talked about bottoms in the jeans business and the jeans category being little deeper to compete .

Mike Mathias: We've been very successful at that, to date and expect to continue that. We'd look to improve upon gross margin in the back half. Markdown front, I think we talked about in that January timeframe at ICR and after our holiday sales release around being well controlled across categories for the most part. We talked about bottoms in the jeans business, in the jeans category being promoted a little deeper to compete. That was having kind of a mixed impact in the AE brand, where markdowns were up a bit in total. Aerie on the other hand, the AUR was up in the quarter. With the growth trajectory of the business, they've been able to really control or even reduce promotions a bit.

Speaker #7: And that was having kind of a mixed impact on the brand, where markdowns were up a bit in total area. On the other hand, there was an uptick in the quarter with the growth trajectory of the business. They've been able to really control or even reduce promotions a bit.

Speaker #7: RR was up mid-single digits in the fourth quarter and markdowns are actually , you know , down and favorable for Aerie . So the mix of the business is very favorable for us with really a couple bottoms categories , especially jean jeans being promoted a little deeper

Mike Mathias: AUR was up mid-single digits in Q4, markdowns are actually, you know, down favorable for Aerie. The mix of the business is very favorable for us with really a couple bottoms categories, especially jeans being promoted a little deeper.

Speaker #6: Should we expect the markdowns to continue to be higher at AE and lower at Aerie?

Paul Lejuez: Should we expect that to continue, the markdowns to be higher at AE and lower at Aerie?

Jennifer Foyle: It's Jen, by the way, Paul. We do expect some pressure in denim. You know, we feel good about our positioning though, as we bring in other bottoms. That's what we're really excited about. There's new bottoms that we've been testing, not only just in long legs, but skirts and shorts. Early reads have been positive. As you know, we have a huge spring break customer, and we're just on the cusp of this right now. In fact, we're in Miami right now, and we can see them coming into shops. We're excited about the way we're positioning. The beauty about these brands, Paul, is that we have a portfolio of brands, right? We can pulse, and throttle categories that we need to, but also get into new categories that are trending.

Speaker #3: We it's Jen , by the way . Paul . We do expect some pressure in denim . And you know we feel good about our positioning though as we bring in other bottoms .

Speaker #3: That's what we're really excited about. So, there's new bottoms that we've been testing—not only just in long legs, but skirts and shorts.

Speaker #3: Early reads have been positive. As you know, we have a huge spring break customer, and we're just on the cusp of this right now.

Speaker #3: In fact , we're in Miami right now and we can see them coming in to shop . So we're excited about the way we're positioning and the beauty about these brands .

Speaker #3: Paul , is that we have a portfolio of brands , right . And we can post and throttle categories that we need to , but also get into new categories that are trending .

Speaker #3: So we feel really good about where we're headed as we get into peak spring break . In all brands . And some of the new categories that you'll see us introducing more , and also just to lean on to Aerie , Mike said it .

Jennifer Foyle: We feel really good about where we're headed as we get into peak spring break in all brands, and some of the new categories that you'll see us introducing more. Also just to lean on to Aerie, Mike said it, we've been pulling back on promotions. They've been doing a nice job balancing out competing and pulling back promotions. It's only just begun here in Aerie. We have spring break again, I mentioned it already, for all brands. It's coming our way. Early reads on swim have been strong, but that's a category that we're looking to build margin and not just unit-based, you know, promotions.

Speaker #3: We've been pulling back on promotion there. They've been doing a nice job balancing out, competing, and pulling back promotions, and it's only just begun here in Aerie. We have spring break again.

Speaker #3: I mentioned it already for the all brands . It's coming our way and swim early reads on swim have been strong , but that's a category that we're looking to build .

Speaker #3: Margin, and not just unit-based. You promotions—

Paul Lejuez: Got it. Thank you. Good luck.

Speaker #6: Thank you . Good luck

Speaker #5: The next question comes from Jay Sole with UBS. Please go ahead.

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

Speaker #8: Cooper . Thank you . A few questions for me . Just number one . Mike , how are you thinking about store openings this year ?

Jay Sole: Super. Thank you. A few questions for me. Just number one, Mike, how are you thinking about store openings this year and sort of you gave us comp sales guidance for Q1 of the year, but how are you thinking about total sales? The Middle East business, can you just give us an update on how you're thinking about that business given, you know, what's going on? Can you also explain, lastly, the impact of, you know, the change to Quiet Logistics, what impact is that having on EBIT dollars? Those are my three questions to start. Thank you.

Speaker #8: And sort of you gave us comp sales guidance for the first quarter of the year . But how do you think about total sales ?

Speaker #8: And then the Middle East business ? Can you just give us an update on how you're thinking about that business ? Giving , given what's going on ?

Speaker #8: And then can you also explain lastly , the impact of , you know , the quiet , the changes to the quiet logistics ?

Speaker #8: What impact does that have on EBITDA dollars? Those are my three questions to start. Thank you.

Speaker #7: Sure. J store openings. We're looking at 35 to 40 openings for Aerie and offline this year. Just to reiterate, we're probably expecting somewhere in the 25 to 30 range in terms of net closings for AE.

Mike Mathias: Sure, Jay. Store openings, we're looking at 35 to 40 openings for Aerie and offline this year. Just to reiterate, we're probably expecting somewhere in the 25 to 30 in terms of net closings for AE as we continue just to refine and optimize the AE store fleet. You can, you know, model that or assume those plans for the year. Total sales, we do have, you know, total sales to comps actually would be pretty similar. We gave high single digit comp guidance for Q1.

Speaker #7: As we continue just to refine and optimize the store fleet so you can model that or assume those those plans for the year , total sales , then we do have , you know , total sales to comp actually would be pretty similar .

Speaker #7: So we gave high single digit comp guidance for the first quarter . Total revenue will be similar to that just based on the fact we do a comp spread in our brand sales .

Mike Mathias: Total revenue will be similar to that, just based on the fact that we do have a bit of a comp spread in our brand sales, but then with the disposition or the closing of Quiet, we'll still see a reduction to total revenue because of that third party revenue. The net net is that comp result and total revenue should be similar. Yeah, I mean, just to expand upon that guidance a bit, high single digit comp for Q1, we're looking at sort of mid to high in Q2 and then mid for the back half. You get to kind of a mid to high comp expectation for the full year then, and then again with total revenue and comp being similar for the year.

Speaker #7: But then with the disposition or the closing of quiet , you'll , you'll see a reduction to total revenue . Because of that third party revenue .

Speaker #7: So the net net is that comp result in total revenue should be similar . And yeah , I mean , just to expand upon that guidance a bit , we high single digit comp for the first quarter .

Speaker #7: We're looking at sort of mid to high in the second quarter, and then mid for the back half. So you get to kind of a mid to high comp expectation for the full year.

Speaker #7: Then and then again with total revenue and comp being similar for the year in the Middle East . You know , our team is doing a nice job just connecting with our business partners .

Mike Mathias: In Middle East, you know, our team is doing a nice job just connecting with our business partners there, really Alshaya in the Middle East and then our JV partner with Fox in Israel. Definitely some disruptions to their businesses at the moment. Alshaya stores are actually mostly open at this point, after some initial disruption, but the stores in Israel are still closed. Remind you that's a licensed business. Those are, you know, a licensed business on one hand and a JV on the other. The EBIT impact to us would be we quantify what we think is...

Speaker #7: There really is al-Qaida in the Middle East, and then our partner with Fox in Israel. Definitely some disruption to the business. Their businesses at the moment outside of stores are actually mostly open at this point.

Speaker #7: After some initial disruption, but the stores are still closed. Reminder that the license—those are licensed business on one hand and a JV on the other.

