Q1 2026 American Eagle Outfitters Inc Earnings Call

May 28, 2026

Speaker #1: Good afternoon, everyone. Welcome to the AEO Inc. first quarter 2026 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 zero.

Operator: Good afternoon, everyone. Welcome to AEO Inc. Q1 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Alexis Tragos, Vice President, Corporate Communications. Please go ahead.

Operator: Good afternoon, everyone. Welcome to AEO Inc.'s Q1 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Alexis Tragos, vice president, corporate communications. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on your telephone keypad.

Speaker #1: To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Alexis Dragos, Vice President of Corporate Communications.

Speaker #1: Please go ahead.

Speaker #2: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Jen Foyle, President, Executive Creative Director for American Eagle and Aerie; and Mike Mathias, Chief Financial Officer.

Alexis Tragos: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jennifer Foyle, President, Executive Creative Director for American Eagle and Aerie, and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. 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. Note that included in our press release and during this call, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis.

Alexis Tragos: Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Jennifer Foyle, President, Executive Creative Director for American Eagle and Aerie; and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. 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. Note that included in our press release and during this call, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis.

Speaker #2: Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs.

Speaker #2: 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.

Speaker #2: Whether as a result of new information, future events, or otherwise, except as required by law. Note that included in our press release and during this call, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis.

Speaker #2: 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.

Alexis Tragos: 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 Q1 investor presentation. Now, I'll turn the call over to Jay.

Speaker #2: Here, you can also find our first quarter investor presentation. Now, I'll turn the call over to Jay.

Speaker #3: Thanks, Alexis, and good afternoon, everyone. This quarter reflected the strength of our portfolio, the power of Aerie, and the work underway at American Eagle. Overall, we are pleased with performance in the quarter.

Jay Schottenstein: Thanks, Alexis, good afternoon, everyone. This quarter reflected the strength of our portfolio, the power of Aerie, and work underway at American Eagle. Overall, we are pleased with performance of the quarter. We delivered revenue of $1.2 billion, up 10% versus last year, with operating income of $28 million ahead of our guidance. Aerie continued to fuel exceptional growth and profitability across channels, surpassing $2 billion on a trailing 12-month basis. AE's performance in men's and women's tops continue their momentum, yet we have identified specific opportunities to better position women's bodies. Over the past year, our teams have moved with urgency to strengthen the business and improve execution. I am proud of the progress we have made. We are moving with purpose and with a firm understanding of where improvement is needed.

Jay Schottenstein: Thanks, Alexis. Good afternoon, everyone. This quarter reflected the strength of our portfolio, the power of Aerie, and work underway at American Eagle. Overall, we are pleased with performance of the quarter. We delivered revenue of $1.2 billion, up 10% versus last year, with operating income of $28 million ahead of our guidance. Aerie continued to fuel exceptional growth and profitability across channels, surpassing $2 billion on a trailing 12-month basis. AE's performance in men's and women's tops continue their momentum, yet we have identified specific opportunities to better position women's bodies. Over the past year, our teams have moved with urgency to strengthen the business and improve execution. I am proud of the progress we have made. We are moving with purpose and with a firm understanding of where improvement is needed.

Speaker #3: We delivered revenue of $1.2 billion, up 10% versus last year, with operating income of $28 million, ahead of our guidance. Aerie continued to fuel exceptional growth and profitability across channels.

Speaker #3: Surpassing $2 billion on a trailing 12-month basis, AE’s performance in men’s and women’s tops continued their momentum. Yet, we have identified specific opportunities to better position women’s bodies. Over the past year, our teams have moved with urgency to strengthen the business and improve execution.

Speaker #3: And I am proud of the progress we have made. We are moving with purpose and with a firm understanding of where improvement is needed.

Speaker #3: We are extremely pleased with the continued momentum at Aerie and Offline, with revenue of $481 million, up 34% to last year. Demand remains strong across categories and channels.

Jay Schottenstein: We are extremely pleased with the continued momentum at Aerie and OFFLINE, with revenue of $481 million, up 34% to last year. Demand remains strong across categories and channels, supported by compelling product collections, high customer engagement, and continued expansion of brand awareness. Aerie's winning formula is its real connection with customers, product positioning, and its leadership in everyday comfort. OFFLINE also continues to be an important long-term growth opportunity as we build awareness and scale the activewear brand across stores, digital, and social. Together, Aerie and OFFLINE are powerful brands with growing recognition, a loyal customer community, and significant runway ahead. American Eagle's results were mixed in the quarter. We had continued strength in men's, delivering the third consecutive quarter of positive performance. We saw softer trends in women's bottoms, including denim, along with pressure on seasonal categories during a colder spring.

Speaker #3: Supported by compelling product collections, high customer engagement, and continued expansion of brand awareness, Aerie's winning formula is its real connection with customers, product positioning, and its leadership in everyday comfort.

Speaker #3: Offline also continues to be an important long-term growth opportunity. As we build awareness and skill, the act of where brand across stores, digital, and social.

Speaker #3: Together, Aerie and Offline are powerful brands with growing recognition, a loyal customer community, and significant runway ahead. American Eagle's results were mixed in the quarter.

Speaker #3: We had continued strength in men's, delivering the third consecutive quarter of positive performance. We saw softer trends in women's bottoms, including denim, along with pressure on seasonal categories during a colder spring.

Speaker #3: These are areas we understand well, and we are actively addressing them. While May started slowly for the AE brand, we're encouraged by the improvement in the business that we have seen over the last few weeks.

Jay Schottenstein: These are areas we understand well, and we are actively addressing. While May started slowly for the AE brand, we're encouraged by the improvement in the business that we have seen over the last few weeks. We remain highly confident in the relevance and resilience of the overall AE brand and in our ability to strengthen execution and drive better results moving forward. We must improve conversion, sharpen assortments, drive greater productivity in women's, and build on the progress in men's. Marketing continues to be an important investment across the portfolio and a key driver of long-term brand health. Supporting both AE and Aerie through initiatives that deepen customer connection, expand our reach, and keep our brands at the center of culture and conversation, or position us well for the future.

Speaker #3: We remain highly confident in the relevance and resilience of the overall AE brand, and in our ability to strengthen execution and drive better results moving forward.

Speaker #3: We must improve conversion, sharpen assortments, drive greater productivity in Women's, and build on the progress in Men's. Marketing continues to be an important investment across the portfolio and a key driver of long-term brand health.

Speaker #3: Supporting both AE and Aerie, through initiatives that deepen customer connection, expand our reach, and keep our brands at the center of culture and conversation, our position is well set for the future.

Speaker #3: This value is seen in strong engagement across the portfolio, where our product and brand message continue to resonate with both new and existing customers.

Jay Schottenstein: This value is seen in strong engagement across the portfolio, where our product and brand message continues to resonate with both new and existing customers. The attention around key campaigns, talent, and customer activation only reinforces the power of our brands. We are leveraging our learnings as we activate go-forward plans and are working to recalibrate spending to maximize our efforts. We will continue investing behind our brands and capabilities where we see the strongest returns. We are excited about the opening of our West Coast distribution center in Phoenix, which went live in early May. As we further optimize our distribution network, improve inventory placement, and continue to give customers more ways to get what they want, when they want it. I am especially proud of our innovation, passion, and teamwork that enabled us to bring this facility online in under one year.

Speaker #3: The attention around key campaigns, talent, and customer activation only reinforces the power of our brand. We are leveraging our learnings as we activate the four plans and are working to recalibrate spending to maximize our efforts.

Speaker #3: We will continue investing behind our brands and capabilities where we see the strongest returns. We are excited about the opening of our West Coast distribution center in Phoenix, which went live in early May.

Speaker #3: As we further optimize our distribution network, improve inventory placement, and continue to give customers more ways to get what they want, when they want it.

Speaker #3: I am especially proud of our innovation, passion, and teamwork that enabled us to bring this facility online in under one year. Every investment we make supports our long-term growth agenda and creates value for AEO.

Jay Schottenstein: Every investment we make supports our long-term growth agenda and creates value for AEO. We're operating in a dynamic environment, and the retail landscape remains highly fluid. This is why execution matters, and we understand the importance of staying disciplined and flexible. We remain fully prepared to utilize the many levers available to us within product sourcing, marketing, and operations to navigate headwinds as a result of macroeconomic uncertainty. Finally, I want to thank our associates across the company. We are proud of the work our teams have done to build a stronger and more agile operating foundation across the organization. Their commitment and dedication to AEO and our brands have been critical to the success and progress we are seeing. We all believe strongly in the opportunities that lay ahead. As America celebrates 250 years, we are incredibly proud of our permanent place in the fabric of American style.

Speaker #3: We're operating in a dynamic environment, and the retail landscape remains highly fluid. This is why execution matters, and we understand the importance of staying disciplined and flexible.

Speaker #3: We remain fully prepared to utilize the many levers available to us within product sourcing, marketing, and operations to navigate headwinds as a result of macroeconomic uncertainty.

Speaker #3: Finally, I want to thank our associates across the company. We are proud of the work our teams have done to build a stronger and more agile operating foundation across the organization.

Speaker #3: Their commitment and dedication to AEO and our brands have been critical to the success and progress we are seeing. We all believe strongly in the opportunities that lie ahead.

Speaker #3: As America celebrates 250 years, we are incredibly proud of our permanent place in the fabric of American style. We have powerful brands, a solid operating foundation, and a clear pathway to drive profitable growth and deliver long-term value for shareholders.

Jay Schottenstein: We have powerful brands, a solid operating foundation, and a clear pathway to drive profitable growth and deliver long-term value for shareholders. With that, I'll turn the call over to Jen.

Speaker #3: With that, I'll turn the call over to Jack.

Speaker #1: Thank you, Jay, and good afternoon, everyone. Before I get into specifics, I want to acknowledge the incredible performance of the Aerie business and extend my appreciation to the entire team.

Jennifer Foyle: Thank you, Jay. Good afternoon, everyone. Before I get into specifics, I want to acknowledge the incredible performance of the Aerie business and extend my appreciation to the entire team. Surpassing $2 billion in revenue reflects years of discipline, brand building, deep customer connection, and consistent execution. Turning now to the quarter. We are thrilled by the excitement, energy, and customer response to the Aerie and OFFLINE brands. Our results are a direct reflection of when great product, impactful marketing, and aligned sales channels work together seamlessly. Aerie is firing on all cylinders, delivering repeatable growth by aligning seasonal trends with elevated brand visibility, perception, and a more engaged customer base. Aerie saw broad-based strength across key categories, led by a 45% comp in Aerie apparel. A key driver of this success has been a head-to-toe approach across intimates, sleep, and apparel.

Speaker #1: Surpassing $2 billion in revenue reflects years of discipline, brand building, deep customer connection, and consistent execution. Turning now to the quarter, we are thrilled by the excitement, energy, and customer response to the Aerie and Offline brands.

Speaker #1: Our results are a direct reflection of when great product, impactful marketing, and aligned sales channels work together seamlessly. Aerie is firing on all cylinders, delivering repeatable growth by aligning seasonal trends with elevated brand visibility, perception, and a more engaged customer base.

Speaker #1: Aerie saw broad-based strengths across key categories, led by a 45% comp in Aerie apparel. A key driver of the success has been a head-to-toe approach across intimates, sleep, and apparel.

Speaker #1: This cohesive strategy simplifies how customers outfit while increasing basket size and AOV. Intimates delivered a standout quarter with high single-digit comps, anchored by a record-setting performance in our Undies business, where our leadership in cotton fabrication drove an exceptional customer response.

Jennifer Foyle: This cohesive strategy simplifies how customers outfit while increasing basket size and AOV. Intimates delivered a standout quarter with high single-digit comps, anchored by a record-setting performance in our undies business, where our leadership in cotton fabrication drove an exceptional customer response. Sleep also continues to scale rapidly, and we view this category as a long-term engine for top-line growth. We successfully transitioned away from brand-wide promotions to more disciplined, high-margin commercial strategies. This shift was fueled by three key levers: targeted promotions, always-on pricing in key categories, and investments in marketing to acquire and retain high-value customers. This strategy has resulted in improved AURs and product margins. We drove elevated brand visibility through marketing investments, most notably our 100% Aerie Real campaign featuring Pamela Anderson. The campaign builds on our Aerie Real mission to always put inclusivity and authenticity first.

Speaker #1: Sleep also continues to scale rapidly, and we view this category as a long-term engine for top-line growth. We successfully transitioned away from brand-wide promotions to more disciplined, high-margin commercial strategies.

Speaker #1: This shift was fueled by three key levers: targeted promotions, always-on pricing in key categories, and investments in marketing to acquire and retain high-value customers.

Speaker #1: This strategy has resulted in improved AURs and product margins. We drove elevated brand visibility through marketing investments, most notably our 100% Airy Reel campaign featuring Pamela Anderson.

Speaker #1: The campaign builds on our Aerie Real mission to always put inclusivity and authenticity first. This next chapter reinforces Aerie's commitment to transparency and a promise to never use AI-generated bodies or people in our marketing.

Jennifer Foyle: This next chapter reinforces Aerie's commitment to transparency and a promise to never use AI-generated bodies or people in our marketing. The strong emotional connection we have built with our customer community is driving deeper resonance, relevance, and loyalty. Additionally, our new Aerie Realmakers influencer program blew past its 6-month target within weeks, significantly increasing repeat customer engagement. Offline is continuing to prove to be the new breakout brand in our portfolio. We continue to build the Offline community, and customers are responding to new silhouettes, styles, and fabrications. Matching sets and a strong color story through curated drops are driving excitement. Offline is currently the number 2 legging brand within our core demo and is well on its way to becoming its own activewear brand.

Speaker #1: The strong emotional connection we have built with our customer community is driving deeper resonance, relevance, and loyalty. Additionally, our new Airy Reel Makers influencer program blew past its six-month target within weeks, significantly increasing repeat customer engagement.

Speaker #1: OFFLINE is continuing to prove to be the new breakout brand in our portfolio. We continue to build the OFFLINE community, and customers are responding to new silhouettes, styles, and fabrications.

Speaker #1: Matching sets and a strong color story through curated drops are driving excitement. OFFLINE is currently the number two legging brand within our core demo, and it's well on its way to becoming its own activewear brand.

Speaker #1: While we remain encouraged by the momentum at Aerie, we do recognize the environment remains competitive and that sustaining growth at this scale requires continued discipline, innovation, and execution.

Jennifer Foyle: While we remain encouraged by the momentum at Aerie, we do recognize the environment remains competitive, and sustaining growth at this scale requires continued discipline, innovation, and execution. I am confident that our team is ready and able to deliver in all those areas. Now turning to American Eagle. I believe deeply in this brand and its potential. While results were more mixed, we are not satisfied with where the business performed this quarter, especially in women's. We know what needs to be corrected, and the teams are aligned and activated to return AE to growth. Despite a slower start to the year, with revenue down 2% to last year, AE's performance in men's, alongside with women's tees and fashion tops, continues to be highlights again this quarter.