Speaker #7: So the Ebit impact to us would be quantified where we think assuming that this , you know , the war wraps up in the first quarter for now , that the impact of the first quarter would be very minimal to us from from an income or Ebit perspective , just based on the structure or the the relationships that are being kind of licensed and JV .

Mike Mathias: Assuming that this, you know, the war wraps up in Q1 for now, that the impact of Q1 would be very minimal to us from an income or EBIT perspective, just based on the structure or the, you know, the relationships there being kinda licensed in JV. For Quiet, again, you'll see some, you know, quarterly revenue reduction from what was about a, you know, probably about a $60 million total number in our 2025 results. That'll wind down here at the beginning of the year and, you know, go to 0, as we get, well, you know, into the year here. Then we talked about, you know, the restructuring in total, which Quiet was a part of, being around a $20 million benefit annually.

Speaker #7: And then for quiet again , you'll see some quarterly revenue reduction from those about , you know , about a $60 million total number in our 2025 results .

Speaker #7: So that'll wind down here at the beginning of the year . And you know , go to zero as we get , you know , into the year here .

Speaker #7: And then we talked about you know , the restructuring in total which quiet was a part of being around a $20 million benefit annually .

Mike Mathias: You know, again, we're in a bit of a wind down mode, but with the other kind of corporate restructuring and store impairments, we're expecting probably at least 50% of that, maybe a little more to benefit this year. We'll provide some updated guidance to especially how the, you know, cadence of the Quiet business shutting down here in the next several months.

Speaker #7: You know , again , we're in a bit of a wind down mode , but with the other kind of corporate restructuring and store impairments , we're expecting probably at least 50% of that , maybe a little more to benefit this year .

Speaker #7: But we'll provide some updated guidance , especially , you know , cadence of the quiet business shutting down here over the next several months .

Speaker #8: All right . Super very helpful . Thank you .

Jay Sole: All right. Super. Very helpful. Thank you.

Speaker #7: Sure .

Mike Mathias: Sure.

Speaker #5: The next question comes from Matthew Boss with J.P. Morgan . Please go ahead .

Operator: The next question comes from Matthew Boss with JPMorgan. Please go ahead.

Speaker #9: Great. Thanks, and congrats on another nice quarter.

Jennifer Foyle: Great. Thanks. Congrats on another nice quarter.

Matthew Boss: Great. Thanks. Congrats on another nice quarter.

Speaker #7: Thanks , Matt . So

Mike Mathias: Thanks, Matt.

Operator: You bet.

Jennifer Foyle: You bet.

Jennifer Foyle: Jen, with Aerie comps up high teens in the back half of the year, could you break down the inflection in the business if we looked at it by customer file or key category performance? Then so far in Q1, have you seen any slowing relative to the low twenties comps that you saw in Q4? Yeah. Very similar, Matt. We're seeing nice momentum headed into Q1. Look, you know, back in Q1 last year, we knew it was a time for all brands, not just Aerie, for us to pivot, focus on our product, deliver, and gain momentum going into the back half, which is, you know, typically our Super Bowl. We have, you know, all brands, it's our big quarter, you know, Q3.

Speaker #9: Jen. So, Jen, with Aerie comps up high teens in the back half of the year, could you break down the inflection in the business? Maybe if we looked at it by customer file or key category performance.

Matthew Boss: Jen, with Aerie comps up high teens in the back half of the year, could you break down the inflection in the business if we looked at it by customer file or key category performance? Then so far in Q1, have you seen any slowing relative to the low twenties comps that you saw in Q4?

Speaker #9: then so far in the first quarter , have you seen any slowing relative to the low 20s comp that you saw , that you saw in the fourth quarter ?

Jennifer Foyle: Yeah. Very similar, Matt. We're seeing nice momentum headed into Q1. Look, you know, back in Q1 last year, we knew it was a time for all brands, not just Aerie, for us to pivot, focus on our product, deliver, and gain momentum going into the back half, which is, you know, typically our Super Bowl. We have, you know, all brands, it's our big quarter, you know, Q3.

Speaker #3: Yeah , very similar . Matt . We're seeing nice momentum headed into Q1 . Look , you know , back in Q1 last year , we knew it was a time for all brands , not just Aerie , for us to pivot , focus on our product , deliver and gain momentum going into the back half , which is , you know , typically our Super Bowl , we have , you know , all brands .

Speaker #3: It's our big quarter , you know , Q3 and I think the team's really that's what we did right . We focused on our product .

Jennifer Foyle: I think the teams really. That's what we did, right? We focused on our product. If you look at Aerie, certainly what was really exciting in Aerie, not only new categories, i.e. sleep, which delivered a lot of growth for the brand. OFFLINE is moving faster. Honestly, it's one of our fastest-growing brands in the total portfolio that I've seen in history. OFFLINE is very exciting. Then, of course, AE. Going back to Aerie, the most important thing is that all categories really worked. I think that's important as we look forward, Matt, because when you think about, you know, just the newer trends and trends are moving faster, I think Aerie then can throttle on either.

Speaker #3: So if you look at Aerie , certainly what was really exciting in area , not only new categories i.e. sleep , which delivered a lot of growth for the brand .

Speaker #3: Offline is moving faster . I honestly , it's one of our fastest growing brands in the total portfolio that I've seen in history .

Speaker #3: So, offline is very exciting. And then, of course, but going back to Aerie, the most important thing is that all categories really worked.

Speaker #3: And I think that's important as we look forward . Matt , because when you think about , you know , just the newer trends and trends are moving faster .

Speaker #3: I think Aerie then can throttle on either . Let's just say that , you know , a more hard lines become trending , whether it's suiting or , you know , more straight lines .

Jennifer Foyle: Let's just say that, you know, more hard lines become trending, whether it's suiting or, you know, more straight lines, what I can say. If Aerie's a softer business, we have all the layering pieces. We can support those businesses. I think that's why we're expanding our offerings in Aerie so that we can lean into other categories when trends change, and I think it's really working. You know, there's new things to come, too. We have new businesses that we're developing, new ideas. The team's running very flexible. I mean, we're really trying to work on flexibility, newness, and I think that's what's winning. Just delivering these new product offerings, when it's not expected, seems to be really working for the Aerie brand.

Speaker #3: What I can say if areas of softer business , we have all the layering pieces , we can support those businesses . And I think that's why we're expanding our , our , our offerings in Aerie so that we can lean into other categories when trends change .

Speaker #3: And I think it's really working . And , you know , there's new things to come too . We have new businesses that we're developing , new ideas .

Speaker #3: The team's running very flexible . I mean , we're really trying to work on flexibility , newness . And I think that's what's winning .

Speaker #3: Just delivering these new products offerings when it's not expected seems to be really working for the Aerie brand . So more to come here .

Jennifer Foyle: More to come here, we've seen nice momentum into Q1, you know, we're gonna focus and continue to deliver.

Speaker #3: But we've seen nice momentum into the into Q1 . And you know , we're going to focus and continue to deliver

Speaker #9: Great color . And then Mike , on the expense side with Reinvestments , I think you cited marketing this year . How best to think about the leverage point in the business for for SG&A or any changes relative to historical flow through to consider

[Analyst] (JPMorgan Chase & Co.): That's great color. Mike, on the expense side, with reinvestments, I think you cited marketing this year. Help us to think about the leverage point in the business for SG&A or any changes relative to historical flow-through to consider.

Matthew Boss: That's great color. Mike, on the expense side, with reinvestments, I think you cited marketing this year. Help us to think about the leverage point in the business for SG&A or any changes relative to historical flow-through to consider.

Speaker #7: Yeah , we have another two quarters here . This intentional and strategic increase in elevation of our advertising spend . So you're going to you're going to see in the first quarter or first two quarters here , like over a 50% increase in advertising dollars , which , which again is intentional .