Speaker #1: And I am confident that our team is ready and able to deliver in all those areas. Now, turning to American Eagle, I believe deeply in this brand and its potential.

Speaker #1: While results were more mixed, we are not satisfied with where the business performed this quarter, especially in Women's. We know it needs to be corrected, and the teams are aligned and activated to return AE to growth.

Speaker #1: Despite a slower start to the year, with revenue down 2% to last year, AE’s performance in men's, alongside women’s tees and fashion tops, continues to be a highlight again this quarter.

Speaker #1: We have been dedicated to rebuilding the AE men's business, and our efforts have resulted in its third consecutive quarter of positive growth, with growth across tops and bottoms.

Jennifer Foyle: We have been dedicated to rebuilding the AE men's business, and our efforts have resulted in its third consecutive quarter of positive growth, with growth across tops and bottoms. This reflects the team's efforts to improve product assortments and generate a stronger customer response in key categories. Women's bottoms underperformed our expectations and was the primary driver of AE sales decline. Some of the challenges this quarter reflected the need to distort into specific styles and fits, coupled with a colder spring, which impacted demand in several seasonal wear now categories. That said, we are very focused on the areas within our control and where we need to improve execution and product productivity. As merchants, we move quickly when we see opportunities and when we see misses, and we are already making adjustments.

Speaker #1: This reflects the team's efforts to improve product assortments and generate a stronger customer response in key categories. Women's bottoms underperformed our expectations and were the primary driver of AE sales decline.

Speaker #1: Some of the challenges this quarter reflected the need to distort into specific styles and fits, coupled with a colder spring which impacted demand in several seasonal wear-now categories.

Speaker #1: That said, we are very focused on the areas within our control and where we need to improve execution and product productivity. As merchants, we move quickly when we see opportunities and when we see misses, and we are already making adjustments.

Speaker #1: As we head into the crucial back-to-school season, we are refining our bottoms architecture, specifically optimizing key silhouettes and rises, while leveraging our chase capabilities to inject fresh newness.

Jennifer Foyle: As we head into the crucial back-to-school season, we are refining our bottoms architecture, specifically optimizing key silhouettes and rises while leveraging our chase capabilities to inject fresh newness. At the same time, we are scaling high-demand categories within women's tops to fully maximize ongoing consumer momentum. Looking ahead, we have strong product deliveries and newness on the way for the remainder of the year. I'm also incredibly excited about the new talent in women's merchandising and design as we stack our exceptional existing roster. Building strength across these critical creative and product roles will sharpen our edge as we prepare for AEO's 50th anniversary in 2027. We continue to see strong customer engagement around the AE brand's marketing initiatives and partnerships. The customer file is expanding and is larger than ever at more than 19 million customers, up 3% year over year.

Speaker #1: At the same time, we are scaling high-demand categories within women’s tops to fully maximize ongoing consumer momentum. Looking ahead, we have strong product deliveries and newness on the way for the remainder of the year.

Speaker #1: I'm also incredibly excited about the new talent in women's merchandising and design as we stack our exceptional existing roster. Building strength across these critical creative and product roles will sharpen our edge as we prepare for AEO's 50th anniversary in 2027.

Speaker #1: We continue to see strong customer engagement around the AE brand's marketing initiatives and partnerships. The customer file is expanding and is larger than ever, at more than 19 million customers, up 3% year over year.

Speaker #1: We saw moments of strong engagement throughout the quarter, and we absolutely believe there is continued customer loyalty and love for this iconic brand, reinforcing that American Eagle remains top of mind with our core customers.

Jennifer Foyle: We saw moments of strong engagement through the quarter, and we absolutely believe there is a continued customer loyalty and love for this iconic brand, reinforcing that American Eagle remains top of mind with our core customers. More recently, we introduced our AE creator community and launched a dedicated TikTok shop, which is helping us engage customers in a more relevant and immediate way. We also have a strong pipeline of launches and collaborations that continue to highlight AE, including already announced partnerships with Bubble Skincare and exclusive integration with Prime Video's hit show, "Off Campus." Our strategic marketing investments have driven awareness and consideration, and now we're focused on conversion. As we transition into the summer season, we are encouraged by a recent acceleration in the trend of the business, and we are well positioned to capitalize on the quarter ahead of us.

Speaker #1: More recently, we introduced our AE Creator Community and launched a dedicated TikTok Shop, which is helping us engage customers in a more relevant and immediate way.

Speaker #1: We also have a strong pipeline of launches and collaborations that continue to highlight AE, including already announced partnerships with Bubble Skincare and exclusive integration with Prime Video's hit show Off Campus.

Speaker #1: Our strategic marketing investments have driven awareness and consideration, and now we're focused on conversion. As we transition into the summer season, we are encouraged by a recent acceleration in the trend of the business, and we are well positioned to capitalize on the quarter ahead of us.

Speaker #1: I firmly believe in the power of the AE brand, and our team is highly focused on executing with even greater clarity, speed, and discipline.

Jennifer Foyle: I firmly believe in the power of the AE brand, and our team is highly focused on executing with even greater clarity, speed, and discipline. We are confident that we can capture demand and build momentum as we move throughout this year. As I close, I want to echo what you heard from Jay. There is incredible work happening across this entire AEO organization. Building and growing brands in today's environment requires creativity, resilience, speed, and constant evolution. I am so proud of the passion and commitment our people continue to pour into our brands every single day. I remain deeply confident in the long-term power of American Eagle, Aerie, and Offline. We are staying very close to our customers, moving quickly when we see opportunity, and remaining disciplined in the areas where we need to improve.

Speaker #1: We are confident that we can capture demand and build momentum as we move throughout this year. As I close, I want to echo what you heard from Jay.

Speaker #1: There is incredible work happening across this entire AEO organization. Building and growing brands in today's environment requires creativity, resilience, speed, and constant evolution. I am so proud of the passion and commitment our people continue to pour into our brands every single day.

Speaker #1: I remain deeply confident in the long-term power of American Eagle, Aerie, and Offline. We are staying very close to our customers, moving quickly when we see opportunity, and remaining disciplined in the areas where we need to improve.

Speaker #1: Together, we are actively working to drive healthy, more consistent performance at AEO over time. And with that, I'll turn the call over to Mike.

Jennifer Foyle: Together, we are actively working to drive healthy, more consistent performance at AEO over time. With that, I'll turn the call over to Mike.

Speaker #2: Thanks, Jen, and good afternoon, everyone. Our first quarter results reflect our continuous actions to strengthen our operational foundation and invest in our brand portfolio for long-term value creation.

Mike Mathias: Thanks, Jen, and good afternoon, everyone. Our Q1 results reflect our continuous actions to strengthen our operational foundation and invest in our brand portfolio for long-term value creation. We delivered on our revenue and operating income expectations, driven by the continued outstanding momentum at Aerie and Offline. As Jay and Jen described, we're actioning on the opportunities for improvement within the AE brand performance. We're managing what is in our control with absolute focus, and the business remains structurally resilient. Q1 consolidated revenue of $1.2 billion increased 10% to last year, with comparable sales growing 8%. Aerie's strong business continued with total sales growing by 34% and comparable sales up 25%, with growth across channels. AE total sales declined 2%, with comparable sales also declining 2%. AE brand digital performance was flat, with the comp results driven by a decline in stores.

Speaker #2: We delivered on our revenue and operating income expectations, driven by the continued outstanding momentum at Aerie and Offline. As Jay and Jen described, we're actioning on the opportunities for improvement within the AE brand performance.