Mike Mathias: We have another 2 quarters here of this intentional and strategic increase in elevation of our advertising spend. You're gonna see in Q1 or Q1 and Q2 here, like, over a 50% increase in advertising dollars, which again, is intentional. I think that's driving SG&A in the 1st half up in the low double-digit range with all other expense categories being managed as we have successfully for a few years now, kind of low to mid-single digit and leveraging nicely on the sales expectation. It's really advertising driving the dollar increase, and advertising is gonna drive some deleverage in Q1 and Q2. We get to the back at this point, looking to, at least our initial plans, is for advertising dollars to be relatively flat, maybe a slight increase.

Speaker #7: So I think that's driving SG&A in the first half up in the low double digit range , with all other expense categories being managed as we have successfully for a few years now , kind of low to mid single digit and leveraging nicely on the sales expectations .

Speaker #7: So it's really advertising driving the dollar increase . And advertising is going to drive some deleverage in the first and second quarter when we get to the back at this point , looking to at least our initial plans is for advertising dollars to be relatively flat , maybe a slight increase .

Speaker #7: So we plan to leverage advertising in the back half of the year because we're anniversary . The elevated spend that started last year in the third quarter .

Mike Mathias: We plan to leverage advertising in the back half of the year once because we're anniversarying the elevated spend that started last year in Q3. The rest of the SG&A lines being well controlled may have a little bit of an incentive comp increase compared to this year in both Q3 and Q4, a little more in Q4. We're looking to leverage SG&A, though, across the back half even with that. We'll get back into a cycle, Matt, you know, starting in the back half of the year and forward 12 months into 2027, that we wanna leverage this expense base on a low to mid-single digit comp.

Speaker #7: And then the rest of the again , the rest of the SG&A lines being , well controlled may have a little bit of incentive comp increase compared to this year in both the third and fourth quarter , a little more in the fourth quarter .

Speaker #7: But we're looking to leverage SG&A , though across the back half , even with that . So we'll get back into a cycle on that .

Speaker #7: Then , you know , starting in the back half of the year . In forward 12 months into 27 , that we want to leverage this expense base on a mid to high single or , sorry , a low to mid single digit comp .

Mike Mathias: You know, with our plans at the moment and the guidance we're providing, we're looking to expand upon some healthy operating rates in the back half once we anniversary tariffs and this elevated advertising spend. We wanna carry that into 2027 on a 12-month basis going forward to get those operating rates back to the high single digits.

Speaker #7: And you know , our plans at the moment and the guidance we're providing , we're looking to expand upon some healthy operating rates in the back half .

Speaker #7: Once we anniversary tariffs . And this elevated advertising spend , we want to carry that into 27 on a 12 month basis . Going forward to get this operating rate back , going back to the high single digits .

Speaker #3: Mike , I think that's a great point , too . When you think about marketing and our strategy , really it was about relevancy for American Eagle , for the American brand .

Jennifer Foyle: Mike, I think that's a great point, too. When you think about marketing and our strategy, really it was about relevancy for American Eagle, for the American Eagle brand. You know, I'm sure you've seen many of the tactics that have gone viral out there for American Eagle. Then Aerie, it's really been awareness. Boy, has that strategy worked. We've grown our brand awareness over 10 points. It's huge. It's a huge number. I'm really proud of the team there. Now the teams are up because keep in mind, we share a platform. Now what we wanna do is get that customer shopping back, you know, coming back to us. We want repeat performance from these customers. We want them to come back through our doors or onto the site. Those are the tactics that we're working on.

Speaker #3: And, you know, I'm sure you've seen many of the tactics that have gone viral out there for American Eagle, and then Aerie.

Speaker #3: It's really been awareness . And boy , has that strategy worked . We've grown our brand awareness over ten points . It's huge .

Speaker #3: It's a huge number. I'm really proud of the team there. And now what the teams are up to—because, keep in mind, we share a platform.

Speaker #3: Now what we want to do is get that customer shopping back . You know , coming back to us . We want repeat performance from these customers .

Speaker #3: We want them to come back through our doors or onto the site. And those are the tactics that we're working on.

Speaker #7: Okay , great . We'll get the 5% this year . Jen . Our teams work very closely on a week to week basis on , you know , there's campaign pieces of it and then there's the week to week spend on kind of digital media performance marketing that we're managing very closely .

Mike Mathias: Well, that's great, Jen. We'll get to 5% this year. Jen, our teams work very closely on a week-to-week basis on, you know, there's the campaign pieces of it, and then there's the week-to-week spend on kind of digital media performance marketing that we're managing very closely. Our teams are doing it very well together and come to Jen and I on those fronts on kind of managing that week to week. The intent, as we talked about then, is to kind of maintain that 5% spend into the sales increase, maintaining that. We think this elevated level to all the metrics Jen just said, you know, moving in the right direction. We like what we're seeing. It's why we're continuing it. We think it's the right new baseline to run the company.

Speaker #7: And our teams are doing it very well together. And come to Jen and I on those fronts, on kind of managing that week to week.

Speaker #7: The intent , as we talked about then , is kind of maintain that 5% spend into the sales increase we think this elevated level , all the metrics .

Speaker #7: Jen just said , you know , moving in the right direction . We like what we're seeing is why we're continuing it . We think it's the right new baseline to run the company .

Speaker #7: We'll make some based on what we see . Rebalancing some of the spend between kind of advertising strategies , maybe , you know , across tactics , around talent versus media and performance spend trying to find in other line items like content creation .

Mike Mathias: We'll make some changes based on what we see, rebalancing some of the spend between kind of advertising strategies, maybe, you know, across tactics around talent versus media and performance spend. Just trying to find efficiencies in other line items like content creation. Already looking at some plans into 2027 around rebalancing some of those things, and we're continuing to manage it that way. This kind of 5% new baseline is working for us.

Speaker #7: Are you looking at some plans in the '27 around rebalancing? Some of those things, and we're continuing to manage it that way.

Speaker #7: But this kind of 5% new baseline is working for us.

Speaker #5: The next question comes from John Kim with TD Cowan . Please go ahead . Go ahead .

Operator: The next question comes from Jonna Kim with TD Cowen. Please go ahead.

Speaker #10: Thank you for taking my question . As you think about American Eagle brand positioning , what are key opportunities that you see for improvement over time ?

Jonna Kim: Thank you for taking my question. As you think about American Eagle's brand positioning, what are key opportunities that you see for improvement over time? Could you just speak to the intimate business performance during the quarter and just quarter to date, what you're seeing there, and how do you think that business will evolve over time as well? Thank you so much.

Speaker #10: And then could you just speak to the intimate business performance during the quarter and this to date , what you're seeing there ? And how do you think that business will evolve over time as well ?

Speaker #10: Thank you so much

Speaker #3: For American Eagle . Mike mentioned it . Number one Street , our fleet rationalization . We're still working through some , you know , lower tier stores that we need to optimize and actually give back to our best stores .

Jennifer Foyle: Yeah. For American Eagle, Mike mentioned it, number one, our fleet rationalization. We're still working through some, you know, lower tier stores that we need to optimize and actually give back to our best stores. Just so you know, our new remodels in the American Eagle brand are really resonating with the customer. We're seeing nice upticks, you know, versus the average base. We're working on three models where we can justify and where it makes sense depending on the mall. Excited about that. Our new solo store has been outperforming, and it's a great visualization to where we're headed for, you know, our entire portfolio of our brands, but a great representation of the American Eagle brand. Number one, fleet optimization. Number two, product, product. We focus on product.

Speaker #3: So just so you know , our new remodels in the American Eagle brand are really resonating with the customer . We're seeing nice upticks , you know , versus the average base .

Speaker #3: And so we're working on the remodels where it where we can justify and where it makes sense depending on the mall . So excited about that .

Speaker #3: Our new Soho store has been outperforming . And it's a great visualization to where we're headed for , you know , our entire portfolio of brands .

Speaker #3: But a great representation of the American Eagle brand . So number one , fleet optimization , number two , product , product , product .

Speaker #3: We focus on product . We're focusing on new innovation , delivering new products , delivering excitement on top of our incredible marketing campaigns that , again , are , you know , we have relevancy now like we needed to get back on the map .

Jennifer Foyle: We're focusing on new innovation, delivering new product, delivering excitement on top of our incredible marketing campaigns that again are you know, we have relevancy now. Like, we needed to get back on the map. That's what American Eagle was up to. We're a more mature brand, and we needed to turn heads. Certainly, the team really has stood out there, and I think, some of these new campaigns and getting up to snuff on our marketing spend and competing, because we underperformed there versus our competition, and I think now we're ready to compete a little bit more. We're building our new franchise businesses. We're excited about men's.

Speaker #3: That's what American Eagle was up to . We're more mature brand , and we needed to turn heads . And certainly the team really has stood out there .

Speaker #3: And I think some of these new campaigns and getting up to snuff on our marketing spend and competing because we were a little we underperformed there versus our competition .

Speaker #3: And I think now we're ready to compete a little bit more. We're building our new franchise businesses. We're excited about men's.

Speaker #3: Men's has turned around and now it's just women's and really looking at women's dollar per square foot by store and making sure that we're really optimizing the women's business in our best stores .

Jennifer Foyle: Men's has turned around. Now it's just women's and really looking at women's dollar per square foot by store and making sure that we're really optimizing the women's business in our best stores and online. Let's not forget about the direct business. Our direct business has been outperforming last year on the back half and going into Q1. We're seeing really nice momentum on the direct business. It's a new way of getting new acquired customers. Again, this is where we're working on how do we get them to repeat shop either on the site or going into stores. That is a new, I would say it's a new initiative for us. We're talking a little bit more about omni-customer.

Speaker #3: And online . Let's not forget about on the direct business , our direct business has been outperforming last year on the back half and going into Q1 , we're seeing really nice momentum on the direct business .

Speaker #3: It's a new way of getting new acquired customers . And again , this is where we're working on how do we get them to repeat shop either on the on the site or going into stores .

Speaker #3: And that is a new I , I would say it's a new initiative for us . We're talking a little bit more about Omni customer .

Speaker #3: I'm not a huge fan of the word Omni , but there's certainly is opportunity in this new world to understand where the customer is going to be leveraging some of our new capabilities and understand where they are , and being there for the customer with what he or she wants .

Jennifer Foyle: I'm not a huge fan of the word omni, but there certainly is opportunity in this new world to understand where the customer is going to be leveraging some of our new capabilities and understand where they are and being there for the customer with what he or she wants. Those are really our tactics. Again, like I said, product, we have new product categories. We have new talent that we're launching in American Eagle. We're excited about that. You've heard some of the, you've seen it already. Ella Langley, by the way, we just launched her. She's the number 1 song in the US right now, her song Choosin' Texas, sorry. We're just excited about continuing to gain that relevancy in American Eagle.

Speaker #3: So most of those are really our tactics . And again , like I said , product . We have new product categories , we have new talent that we're launching in American Eagle .

Speaker #3: We're excited about that . You've heard some of the you know , you've seen it already . Ella Langley , by the way .

Speaker #3: We just launched her . She's the number one song in the US right now . Her song facing Choosing Texas . Sorry . So we're just excited about continuing to gain that relevancy in American Eagle .

Speaker #3: And keep in mind , it's our Americas 250th anniversary this year . And next year's 50th anniversary . So lots of excitement around American Eagle on the intimate side , I think intimate is just getting going .

Jennifer Foyle: Keep in mind, it's America's 250th anniversary this year, and next year's AE's 50th anniversary. Lots of excitement around American Eagle. On the intimate side, I think intimates is just getting going. We're leveraging undies to bundle and to get new customers into our brand. We're considering it the lipstick of our brand. Also we're launching new bra silhouettes. Bralettes are back and these layering pieces. We have lots of categories now on the intimate side, again, that we can lean into and pulse, depending on the trends and where the trends are going. We're feeling good about intimates. Again, they saw great success in Q4, and we're continuing that momentum into Q1.

Speaker #3: We're leveraging undies to bundle and to get new customers into our brand . We're considering it . The lipstick of our brand , but also we're launching new brands , silhouettes .

Speaker #3: Bralettes are back and these layering pieces . So we have lots of categories now on the intimate side again that we can lean into and pulse on , on the trends and where the trends are going .

Speaker #3: But we're feeling good about intimates again , they they saw great success in Q4 and we're continuing that momentum into Q1 .

Speaker #11: Thank you .

Dana Telsey: Thank you.

Speaker #5: The next question comes from Dana Telsey with Telsey Advisory Group . Please go ahead .

Operator: The next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.

Speaker #12: Hi . Good afternoon . As you think about the advertising , which has been so , so successful , obviously Stagecoach now being the next thing , how do you think of it for the balance of the year and how do you see lapping whether it's Sydney Sweeney or the others .

Dana Telsey: Hi. Good afternoon. As you think about the advertising, which has been so successful, obviously Stagecoach now being the next thing, how do you think of it for the balance of the year, and how do you see lapping, whether it's Sydney Sweeney or the others? On the refreshes in stores, how many store refreshes are you doing, and what kind of productivity gains have you seen from these refreshes? Thank you.

Speaker #12: And then on the refreshes in stores , how many store refreshes are you doing and what kind of productivity gains have you seen from those refreshes ?

Speaker #12: Thank you .

Speaker #3: Sure . So , you know , I didn't mention this before , but also not only are we leveraging talent more so on the side of the business , but in both brands and Aerie , we're really leaning into our our community and our customer base .

Jennifer Foyle: Sure. You know, I didn't mention this before, but also not only are we leveraging talent, more so on the AE side of the business, but in both brands, AE and Aerie, we're really leaning into our community and our customer base. We're really. I mean, both brands right now are starting new tactics to gain new customers, as far as... Well, there's some I can't tell you. There's some I can't share with you. This creator community that I think we are just encroaching on, for both brands, it's real, and that is the difference, okay? There's a lot, you know, a lot of our competition's out there. They're getting, you know, they're finding tactics.

Speaker #3: And we're really I mean , both brands right now are starting new new tactics to gain new customers . As far as well , there's some there's some I can't tell you .

Speaker #3: There's some I can't share with you . But this , this creator community that I think we are just encroaching on for both brands .

Speaker #3: It's real . And that is the difference . Okay , so there's a lot , you know , a lot of our competitions out there , they're getting , you know , they're they're finding tactics .

Speaker #3: But I think our tactics for our brands are about real and authentic and getting our community that believes in our brands to celebrate our brands .

Jennifer Foyle: I think our tactics for our brands are about real and authentic and getting our community that believes in our brands to celebrate our brands. That's and so these influencers that we're leveraging across all brands, I think we're gonna really lean into. you know, we're excited about it, and we're already starting to see some momentum gaining with this influencer program that we're starting. Again, it's more innate. we own it, and we are, and we're excited about it. There the tactics are slightly different than some of what we see our competition doing.

Speaker #3: And that's and so these influencers that we're leveraging across all brands , I think we're going to really lean into both , you know , we're excited about it .

Speaker #3: And we're already starting to see some momentum gaining with this influencer program that we're starting . And again , it's more innate . We own it and we are and we're excited about it .

Speaker #3: So it's the tactics are slightly different than some of what we see our competition doing

Speaker #7: On the store . Remodels , refreshes . Dana , we've got , as I said in prepared remarks , we'll do at least around 60 , maybe a few more than that this year .