Speaker #2: We're managing what is in our control with absolute focus, and the business remains structurally resilient. First quarter consolidated revenue of $1.2 billion increased 10% over last year, with comparable sales growing 8%.

Speaker #2: Aerie's strong business continued, with total sales growing by 34% and comparable sales up 25%, with growth across channels. AE total sales declined 2%, with comparable sales also declining 2%.

Speaker #2: AE brand digital performance was flat, with the comp result driven by a decline in stores. Gross profit dollars of $456 million rose 41% from last year, and gross margin of 38.2% increased 860 basis points.

Mike Mathias: Gross profit dollars of $456 million rose 41% from last year, and gross margin of 38.2% increased 860 basis points. Merchandise margin improved 710 basis points, driven primarily by last year's inventory writedown. Buying occupancy and warehousing expenses leveraged 150 basis points due to positive sales and expense initiatives to control delivery and distribution costs, including benefits from winding down third-party fulfillment operations. SG&A dollars increased 11% as a result of planned investments in advertising. Interest expense increased due to a transaction agreement under which we sold a portion of our tariff claims. Other income increased due to an unrealized gain on investments. Depreciation was flat year over year at $51 million. We recorded a Q1 operating profit of $28 million. The Q1 tax rate was approximately 17%, and EPS was $0.14. Consolidated ending inventory at cost was up 27%, with units up 5%.

Speaker #2: Merchandise margin improved 710 basis points, driven primarily by last year’s inventory write-down. Buying, occupancy, and warehousing expenses leveraged 150 basis points due to positive sales and expense initiatives to control delivery and distribution costs, including benefits from winding down third-party fulfillment operations.

Speaker #2: SG&A dollars increased 11% as a result of planned investments in advertising. Interest expense increased due to a transaction agreement under which we sold a portion of our tariff claims.

Speaker #2: Another income increase was due to an unrealized gain on investments. Depreciation was flat year over year at $51 million. We recorded a first quarter operating profit of $28 million.

Speaker #2: The first quarter tax rate was approximately 17%, and EPS was $0.14. Consolidated ending inventory at cost was up 27%, with units up 5%.

Speaker #2: The increase in cost in relation to units reflects the impact of incremental tariffs this year and the comparison to the inventory write-down taken in Q1 of last year.

Mike Mathias: The increase in cost in relation to units reflects the impact of incremental tariffs this year and the comparison to the inventory writedown taken in Q1 of last year. In the Q1, as Jay noted, we continued to make long-term investments in our business while returning cash to shareholders. Q1 CapEx totaled $61 million, and the company returned $74 million to shareholders during the quarter, $21 million via the quarterly dividend and $53 million via repurchasing 3 million shares. We ended the quarter with $103 million in cash and approximately $620 million of total liquidity, including our revolver. Now turning to our outlook. For the Q2, we expect comparable sales growth in the mid- to high-single digits, with Aerie and Offline continuing in the high teens to low 20s, and American Eagle in the flat to negative low single-digit range.

Speaker #2: In the first quarter, as Jay noted, we continued to make long-term investments in our business while returning cash to shareholders. First quarter CapEx totaled $61 million, and the company returned $74 million to shareholders during the quarter.

Speaker #2: We returned $21 million via the quarterly dividend and $53 million through the repurchase of 3 million shares. We ended the quarter with $103 million in cash and approximately $620 million of total liquidity, including our revolver.

Speaker #2: Now turning to our outlook. For the second quarter, we expect comparable sales growth in the mid- to high-single digits, with Aerie and Offline continuing in the high teens to low 20s, and American Eagle in the flat to negative low-single-digit range.

Speaker #2: Our operating income expectation is in the range of $45 to $50 million, which includes a $20 million incremental tariff headwind versus last year. SG&A is in the mid-teens, driven primarily by continued investment in advertising, as previously discussed.

Mike Mathias: Our operating income expectation is in the range of $45 to 50 million, which includes a $20 million incremental tariff headwind versus last year, and SG&A up in the mid-teens, driven primarily by continued investment in advertising, as previously discussed. The tariff rate on imports is planned at 10% for the Q2, and the balance of the year is planned at 15%. We've applied for roughly $190 million in tariff refunds and anticipate a $140 million net cash benefit. However, it's not included in our guidance, with a significant portion still outstanding. 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. In the H2 of the year, we will cycle tariffs and investments in advertising, which begin mid-year 2025.

Speaker #2: The tariff rate on imports is planned at 10% for the second quarter, and for the balance of the year it's planned at 15%. We've applied for roughly $190 million in tariff refunds and anticipate a $140 million net cash benefit.

Speaker #2: However, it's not included in our guidance, with a significant portion still outstanding. For the full year, we expect operating profit in the range of $390 million to $410 million, based on consolidated comparable sales growth in the mid-single digits.

Speaker #2: In the second half of the year, we will cycle tariffs and investments in advertising, which began mid-year 2025. We expect CapEx to remain in the range of $250 to $260 million, as previously guided.

Mike Mathias: We expect CapEx to remain in the range of $250 to $260 million, as previously guided. To wrap up our prepared remarks, the year is off to a solid start with strength across the majority of our portfolio. The teams have taken actions to capture opportunities where we see them. We'll continue to manage with discipline, reallocating investment across the portfolio to create value. We'll continue to control what we can control in what is still a complicated and evolving macro environment. With that, we'll open it up for questions.

Speaker #2: To wrap up our prepared remarks, the year is off to a solid start with strength across the majority of our portfolio. The teams have taken actions to capture opportunities where we see them.

Speaker #2: We'll continue to manage with discipline, reallocating investment across the portfolio to create value. We'll continue to control what we can control in what is still a complicated and evolving macro environment.

Speaker #2: And with that, we'll open it up for questions.

Speaker #1: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, and then two. Please limit yourself to one question. At this time, we'll pause momentarily to assemble a roster. And the first question will come from Jay Sole with UBS. Please go ahead.

Speaker #1: To withdraw your question, please press star, and then 2. Please limit yourself to one question. At this time, we'll pause momentarily to assemble a roster.

Speaker #1: And the first question will come from Jay Sole with UBS. Please go ahead.

Speaker #3: Great. Thank you so much. Maybe I'd love to dig into the American Eagle women's business. Jen, you know, you talked about how women's tees and fashion tops are good.

Jay Sole: Great. Thank you so much. Maybe I'd love to dig into the American Eagle women's business. Jen, you know you talked about how women's tees and fashion tops are good, but women's bottoms is weak. Can you give us a little bit more color here? Like, what were some of the styles that maybe you need to lean into a little bit more? Last year when there were issues the H1 of the year, you corrected them real quick and back to school ended up being really strong. It sounded like you're saying you're refining your bottoms architecture for back to school. Do you think you can, you know, get that comp trend to inflect, you know, by the time we get to back to school? A little bit more color there would be super helpful. Thank you.

Speaker #3: But women's bottoms is weak. Can you just give us a little bit more color here? What were some of the styles that maybe you need to lean into a little bit more?

Speaker #3: And last year, when there were issues in the first half of the year, you corrected them real quick, and back-to-school ended up being really strong.

Speaker #3: It sounded like you're saying you're refining your bottoms architecture for back-to-school. Do you think you can get that comp trend to inflect by the time we get to back-to-school?

Speaker #3: A little bit more color there would be super helpful. Thank you.

Speaker #4: Absolutely. Yeah, we're really pleased with the fashion business. We've been really working hard in tops and tees, with exceptional run rates there, but not enough to offset a highly focused and concentrated area that we need to turn around and engage in.