Mike Mathias: On the store remodels refreshes, Dana, we've got, as I said in prepared remarks, we'll do at least around 60, maybe a few more than that this year. We're, I think, in our third to fourth year of that program. We still have about a 350 to 400 store total we're working toward. Probably about another year away from that. I think we'll get over the 300 mark or close to that with these next 60. You know, again, the average age of the fleet before we started this was about 12 years. We were behind the game, behind a little bit, due to COVID and our intentions of refreshing the fleet. The stores we know we wanna sign leases for a longer, for the longer term.

Speaker #7: We're I think , in our third to fourth year of that program , we're we still have about a 350 to 400 store total .

Speaker #7: We're working toward probably about another year away from that . I think we'll get we'll get over the 300 mark or close to that with the with these next 60 , you know , again , the average age of the fleet before we started this was about 12 years .

Speaker #7: We were behind the game , behind a little bit due to Covid and our intentions of refreshing the fleet . The stores we know we want to sign leases for a longer for the longer term .

Speaker #7: And I think once you know , we'll get into a rhythm of keeping the average age more in that 6 to 7 year sweet spot , which we think is the right thing to do .

Mike Mathias: I think once, you know, we'll get into a rhythm of, you know, keeping the average age more in that six to seven year sweet spot, which we think is the right thing to do. And then on a performance basis, we are seeing, You know, a comp result or an increase in these stores that's above the chain average. We, you know, we like what we're seeing in terms of payback on that cash. It's a bit of a, you know, kind of maintenance/some payback by doing this.

Speaker #7: So . And then on a performance basis , we are seeing , you know , a comp result or an increase in these stores that's above the chain average .

Speaker #7: So we , you know , like we like what we're seeing in terms of payback on that cash . It's a bit of a , you know , kind of maintenance slash some , some payback by doing this .

Speaker #7: We have refined the cost of these down from where we started in the first year . So we're , you know , kind of the , the elements of the store that we need .

Mike Mathias: We have refined the cost of these down from where we started in the first year. We're, you know, kind of, they're yet the elements of the store that we need to touch. You know, the biggest bang for our buck, it's the average has come down on the spend since we started. We're kind of, you know, maybe more than halfway through the program. We like what we're seeing in terms of performance and with the intent on an ongoing basis to kind of maintain the age of the fleet more in that six, seven year range.

Speaker #7: We need to touch . And you know , the , the biggest bang for our buck . It's the average has come down on the spend since we started .

Speaker #7: So we're kind of , you know , maybe more than halfway through the program . We like what we're seeing in terms of performance .

Speaker #7: And with the intent on , on an ongoing basis to kind of maintain the age of the fleet more in that six , seven year range .

Speaker #12: Thank you

Jennifer Foyle: Thank you.

Dana Telsey: Thank you.

Speaker #5: The next question comes from Janine Stitcher with BTIG. Please go ahead.

Operator: The next question comes from Janine Stichter with BTIG. Please go ahead.

Speaker #13: Hi . Good afternoon . Just on the tariff , can you remind us what you've done on pricing and response ? Have you raised tickets at all ?

Janine Stichter: Hi, good afternoon. Just on the tariffs, can you remind us what you've done on pricing in response? Have you raised tickets at all and any thoughts on pricing for the rest of the year?

Speaker #13: And any thoughts on pricing for the rest of the year?

Speaker #7: Yeah , I think we've talked about really business as usual . We've been approached kind of tickets and pricing , just like we always have where we , you know , what's the right price value equation for the customer .

Mike Mathias: I think, we've talked about really business as usual. We've approached kind of tickets and pricing just like we always have, where we, you know, what's the right price value equation for the customer? Where are we not seeing price resistance across items? Some strategic intent of increasing tickets a bit so we can kind of provide that right value equation from a promotion perspective to the customer. No, no specific intents around tariff pass through. It's really what we've always done from a pricing perspective. You know, maintaining, again, the AUR for Q4 was relatively flat, like, down a little bit in AE and up in Aerie. You know, from a margin perspective, that's not a bad place to be with some mixed benefits in there, aside from the tariff impact.

Speaker #7: Where are we not seeing price resistance across items ? Some strategic intent of increasing tickets a bit so we can kind of provide the right value equation from a promotion perspective to the customer .

Speaker #7: So no , no specific intents around tariff pass through . It's really what we've been , what we've always done from a pricing perspective .

Speaker #7: And, you know, maintaining again, year-over-year for the fourth quarter was relatively flat—like down a little bit in AEO and up in Aerie.

Speaker #7: You know, from a margin perspective, that's not a bad place to be, with some mixed benefits in there. Aside from the tariff impact.

Speaker #7: So we'll continue down that path with their opportunistic and kind of opportunities to to . Raise tickets a bit . But , you know , I'll just based on customer reaction and what's right for that price value equation .

Mike Mathias: We'll continue down that path, with where there are opportunistic and kind of opportunities to raise tickets a bit. You know, I'll just based on customer reaction and what's right for the price value equation.

Speaker #13: Great . And then maybe just back on quiet logistics with the $20 million in annualized savings , are you thinking about reinvesting any of that , or are there areas you really spend more , or is that flowing all the way through the bottom line ?

Janine Stichter: Great. Maybe just back on Quiet Logistics, with the $20 million annualized savings, are you thinking about reinvesting any of that? Are there areas you would potentially spend more, or is that flowing all the way to the bottom line? Thank you.

Speaker #13: Thank you

Speaker #7: I think that we're looking at reinvesting, other than probably advertising. I mean, a lot of what we've been doing with the management of our expense base for several years was to find some funding to do what we're doing on the advertising line.

Mike Mathias: No, I think, I wouldn't not really. We're looking at reinvesting other than probably advertising. I mean, a lot of what we've been doing with the management of our expense base for several years was to find some funding to do what we're doing on the advertising line. Actually, you know, we've been measuring that ourselves and just looking at this, our own sort of internal scorecard over the last several years. We've done a nice job at kind of reducing the rate of sale on the majority of the expense base, the bigger line items that we've, you know, the project we had a few years ago where we kind of addressed 85% of our overall OpEx base. We've been continued success there to kinda knock that down as a rate of sale.

Speaker #7: And actually, if you, you know, we've been measuring that ourselves and just looking at our own sort of internal scorecard over the last several years, we've done a nice job at kind of reducing the rate of sale on the majority of the expense base.

Speaker #7: The bigger line items that we've , you know , the project we had a few years ago where we kind of addressed 85% of our overall opex base .

Speaker #7: We've been continued success there to kind of knock that that down as a rate of sale . And we have we've sort of funding that back to advertising right now .

Mike Mathias: We've sort of funding that back to advertising right now in total. Again, we'll anniversary that and start to leverage again, starting in the back half of the year. No reinvestment of those dollars specifically. It's sort of an ongoing program to, you know, improve our operating rate. Short term here, we're investing some dollars back in advertising for sure these 12 months. Nothing else specific from that savings that we're intending to do.

Speaker #7: In total . Again , we anniversary that and start to leverage again starting in the back half of the year . So no reinvestment of those dollars specifically .

Speaker #7: It's sort of an ongoing program to , you know , improve our operating rate short term . Here we're investing some dollars back in advertising for sure .

Speaker #7: Of these 12 months . But nothing nothing else specific from that savings that we're intending to

Speaker #5: The next question comes from John Keiper with Goldman Sachs . Please go ahead .

Operator: The next question comes from Jaycen Kampala with Goldman Sachs. Please go ahead.

Speaker #14: Hi , everybody . Thank you guys . I just had a question about the low single digit comp in one Q just noticing that the if you go from four q 24 to 1 Q 25 , the sequential comparable gets three points easier , but the the low single digit sort of implies that on a two year stack basis there's a slowdown .

Jaycen Kampala: Hi, everybody. Thank you, guys. I just had a question about the low single digit AE comp in Q1. Just noticing that if you go from Q4 2024 to Q1 2025, the sequential comparable gets, you know, 3 points easier. The low single digit sort of implies that on a 2-year stack basis, there's a slowdown. Just any commentary around that, and then I have a follow-up.

Jonathan Keypour: Hi, everybody. Thank you, guys. I just had a question about the low single digit AE comp in Q1. Just noticing that if you go from Q4 2024 to Q1 2025, the sequential comparable gets, you know, 3 points easier. The low single digit sort of implies that on a 2-year stack basis, there's a slowdown. Just any commentary around that, and then I have a follow-up.

Speaker #14: So just any , any commentary around that . And then and then I have a follow up .

Speaker #7: Yeah . John I think if you look at the improvement to that point , I mean , I think we've seen a five point improvement from kind of the second quarter of last year through the fourth to this fourth quarter result of plus two .

Mike Mathias: Yeah. John, I think, if you look at the improvements to that point, I mean, I think we've seen a five-point improvement from kind of the Q2 of last year through the Q4 to this Q4 result of +2. The guidance we're providing now is based on what we've seen to date. We know there's been some weather disruptions, some serious storms and things like that in this February, this year that we didn't really see that dramatically last year, especially the Northeast getting pounded a bit. We have our store base is a nice concentration in that area. We're pleased to see the kind of trend continue from Q4. That being said, you know, Jen said it, the spring break time is ahead of us. You know, short season is coming.

Speaker #7: And the guidance we're providing now is based on what we've seen to date. We know there's been some weather disruptions, some serious storms and things like that.

Speaker #7: In this February, this year, we saw something we didn't really see that dramatically last year, especially in the Northeast getting pounded a bit.

Speaker #7: And we have our store base is a nice concentration in that area. But we're pleased to see the kind of trend continue from the fourth quarter.

Speaker #7: That being said , you know , Ken said at the spring break , time is ahead of us . You know , short season is coming .

Mike Mathias: You know, the March whole timeframe is more like 75% of our total Q1, so we've got a long way to go. Continuation of the trend we saw, and, you know, the teams are working hard to capture these next two months, and we'll see how the quarter pans out. It's a, the right place to be at the moment.

Speaker #7: You know that the time frame is more like 75% of our total first quarter . So we've got a long way to go .

Speaker #7: But so continuation of the trend , we saw and you know the teams are working hard to capture these next two months . And we'll see how the quarter pans out .

Speaker #7: But it's a it's a the right place to be at the .

Speaker #14: Got it . Okay . And then just in terms of the Aerie comp , which was very impressive , just any way that we can get a sense of buckets that contributed to that 23 like I guess there was a different question that tried to tried to get at this , but you mentioned like 14% new customer additions , just , you know , any any ways we can piece together the building blocks to get to the 23 .

Jaycen Kampala: Got it. Okay. Then just in terms of the Aerie comp, which was very impressive, just any way that we can get a sense of buckets that contributed to that 23? Like, I guess, there was a different question that tried to get at this, but you mentioned like 14% new customer addition. Just, you know, any ways we can piece together the building blocks to get to the 23?

Jonathan Keypour: Got it. Okay. Then just in terms of the Aerie comp, which was very impressive, just any way that we can get a sense of buckets that contributed to that 23? Like, I guess, there was a different question that tried to get at this, but you mentioned like 14% new customer addition. Just, you know, any ways we can piece together the building blocks to get to the 23?

Speaker #3: Yeah, that was actually brand awareness. I just wanted to let you know we were roughly at 55%, and we increased that.

Jennifer Foyle: Yeah. That was actually brand awareness. I just wanted to let you know. We were roughly at 55% as we increased that, but we do have a new customer base too, solidly growing our customer base. In Aerie, I have to say this, literally all categories worked, whether it was set dressing, fleece, knit tees, sweaters, sleep. Really was unbelievable, and intimate, and layering. We have this new layering business that we're pretty excited about. You know, so far, so good. That continues into Q1. Again, we still have some categories that we actually lean on more as we head into the spring break time period.

Speaker #3: But we do have a new customer base to solidly growing our customer base in Aerie . I , I have to say this literally all categories worked , whether it was set dressing , fleece knit , tees , sweaters Sleep really was unbelievable .

Speaker #3: And intimate and layering . We have this new layering business that we're pretty excited about , so you know , so far , so good .

Speaker #3: And that continues into Q1 . And again , we still have some categories that we actually lean on more as we head into the spring break time period .

Speaker #3: So, you know, strategically, we didn't pull swim in as hard as we used to in the past because we believe that there's a different strategy for swim where we can lean on.

Jennifer Foyle: You know, strategically, we didn't pull swim in as hard as we used to in the past, because we believe that, there's a different strategy for swim where we can lean on. It's a great margin category.

Speaker #3: It's a great margin category, and I think that's what we're looking to do. And we're going to bring in newness monthly, more so than we did in the past.

Marni Shapiro: I think that's what we're looking to do. We're gonna bring in newness monthly, more so than we did in the past excite that girl. I think there's still more to come here 'cause we still have some new category introductions or seasonal introductions that I think are still in play. Early reads on these seasonal categories, including in AE, are strong. Last year, if you remember, we had weather and shorts were really tough across the board. That's a huge category for us in Aerie, OFFLINE and in American Eagle. There's still a lot of volume in front of us and, you know, we're gonna set ourselves up for success there.

Jennifer Foyle: I think that's what we're looking to do. We're gonna bring in newness monthly, more so than we did in the past excite that girl. I think there's still more to come here 'cause we still have some new category introductions or seasonal introductions that I think are still in play. Early reads on these seasonal categories, including in AE, are strong. Last year, if you remember, we had weather and shorts were really tough across the board. That's a huge category for us in Aerie, OFFLINE and in American Eagle. There's still a lot of volume in front of us and, you know, we're gonna set ourselves up for success there.

Speaker #3: Past . Excite that girl . So I , I think there's still more to come here because we still have some new category introductions or or seasonal introductions that I think are still in play .

Speaker #3: Early reads on these seasonal categories , including Nike , are strong . Last year , if you remember , we had weather and shorts were really tough across the board .

Speaker #3: So and that's a huge category for us in Aerie , offline and in American Eagle . So there's still there's still a lot of volume in front of us .

Speaker #3: And you know , we're going to set ourselves up for success here .

Speaker #14: Great . Thank you .

Jennifer Foyle: Great. Thank you.

Jonathan Keypour: Great. Thank you.

Speaker #5: The next question comes from Corey Tarlow with Jefferies. Please go ahead.

Operator: The next question comes from Corey Tarlow with Jefferies. Please go ahead.

Speaker #11: Yes .

Speaker #4: Thanks .

Corey Tarlow: Yeah, thanks. Mike, on tariffs, could you remind us again, what the impact is that you're expecting? I ask that in the vein of you guided with IEPA in, how much upside is there to the current guide if that is struck down?

Speaker #15: Mike . On tariffs , could you remind us again what the impact is that you're expecting . And then I asked that in the vein of you guided with Iipa in how much upside is there to the current guide .

Speaker #15: If that is struck down

Speaker #7: Yeah . So I'll just do quarterly impact of laid things out with tariffs that were in place . So about a $30 million impact .

Mike Mathias: Yeah. Just the quarterly impact of, how we laid things out, with IEPA tariffs that were in place. About a $30 million impact each of the Q1 and Q2. Kind of $60 million total for the spring season. We incurred $20 million of impact in Q3 of 2025, but probably more like a $30, $35 million on a full quarter basis because of the timing of the effective, the effective, tariff rates last year. We incurred $50 million of impact this past Q4. That gets you to your $130 million plus number for, on an annual basis.