Jennifer Foyle: Absolutely. Yeah, we're really pleased with the fashion business. We've been really working hard in tops and tees, and exceptional run rates there, but not enough to offset a highly focused and concentrated area that we need to turn around and engage in. The team has already pivoted. In fact, more recently, we've seen some more positive results in the denim side of the business. We are 100% focused there. We know where the problem is. We are going to pivot, and we've already done testing for back to school. We know what rises are working, we know what fits are working, and we're excited to enter into our Super Bowl, which is, as you know, Q3 is when we lead in denim, and it was just highly focused there. That's all I can say.

Speaker #4: And the team has already pivoted. In fact, more recently, we've seen some more positive results on the denim side of the business, and we are 100% focused there.

Speaker #4: We know where the problem is. We are going to pivot. And we've already done testing for back-to-school. We know what rises are working.

Speaker #4: We know what fits are working, and we're excited to enter into our Super Bowl, which is, as you know, Q3 is when we lead in denim.

Speaker #4: And it was just highly focused there. That's all I can say. And like I said, the more recent results are proving well for us.

Jennifer Foyle: Like I said, the more recent results are proving well for us and excited to see what's to come.

Speaker #4: And excited to see what’s to come.

Speaker #3: All right. Thank you so much.

Jay Sole: All right. Thank you so much.

Speaker #1: The next question will come from Marnie Shapiro with Retail Tracker. Please go ahead.

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

Speaker #5: Hey, guys. Congratulations on Aerie. It just looks great. I was curious if we can dive into it a little bit there. Is the traffic or the sales being driven by lapsed shoppers, new shoppers, or are people just buying more when they come into the store?

Marni Shapiro: Hey, guys. Congratulations on Aerie. The stores look great. I was curious if we can dive in just a little bit there. Is the traffic or the sales being driven by lapsed shoppers, new shoppers, or are people just buying more when they come into the store?

Jennifer Foyle: All of the above, Marni. It's really, we are striking on all chords. Honestly, we really hit a home run here. I just want to give kudos to the team. Last year at this time, as you know, we really had to pivot and turn this business around. Certainly, as we entered into Q3 and Q4, we really led the way here. This brand looks great, Marni, and the customer engagement is unbelievable. Our brand awareness is up over double digits. That was something that we spoke to on some prior calls. Just all product categories are working. It's just our head-to-toe outfitting. They're engaged in our outfitting. We really are set up to win. I don't know if you've been to the store, but if you look at it's just really a mix and match environment. It's like a candy shop.

Speaker #4: All of the above. Marnie, it's really—we are striking on all chords. Honestly, we really hit a home run here. And I just want to give kudos to the team last year at this time.

Speaker #4: As you know, we really had to pivot and turn this business around. And certainly, as we entered into Q3 and Q4, we really led the way here.

Speaker #4: This brand looks great, Marnie. And the customer engagement is unbelievable. Our brand awareness is up over double digits. That was something that we spoke to on some prior calls.

Speaker #4: And just all product categories are working. It's just our head-to-toe outfitting. They're engaged in our outfitting. They know what we really are set up to win.

Speaker #4: I mean, I don't know if you've been to the store, but if you look at it, it's just really a mix-and-match environment.

Speaker #4: It's like a candy shop. That's what I say every time I go into the store. It's exciting to see, and we're just highly focused on those wins.

Jennifer Foyle: That's what I say every time I go into the store. It's exciting to see, and we're just highly focused on those wins and how we're going to enter into back to school. I'm really excited what I'm seeing. The marketing gets better with age. The team never ceases to fail me. Every time I look at what's coming next, I can't believe that it even looks better than the last. As you know, our winning formula is our customer base. They believe in our platform, REAL. We launched 100% Aerie Real, and they love this campaign. We took a stance on AI, not airbrushing our models or using AI to manipulate our imagery, and it is resonating. I'm excited to see what's to come here. We have more categories coming your way, new categories.

Speaker #4: And how we're going to enter into back to school. And I'm really excited. What I'm seeing—the marketing gets better with age. The team, they never cease to fail me.

Speaker #4: I mean, every time I look at what's coming next, I can't believe that it even looks better than the last. So our winning former, as you know, our winning formula is our customer base.

Speaker #4: They believe in our platform—real. We launched 100% real, and they love this campaign. We took a stance on AI, not airbrushing our models or using AI.

Speaker #4: To manipulate our imagery, and it is resonating. So I'm excited to see what's to come here. We have more categories coming your way—new categories.

Speaker #4: We're testing out a lot of new ideas. And yeah, we're just going to keep this momentum going.

Jennifer Foyle: We're testing into a lot of new ideas and yeah, we're just going to keep this momentum going.

Speaker #3: And Marnie, just to riff on your metrics perspective and add on to what Jen said, it's traffic, it's conversion, it's AUR, it's AOV, it's existing customers.

Mike Mathias: Marni, just from a pure metrics perspective, just to add on to what Jen said, it's traffic, it's conversion, it's AUR, it's AOV, it's existing customers, it's new customers. That all the above comment is all the metrics are green across the board on that front.

Speaker #3: It's new customers. So all of the above comments are—all the metrics are green across the board on that front.

Marni Shapiro: That's fantastic. Best of luck. I'll leave it to somebody else, but Jen, the low-rise drapey jeans that are in American Eagle right now with the orange flowers on them, you need like-

Speaker #5: That's fantastic. Best of luck. I'll leave it to somebody else. But Jen, the low-rise drapey jeans that are in American Eagle right now with the orange flowers on them, you need like 200 more pairs per store.

Jennifer Foyle: Cute.

Marni Shapiro: 200 more pair per store. Thank you, guys. Goodbye.

Speaker #5: Thank you guys. Goodbye.

Speaker #4: Thank you.

Jennifer Foyle: Thank you.

Speaker #1: The next question will come from Matthew Boss with JPMorgan. Please go ahead.

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

Speaker #3: Great, thanks. So at Aerie, Jen, could you speak to new customer acquisition that you’re seeing with three consecutive comps now of double digits? And just the opportunity that you see for incremental market share from here.

Matthew Boss: Great, thanks. At Aerie, Jen, could you speak to new customer acquisition that you're seeing with three consecutive comps now of double digits, and just opportunity that you see for incremental market share from here. Mike, could you elaborate on the drivers of gross margin contraction in Q2, if we're thinking about markdowns, freight, and tariffs, and just puts and takes to consider in H2?

Speaker #3: And then, Mike, could you elaborate on the drivers of gross margin contraction in the second quarter, if we're thinking about markdowns, freight, and tariffs?

Speaker #3: And just puts and takes to consider in the back half of the year.

Speaker #6: Yeah, I can start with that gross margin question, Matt. So for the second quarter—yeah, I think when you think about the second quarter and what we're up against last year—last year, we were at a pretty healthy, kind of good rate relative to history.

Mike Mathias: Yeah, I can start with that gross margin question, Matt. For Q2, yeah, I think when you think about Q2, what we're up against last year. Last year, we were a pretty healthy, kind of good rate of history with the write-down and the kind of pull forward of markdowns that we executed in Q1 last year. This year, with the tariff assumption we're using, it's somewhere between 150 basis points to 200 basis points of tariff impact in the quarter still for Q2, up against no impact last year. The expenses and gross margin on the kind of mid-to-high single-digit revenue guide, we do expect those BOW expenses and gross margin to leverage again in Q2. That's a positive side. Tariffs, again, being a 150 to 200 basis point impact headwind.

Speaker #6: With the write-down and the kind of pull-forward of markdowns that we executed in the first quarter last year, this year, with the tariff assumption we're using, it's somewhere between 150 basis points to 200 basis points of tariff impact in the quarter still for Q2, against no impact last year.

Speaker #6: And we are, and the expenses in gross margin, on the kind of mid- to high-single-digit revenue guide, we do expect those BOW expenses and gross margin to leverage again in the second quarter.

Speaker #6: So that's a positive side. Tariffs, again, being a 150 to 200 basis point impact—headwind. And then we are accounting for, in the guide, some expectation for some needed AE brand markdowns, just to ensure clearance inventory at the end of the quarter is in an optimal position as we head into that back-to-school Super Bowl period, as Jen likes to describe it.

Mike Mathias: We are accounting for in the guide some expectation for some needed AE brand markdowns just to ensure clearance inventory at the end of the quarter is in the optimal position as we head into that back to school Super Bowl period, as Jen likes to describe it. Those are your puts and takes in terms of gross margin. Some headwind in tariffs, a little bit of markdown pressure in AE to get clean for back to school, and then expense leverage to the good side.

Speaker #6: So those are your puts and takes in terms of gross margin: some headwind in tariffs, a little bit of markdown pressure in AE to get cleaned for back-to-school.

Speaker #6: And then, expense leverage to the good side.

Speaker #4: And our new customer acquisitions are up roughly 1 million, which is incredible. And the beauty of Aerie is—well, we just mentioned it—not only are our new customer acquisitions up, our retained customers are up.

Jennifer Foyle: Our new customer acquisitions up roughly 1 million, which is incredible. The beauty of Aerie is, well, we just mentioned it. Not only is our new customer acquisitions up, our retained customers are up. They're staying with us. We remain very sticky. Again, it just goes back to our platform. Our emotional connection, it just drives. It's unbelievable, this community. I didn't mention, but we have a new influencer program that actually hit it out of the ballpark. We beat our expectations 3 weeks in, this is really hitting home with this community of ours. We're just going to continue to build on that success.

Speaker #4: They're staying with us. We remain very sticky. And again, it just goes back to our platform—our emotional connection, it just drives, it's unbelievable.

Speaker #4: This community. And I didn't mention, but we have a new influencer program that actually hit it out of the ballpark. We beat our expectations three weeks in.

Speaker #4: And this is really hitting home with this community of ours, so we're just going to continue to build on that success.

Speaker #6: And then, Matt, just to jump back in on the back half gross margin—just to give you some of the flavor or some more detail to the guide.

Mike Mathias: Matt, just to jump back in on the back half gross margin, just to give you the flavor there, some more detail to the guide. Starting with that mid-single digit comp expectation across the portfolio. As everybody knows, we'll be lapping tariffs in the back half. It becomes apples to apples. The reason that 15% assumption for tariffs in the back half. There's some favorability to our original guide there, which we were thinking about IEEPA tariff rates still at the same time or with our original guide back in March. We did have built in a little bit of expectation into our plans for some potential freight, ocean air freight rates pressure.

Speaker #6: Starting with that mid-single-digit comp expectation across the portfolio—as you know, everybody knows—we'll be lapping tariffs in the back half, so it becomes apples to apples.

Speaker #6: The reason for that 15% assumption for tariffs in the back half is that there's some favorability to our original guide there, when we were thinking about AIPA tariff rates at the same time as our original guide back in March.

Speaker #6: But we did have built in a little bit of expectation into our plans for some potential pressure on ocean and air freight rates. So that's kind of a wash between the tariff assumptions and that placeholder for freight.

Mike Mathias: Kind of a wash between the tariff assumptions and that placeholder for freight, and we'll see how that all pans out here as we pass towards the H2 of the year. Product margin in total, we're expecting to get some benefit across the brands and across the portfolio. EOW expense leverage and gross margin kind of relatively flat, maybe a bit of leverage. Gross margin in total, then we're expecting expansion. We're expecting improvement in the H2. If you think about our full year guide, then H1, H2, we're positioned at that mid-single digit to get back to operating rate improvement.

Speaker #6: And we'll see how that all pans out here as we pass toward the back half of the year. Product margin and total—we're expecting some benefit across the brands and across the portfolio.

Speaker #6: And at the end—so in BOW, expense leverage and gross margin, kind of relatively flat, maybe a bit of leverage. So, at the end, of the gross margin and total then, we're expecting expansion.

Speaker #6: We're expecting improvement in the back half. And if you think about our full-year guide—then, kind of first half, back half—we're positioned at that mid-single-digit to get back to operating rate improvement.

Speaker #6: So, income is growing ahead of revenue, and operating rates are improving. That would be our expectation as we lap tariffs, lap the advertising investments, and rebalance those investments.

Mike Mathias: Income growing ahead of revenue, improving operating rates, that would be our expectation as we lap tariffs, lap the advertising investments, rebalance those investments, set up advertising to leverage then in H2 really on any revenue growth as the $ are planned relatively flat. We'll get back to, again, implied in the guide is almost a double-digit income expectation for H2 on the mid-single digit revenue.

Speaker #6: Set up advertising to leverage, then in the back half really rely on any revenue growth as the dollars are playing relatively flat. We'll get back to—again, implied in the guide is almost a double-digit income expectation for the back half on the mid-single-digit revenue.

Speaker #3: Helpful color. Best of luck.

Matthew Boss: Helpful color. Best of luck.

Speaker #6: Thanks, Matt.

Speaker #4: Thank you.

Mike Mathias: Thanks.

Mike Mathias: Thank you.

Speaker #1: The next question will come from Dana Telsey with Telsey Advisory Group. Please go ahead.

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

Speaker #5: Hi. Good afternoon, everyone. As you think about your guide for the second quarter, do you expect a similar breakdown between the brands, or with the second quarter being the beginning of back-to-school, should we expect to see any uptick in Aerie?

Dana Telsey: Hi. Good afternoon, everyone. As you think about your guide for Q2, do you expect a similar breakdown between the brands? With Q2, the beginning of back to school, should we expect to see any uptick in Aerie? In American Eagle, I mean. Aerie, 25% is amazing. Jen, as you think about the other product categories beyond bottoms at American Eagle, what are you seeing and how do you see the women's business doing? Just lastly, on stores, store closures for American Eagle, where are you and where are you in the refreshes and how are they performing? Thank you.

Speaker #5: In American Eagle—I mean, Aerie—25% is amazing. And then, Jen, as you think about the other product categories beyond bottoms at American Eagle, what are you seeing, and how do you see the women’s business doing?

Speaker #5: And then just lastly, on stores and store closures for American Eagle, where are you, and where are you in the refreshes, and how are they performing?

Speaker #5: Thank you.

Speaker #6: I can start, Dana. I'll start with actually the last part of that first—I'll work backwards. So, store closures: we're still expecting a net 20 to 25, around 25 closures in the AE brand for the year.

Mike Mathias: I can start, Dana. I'll start with actually the last part of that first, I'll work backwards. Store closures, we're still expecting a net 20 to 25, around 25 closures in the AE brand for the year. On the opening side, about 40 Aerie and OFFLINE openings. The remodel program for AE, around 80, could be north of 80 projects there. That's still being a refined number. That'll get us almost to the end of that maybe one more year of remodel program for the AE brand on that front. Your Q2 guide for sales. We talked about Aerie continuing this tremendous momentum at a high teen to 20% clip, which would be a tremendous outcome again, but I think could be some upside to that. We'll keep an eye on that. On the American Eagle brand, we said flat to down low single.