Speaker #7: Each of the first and second quarter . So kind of 60 million total for the spring season , we incurred 20 million of impact in Q3 of 25 .

Speaker #7: But probably more like a 30 , $35 million on a full quarter basis because of the timing of the effect of the effect of tariff rates last year .

Speaker #7: And then we incurred $50 million of impact this past fourth quarter . So that your $130 million plus number for us on an annual basis , obviously .

Mike Mathias: Obviously, we left that guidance or the approach to guidance in place because to your second question, I don't think any of us know what's about to happen. We've got this 10% Section 122 in place. All indication is that's going to go to 15% based on kind of recent communication. We know there's things happening on the 301 front that, you know, this administration tends to do. The impact to the total year, we believe the guidance we just gave should be the worst case, knock on wood. I hope I didn't just jinx ourselves and the entire industry with that comment. There would be upside.

Speaker #7: I mean , we left that we left that guidance or that the approach to guidance in place Because to your second question , I don't think any of us know what's about to happen .

Speaker #7: We've got this 10% Section 122 in place. All indications are that's going to go to 15%, based on kind of recent communication.

Speaker #7: We know there's things happening on the 301 front that , you know , this administration intends to do . So the impact to the total year , we believe the guidance we just gave should be the worst case .

Speaker #7: Knock on wood . I hope we didn't just jinx ourselves in the entire industry with that comment , but there would be upside .

Speaker #7: We've done some back of the envelope math of what it could look like based on the cadence of when we think the section 122 tariffs expiring after 150 days , and if 301 take effect .

Mike Mathias: We've done some back of the envelope math of what it could look like based on the cadence of when we think, you know, the Section 122 tariffs expiring after 150 days and if Section 301 take effect. It's all guesstimates at this point. I think we'll know a lot more by the Q1 call at the end of May. I expect to provide a bit of upside to this guidance at that point, but better off to quantify that over these next couple months once we actually know more than kind of put numbers out there that we're not 100% sure of at the moment.

Speaker #7: But it's all just guesstimates at this point. So I think we'll know a lot more by the first quarter call at the end of May.

Speaker #7: I expect to provide a bit of upside to this guidance at that point , but better off to quantify that over these next couple of months .

Speaker #7: Once we actually know more than kind of put numbers out there that we that we're not 100% sure of at the moment .

Speaker #15: Got it . That's super helpful . And then just as a quick follow up , it looks like there's no buyback embedded in the outlook .

Corey Tarlow: Got it. That's super helpful. Just as a quick follow-up, it looks like there's no buyback embedded in the outlook. I was just curious how you're thinking about that specifically? Thanks so much.

Speaker #15: So I was just curious how you're thinking about that specifically. Thanks so much.

Speaker #7: Yeah. We repurchased about a million shares there before the end of the year. Share counts in our projection right now would be about 177 million for the year, versus 176 million last year.

Mike Mathias: Yeah. We purchased about 1 million shares there before the end of the year. Share counts in our projection right now would be about 177 million for the year versus 176 million last year. We are gonna look at, you know, again, we always talk about capital allocation being investing back in the business first. We're committed to our $0.50 per share dividend and then, you know, looking at buybacks to offset dilution minimally. That was, you know, the January buyback was part of that. If you look at the full year last year, we returned again $341 million to shareholders, $85 million in dividends and over $250 million in share repurchases. We'll continue to look at it, Corey.

Speaker #7: We are going to look at, you know, again, we always talk about capital allocation being investing back in the business.

Speaker #7: First , we're committed to our 50 cent per share dividend . And then , you know , looking at buybacks to offset dilution minimally .

Speaker #7: So you know , the January buyback was a part of that . If you look at the full year last year we returned again 341 million to shareholders , 85 million in dividends and over 250 million in share repurchases .

Speaker #7: So we'll continue to look at it , Cory , when minimally , minimally offset kind of internal deletion from internal grants in general .

Mike Mathias: We wanna minimally offset kind of internal dilution from internal grants in general. We'll kind of prioritize that, look at anything above and beyond that as we kinda get into the year and see how cash flow is trending.

Speaker #7: So we'll kind of prioritize that , look at anything above and beyond that as we kind of get into the year and see how cash flow is , is trending

Speaker #5: The next question comes from Marni Shapiro with the retail Tracker . Please go ahead .

Operator: The next question comes from Marni Shapiro with The Retail Tracker. Please go ahead.

Speaker #16: Hey , everybody . Congratulations . And please extend my condolences to Jay . Jen , the stores look fantastic . So I have a couple of quick hit questions for you .

Marni Shapiro: Hey, everybody. Congratulations, and please extend my condolences to Jay. Jen, the stores look fantastic. I have a couple quick hit questions for you. Following on the denim conversation, I'm curious if part of the denim is a shift in what's working in denim from higher rises to lower, from very baggy to boot, and the customer is a little slower to move, or is it, or is it something else that you're thinking? On your collaborations, which have been incredibly successful, and I love the two new ones. Are you thinking about expanding this into Aerie at all to do something there along the similar vein now that Aerie is kinda like, you know, Aerie's back? Are you kinda thinking along the lines there in Aerie?

Speaker #16: Following on the denim conversation . I'm curious if part of the denim is a shift in what's working in denim from higher rises to lower from very baggy to boot , and the customer is a little slower to move , or is it ?

Speaker #16: Or is it something else that you're thinking and then on your collaborations , which have been incredibly successful ? And I love the two new ones .

Speaker #16: Are you thinking about expanding this into area at all to do something ? There along the similar vein , now that area is kind of like , you know , Ari's back , so you're kind of thinking along the lines there .

Speaker #16: And Ari .

Speaker #3: I like that . Marni , first and foremost , Aerie has some great things in store . But again , we Aerie has many different tactics , and I just mentioned we we do a little bit more grassroots .

Jennifer Foyle: I like that thinking, Marni. First and foremost, Aerie has some great things in store. Again, Aerie has many different tactics, and I just mentioned we do a little bit more grassroots, the community, and they vote for us, and it's a winning recipe. I will say, Marni, we do have some fun things in store. As you know, back in October, we leaned into, you know, not using AI on our models, and it's a nice uptick to where we were, you know, when we launched Aerie Real. I think it's a great, it actually addresses the new generation. I'm quite excited about it, and we've only just begun here. Really, that's what we're up to in Aerie.

Speaker #3: The community . And it's just they vote for us and it's a winning recipe . But I will say , Marni , we do have some some fun things in store .

Speaker #3: And as you know , back in October , we leaned into , you know , not using AI on our models . And it's a nice uptick to where we were .

Speaker #3: You know , when we launched Area Real . I think it's just it's a great it actually addresses the new generation . I'm quite excited about it .

Speaker #3: And we've only just begun here . So really that's what we're up to in the area . And again , Marni , with all these new customers , we've got to get them to come back more often .

Jennifer Foyle: Again, Marni, with all these new customers, we've got to get them to come back more often. You can't imagine the dollars on the table if we could just get them to come back one more time annually. Those will be some of our focuses. Can we go back to your first question? I'm sorry, I got so excited about Aerie for a minute.

Speaker #3: You can't imagine the dollars on the table. If we could just get them to come back one more time annually. So those will be some of our focuses.

Speaker #3: And can we go back to your first question ? I'm sorry I got so excited about Aerie for a minute .

Speaker #16: It was just curious . There are changes happening in denim . You rises .

[Analyst] (The Retail Tracker): It's just, I'm curious, there are changes happening in denim, you know, rises lower.

Marni Shapiro: It's just, I'm curious, there are changes happening in denim, you know, rises lower.

Speaker #3: Yes .

Speaker #16: Oh , absolutely . Yeah . The baggy baggy is going giving way to a cleaner a little more narrow boot . So is that kind of I feel like there's a confusion with the customers right now , because you're not the only ones talking about this .