Speaker #6: On the opening side, about 40 AE and offline openings. And then the remodel program for AE, around 80—could be north of 80—projects there; that's still being a refined number.

Speaker #6: But that'll get us almost to the end of that—maybe one more year of kind of remodel program for the AE brand on that front.

Speaker #6: Your Q2 guide for sales—we talked about Aerie continuing this tremendous momentum at a high-teens to 20% clip, which would be a tremendous outcome again, but I think there could be some upside to that.

Speaker #6: We'll keep an eye on that. On the American Eagle brand, we said flat to down low single digits in the guides. It's really pretty consistent with what we're seeing to date.

Mike Mathias: The guides is really pretty consistent with what we're seeing May to date. As I think we said in our prepared remarks, the first couple weeks of May were a little tougher, almost continuing a couple tougher weeks in the back half of April. These last two weeks of May have been really encouraging, week going into Memorial Day and now on the back end of Memorial Day being still consistent with the uptick in trends. The mix of the brands is sort of flat to slightly down in AE and high teens to 20% in Aerie. That gets you to your mid to high single digits. Could be some play really in either brand in terms of how things continue in June and July.

Speaker #6: But, as I think we said in our prepared remarks, the first couple of weeks of May were a little tougher, almost continuing a couple of tougher weeks in the back half of April.

Speaker #6: But these last two weeks of May have been really encouraging kind of week going into Memorial Day and now on the back end of Memorial Day.

Speaker #6: Still consistent with an uptick in trend. So the mix of the brands is sort of flat to slightly down in AE. And high teens to 20% in Airy.

Speaker #6: That gets you to your mid to high single digits. Could be some play really in either brand in terms of how things continue in June and July.

Speaker #4: Yeah, and just piggybacking off of what Mike just said, more recently we've seen a turnaround in women's. We still have the rest of this quarter to go.

Jennifer Foyle: Yeah. Just benching off of what Mike just said, more recently, we've seen a turnaround in women's. We still have the rest of this quarter to go, but some near-in learnings that we're certainly applying for back to school. We did have other bottom categories that were highly successful. We just didn't have enough distortion in them. You'll be seeing some of those other categories, not just denim, but newness in other categories and penetrated higher as we go into back to school. Of course, we believe in our denim testing. We do it very well, and we think we have the right fits and silos for back to school. You're going to see more excitement in denim, ranking some fashion silhouettes into our top 10. Really a lot of excitement there. Marni, we have more excitement for you.

Speaker #4: But some near-end learnings that we're certainly applying for back to school. We did have other bottom categories that were highly successful; we just didn't have enough distortion in them.

Speaker #4: So you'll be seeing some of those other categories not just denim, but newness in other categories as we and penetrated higher as we go into back to school.

Speaker #4: And then, of course, we believe in our denim testing. We do it very well, and we think we have the right fits and silos for back-to-school.

Speaker #4: You're going to see more excitement in denim. Ranking some fashion silhouettes into our top 10. Really a lot of excitement there. So Marnie, we have more excitement for you.

Speaker #4: But we're very excited about the denim assortment, shorts have turned on for us. They were slow. Definitely slow, but going into Memorial Day weekend, even with the colder climates, shorts had a huge turnaround for us.

Jennifer Foyle: We're very excited about the denim assortment. Shorts have turned on for us. They were slow, definitely slow, but going into Memorial Day weekend, even with the colder climates, shorts had a huge turnaround for us. Look, we have weeks to go here, and then of course, our big, as I say again, our Super Bowl is our back to school. I think the teams are armed and ready. All of this fashion that's working, we've chased back into. We can execute very swiftly on cut and sew T-shirts, bare knits, and the team's done a great job getting us back into what's working.

Speaker #4: So look, we have weeks to go here. And then, of course, our big—as I say again—our Super Bowl is our back-to-school.

Speaker #4: And I think the teams are armed and ready. All of this fashion that’s working, we've chased back into. We can execute very swiftly on cut and sew, T-shirts, bare knits.

Speaker #4: And the team's done a great job getting us back into what's working.

Speaker #5: Thank you.

Speaker #1: The next question will come from Adrian Yee with Barclays. Please go ahead.

Dana Telsey: Thank you.

Operator: The next question will come from Adrienne Yih with Barclays. Please go ahead.

Speaker #3: Hi, this is Angus on for Adrian Yee. Thanks for taking our question. You mentioned improving conversion as a key opportunity at AE. Can you just unpack where you're seeing the biggest gap today, whether that's stores versus digital?

Angus: Hi, this is Angus on for AD. Thanks for taking our question. You mentioned improving conversion as a key opportunity at AE. Can you just unpack where you're seeing the biggest gap today, whether that's stores versus digital, and what specific actions you're taking to close that gap near term? My follow-up is on inventory. Dollars are up meaningfully versus units. Can you help us understand how much of that is mix versus tariffs? I'm sure it's mostly tariffs, just how comfortable you feel with inventory positioning into H2. Thank you very much.

Angus Kelleher-Ferguson: Hi, this is Angus on for AD. Thanks for taking our question. You mentioned improving conversion as a key opportunity at AE. Can you just unpack where you're seeing the biggest gap today, whether that's stores versus digital, and what specific actions you're taking to close that gap near term? My follow-up is on inventory. Dollars are up meaningfully versus units. Can you help us understand how much of that is mix versus tariffs? I'm sure it's mostly tariffs, just how comfortable you feel with inventory positioning into H2. Thank you very much.

Speaker #3: And what specific actions are you taking to close that gap in the near term? And then my follow-up is on inventory. Dollars are up meaningfully versus units.

Speaker #3: Can you help us understand how much of that is mix versus tariffs? I'm sure it's mostly tariffs, but just how comfortable do you feel with inventory positioning going into the back half?

Speaker #3: Thank you very much.

Speaker #4: Yeah. Sure. It was more I would say we leaned into where we had some conversion opportunity were definitely stores. And again, like I said, more recently, we've seen the digital channel really have an incredible uptick for the AE business.

Jennifer Foyle: Yeah, sure. It was more, I would say, we leaned into where we had some conversion opportunity were definitely stores. Again, like I said, more recently, we've seen the digital channel really have an incredible uptick for the AE business. What we've been doing is doing, again, testing, by store grade, by groups, seeing the price-value quality equation, where it's working for us, where we can compete. We've had some really good results from some stores, and we applied them more recently, and we've seen some wins. Again, we continually look at for these golden nuggets to turn the business around, and I think we've seen some of that, these green shoots, and we're certainly going to apply those learnings.

Speaker #4: So what we've been doing is, again, testing by store grade, by groups, seeing the price-value quality equation—where it's working for us, where we can compete—and we've had some really good results from some stores.

Speaker #4: And we applied them more recently. And we've seen some wins. So again, we continually look at for these golden nuggets, to turn the business around.

Speaker #4: And I think we've seen some of that. These green shoots. And we're certainly going to apply those learnings.

Speaker #6: And then on inventory, yeah, we're in a good position at the end of the quarter. I'll start with the units—up 5% in relation to our kind of ACOMP and 10% total revenue.

Mike Mathias: On inventory, yeah, we're in a good position at the end of the quarter. I'll start with the units up 5 in relation to our kind of AE comp and 10% total revenue. Up 27 in cost and as I said in my prepared remarks there, that the impact of tariffs, to your point, is the biggest impact differential between the units and cost dollars. With the write-down last year that we took, normalizing for those two things, our cost dollars would be up more in the high single-digit range. A couple of reconciling items, picture 27 to up high single with units up 5.