Jennifer Foyle: Yes. Oh, yes.

[Analyst] (The Retail Tracker): The baggy is going, giving way to a cleaner, a little more narrow bootcut. Is that kind of... I feel like there's a confusion with the customers right now, because you're not the only ones talking about this. All my peeps are talking about this.

Marni Shapiro: The baggy is going, giving way to a cleaner, a little more narrow bootcut. Is that kind of... I feel like there's a confusion with the customers right now, because you're not the only ones talking about this. All my peeps are talking about this.

Speaker #16: All my peeps are talking about this .

Speaker #3: I think you're right . I think definitely the rises are getting lower . You're seeing more midriffs being shown . But I also think it is about these other bottoms , including skirts , shorts and you know , other other .

Jennifer Foyle: I think you're right. I think definitely the rises are getting lower. You're seeing more midriff being shown. I also think it is about these other bottoms, including skirts, shorts, and other products, you know, khaki, chino, utility. Those ideas, I think are, you know, here, and I think it is about pivoting into those. You're right, definitely the lower rise is something that, you know, we are addressing, and we do have. And that is working for us. Now it's about just, you know, moving the business. You know, this business has changed drastically, Marni. There's so many new fits to your point. You know, we are seeing, you know, with Ella, we're seeing the boot work for us, for sure. That makes a lot of sense.

Speaker #3: You know , khaki chino utility . Those ideas , I think are , you know , here . And I think it is about pivoting into those .

Speaker #3: But you're right . Definitely the lower rise is something that , you know , we are addressing . And we do have and that is working for us .

Speaker #3: So now it's about just , you know , moving the business , you know , this business has changed drastically . Marni . There's so many new fits to your point .

Speaker #3: You know , we are seeing , you know , with Ella , we're seeing the boot work for us for sure . That makes a lot of sense .

Speaker #3: So right now we're in the process of our test and scale for back-to-school. So I'll learn more in a couple of weeks.

Jennifer Foyle: Right now we're in the process of our test and scale for back to school. I'll learn more in a couple weeks as far as... We have all these fits out there that we test and learn from and where we wanna place our bets. There's more to come here, and the team's ready to execute.

Speaker #3: As far as and we have all these fits out there that we test and learn from and where we want to place our bets .

Speaker #3: So, there's more to come here, and the team's ready to execute well.

Speaker #16: The stores look fantastic , your denim shorts look absolutely fantastic . Congratulations . Best of luck . Are great .

[Analyst] (The Retail Tracker): Well, the stores look fantastic. Your denim shorts look absolutely fantastic. Congratulations. Best of luck with everything.

Marni Shapiro: Well, the stores look fantastic. Your denim shorts look absolutely fantastic. Congratulations. Best of luck with everything.

Jennifer Foyle: They are great. Thank you, Marni.

Speaker #3: Thank you . Thank you

Judy Meehan: Thanks, Marni. Operator, we have time for one more question.

Speaker #17: Marni . Operator . We have time for one more question

Speaker #5: Sure . That question will be coming from Janet Kloppenburg with JJK research Associates , Inc. please go ahead .

Operator: Sure. That question will be coming from Janet Kloppenburg with JJK Research Associates Inc. Please go ahead.

Speaker #18: Thank you . And thank you for squeezing me in . Yeah , I was a little surprised to hear that that denim bottoms were not performing .

Janet Kloppenburg: Thank you, and thank you for squeezing me in. Yeah, I was a little surprised to hear that denim bottoms were not performing. I don't know, maybe I'm misinterpreting it, Jen. Are they performing to your expectations, and because you've made investments in other, in other denim areas, or maybe denim isn't where you think the brand should be right now?

Speaker #18: I don't know, maybe I'm misinterpreting it. Jen, are they performing to your expectations because you've made investments in other, and in other denim areas? Or maybe denim isn't where you think the brand should be right now.

Speaker #18: So

Speaker #3: Denim .

Jennifer Foyle: No, no. Denim is-

Speaker #18: Yeah , yeah yeah .

Janet Kloppenburg: Yeah.

Jennifer Foyle: Yeah.

Speaker #3: No no . Denim is at the . Yeah it is at the soul of everything we do in American Eagle . Like we have maintained our market share like our positioning , everything we do .

Janet Kloppenburg: Yeah.

Jennifer Foyle: No, no. Denim is. Yeah, that is at the core of everything we do in American Eagle. Like, we have maintained our market share, like our positioning, everything we do, you know, that is our core recipe for that, for that business. Both men's and women's did comp on the quarter. It was just, you know, in some cases, what price are they willing to pay for some fashion? That's some of the pressure that we felt. We learned that lesson, and we're trying to take that forward. Particularly, you know, the most important quarter obviously is Q3 for this business. Applying those learnings. But no, it, you know, denim, it's at the core of everything we do.

Speaker #3: You know , that is our core recipe for that , for that business . And both both men's and women's did comp on the quarter .

Speaker #3: It was just , you know , in some cases what price do they were willing to pay for some fashion . So that's some of the pressure that we felt .

Speaker #3: But we've learned that lesson, and we're trying to take that forward. Particularly, you know, the most important quarter obviously is Q3 for this business.

Speaker #3: So applying those learnings , but no , you know , denim it's it's it's at the core of everything we do . It's just it was more about just , you know , leaning some fits that didn't work as successfully as we were hoping to .

Jennifer Foyle: It's just, it was more about just, you know, leaning into some fits that didn't work as successfully as we were hoping to, and learning from that and reapplying those lessons. Yep.

Speaker #3: And learning from that and applying those lessons. Yeah.

Speaker #18: Okay . Great . And then just from my I think you said Orwell was flat . Can you just talk a little bit more about the traffic and unique trends in the quarter and what how we should think about that going forward ?

Janet Kloppenburg: Okay. Great. Just from my... I think you said AUR was flat. Can you just talk a little bit more about the traffic and unit trends in the quarter and how we should think about that going forward? Thank you.

Speaker #18: Thank you .

Speaker #7: Yeah , yes , yes , Janet . So here you are . Overall a company level was flat . Was down slightly or kind of low single and area was up in the mid-single digits .

Mike Mathias: Yes. Yes, Janet. AUR overall at a company level was flat. AE was down slightly or kind of low single, and Aerie was up in the mid-single digits. It kind of ties to the margin color we were providing earlier as well, and what Jen just mentioned about, you know, we've been talking about jeans specifically as, you know, being positive, but then, you know, a little pressure, a little kind of more promotional to drive those results. We're expecting something similar as we continue, like right now in the beginning of the first, you know, early into the year here. Again, the Aerie team on the current trajectory is being able to kind of manage intelligently and pull back and be more targeted. AE is really still fighting the same game we just talked about.

Speaker #7: So it kind of ties to the margin color . We were providing earlier as well . And what Jen just mentioned about , you know , we've been talking about Gene specifically of being positive , but then , you know , a little pressure , a little kind of more promotional to to drive those results .

Speaker #7: And we're expecting something similar as we continue , like right now in the beginning of the first , you know , early in the year here again , the area team on the current trajectory is being able to kind of manage intelligently and pull back and be more targeted , and then AE is really still fighting the same game .

Speaker #7: We just talked about it. So we're expecting something similar in the short term, and we'll see how the rest of the season progresses.

Mike Mathias: We're expecting something similar in the short term, and we'll see how the rest of the season progresses.

Speaker #5: The conference is now concluded . Thank you for attending today's presentation . You may now disconnect .

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

Speaker #17: Thank you

Judy Meehan: Thank you.

Speaker #19: I have

Jennifer Foyle: How'd we do? Did we do okay?

Speaker #3: I really have. How do we do? Do we do?

Jennifer Foyle: How'd we do? Did we do okay?

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