Speaker #6: Up 27 in cost. And as I said in my prepared remarks, the impact of tariffs, to your point, is the biggest impact differential between those units and cost dollars.

Speaker #6: And then, with the write-down last year that we took, normalizing for those two things, our cost dollars would be up more in the high single-digit range.

Speaker #6: So, a couple of reconciling items: picture 27 to high single, with units up five.

Speaker #3: Great. Thank you.

Speaker #1: The next question will come from Jonah Kim with TD Cowen. Please go ahead.

Angus: Great. Thank you.

Angus Kelleher-Ferguson: Great. Thank you.

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

Speaker #5: Hi, thank you for taking my question. Just one on marketing—how are you allocating the marketing spend across Aerie and Eagle? I’d just love a breakdown there.

Jonna Kim: Hi. Thank you for taking my question. Just one on marketing. How are you allocating the marketing spend across Aerie and Eagle? Just would love the breakdown there. Then the second question, how are you thinking about comping the comps with just Aerie being so strong and posting really good results in H2? What are key strategies around comping the comps there? Thank you so much.

Speaker #5: And then, just a second question: how are you thinking about comping the comp, with just Aerie being so strong and posting really good results in the second half?

Speaker #5: What are the key strategies around comping the comp there? Thank you so much.

Speaker #4: Of course. Look, this is what Aerie does best. I do want to remind you, we grew the business $1 billion in five years.

Jennifer Foyle: Of course. Look, this is what Aerie does best. I do want to remind you, we grew the business $1 billion in five years. I think that's a record number. I'm certainly impressed with this team and how we continue to look at opportunities on how to comp our business. I remember maybe one, maybe two quarters where we saw some softness. This business has been unbelievable year over year, and we're constantly challenging ourselves. You're only as good as yesterday, and that's how we think about the business every day. We have to have better product, better marketing, better campaigns, quality. That's what this whole company, all of our brands. We continually focus on quality and how we can compete on our terms, and Aerie does it impeccably well.

Speaker #4: I mean, I think that's a record number. I'm certainly impressed with this team. And how we continually look at opportunities on how to comp our business.

Speaker #4: I remember maybe one, maybe two quarters where we saw some softness. This business has been unbelievable year over year. And we're constantly challenging ourselves.

Speaker #4: You're only as good as yesterday. And that's how we think about the business every day. We have to have better product, better marketing, better campaigns.

Speaker #4: Quality—that's what this whole company, I mean all of our brands, is about. We continually focus on quality and how we can compete on our terms. And Aerie does it impeccably well.

Speaker #4: And we have some room to grow on the AE side. But I think the teams leaned in. And the Airy team feels very good about what we're going up against.

Jennifer Foyle: We have some room to grow on the AE side, but I think the team's leaned in, and the Aerie team feels very good about what we're going up against.

Speaker #6: On the advertising front, spend is up across both brands. Airy more commensurate with the sales increase. So as we're the sales are up 30%.

Mike Mathias: On the advertising front, spend is up across both brands. Aerie more commensurate with the sales increase. As the sales are up 30% and in our forward plans within our guidance, advertising is up in relation to that. A little ahead of sales to fuel, obviously, this pretty tremendous trend. Very good flow through on that investment. As we've been talking about now for 3 quarters and into Q2, this incremental investment in AE, and Jen highlighted the benefits of customer file consideration, propensity to spend.

Speaker #6: And in our forward plans within our guidance, advertising is up in relation to that—a little ahead of sales, just to fuel, obviously, this pretty tremendous trend.

Speaker #6: So, very good follow-through on that investment. As we've been talking about now for three quarters and into the second quarter, this incremental investment in AE that Jen highlighted: the benefits of customer file consideration, and potential to spend.

Speaker #6: The teams are doing a lot of evaluation, surveys, etc. on the effectiveness of this, not just from a quantitative perspective every day, but what we think those metrics could lead to here for the rest of the summer, but especially in the back to school and the back half of the year in terms of customer file growth.

Mike Mathias: The teams are doing a lot of evaluation, surveys, et cetera, on the effectiveness of this, not just from a quantitative perspective every day, but what we think those metrics could lead to here for the rest of the summer, but especially in the back to school and the H2 in terms of customer file growth and that consideration score elevating with the marketing campaigns that we've been investing in. The Q2 here is the last quarter of kind of incrementality on that spend. We get into the Q3 and Q4 and total spend across the company is relatively flat for the H2. On the sales guide, advertising is set up to leverage for the rest of the year.

Speaker #6: And that consideration score is elevating with the marketing campaigns that we've been investing in. The second quarter here is the last quarter of kind of incrementality on that spend.

Speaker #6: We get into the third and fourth quarter, and total spend across the company is relatively flat for the back half. So, on the sales guide, advertising is set up to leverage for the rest of the year.

Speaker #6: And we are rebalancing then a little between brands in the back half, but then definitely in terms of how we're spending the dollars. And Jen mentioned the shift to conversion.

Mike Mathias: We are rebalancing then a little between brands in H2, but then definitely in terms of how we're spending the dollars. Jen mentioned the shift to conversion. A lot of what we've been doing is these bigger campaigns, the Sydney Sweeney campaign, the Stagecoach stuff in Q1 with Ella Langley and Bailey Zimmerman. We have Lamine Yamal coming as well, as Jen talked about in her remarks. The H2 spend is more weighted toward digital media, performance marketing, influencer spend, and more day-to-day traffic driving elements. I think that's where the conversion will play in too, because that traffic has a higher propensity to convert.

Speaker #6: So a lot of what we've been doing is these bigger campaigns, the Sydney-Sweeney campaign, the stage coach up in the first quarter with Ella Langley and Bailey Zimmerman.

Speaker #6: We have Lamine Yamal coming as well. As Jen talked about in her remarks, and but the back half spend is more weighted toward digital media, performance marketing, influencer, and influencer spend, more day-to-day traffic driving elements.

Speaker #6: So I think that's where the conversion will play into because that traffic has a higher propensity to convert. So we are rebalancing kind of how those dollars will be spent in the starting really in the third quarter.

Mike Mathias: We are rebalancing how those dollars will be spent starting really in Q3, which we feel is going to set us up for success and be able to hit the revenue expectations that we have for ourselves in H2.

Speaker #6: Which we feel is going to set us up for success and allow us to hit the revenue expectations that we have for ourselves in the back half.

Speaker #5: Got it. Thank you.

Speaker #1: The next question will come from Rick Patel with Raymond James. Please go ahead.

Jonna Kim: All right. Thank you.

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

Speaker #7: Thank you. Good afternoon. It looks like you're planning SG&A growth to be up high single digits for the year versus up mid-single digits three months ago.

Rick Patel: Thank you. Good afternoon. It looks like you're planning SG&A growth to be up high single digits for the year versus up mid single digits 3 months ago. Can you unpack that for us? Is that all marketing or are there other factors at play? Secondly, can you provide additional color on the marketing campaign that you have planned into back to school and the potential for new brand ambassadors as we think about the back half?

Speaker #7: Can you unpack that for us? Is that all marketing or are there other factors at play? And then secondly, can you provide additional color on the marketing campaigns that you have planned into back to school and the potential for new brand ambassadors as we think about the back half?

Speaker #6: Yeah, thanks, Rick. The SG&A result for the year—you've got the 11% increase in Q1. You're guiding mid-teens here for the second quarter. The whole first half of the year is mostly, really, all driven for the most part by the incremental advertising investment.

Mike Mathias: Thanks, Rick. The SG&A result for the year, you've got the 11% increase in Q1. We're guiding mid-teens here for Q2. The whole H1 here is mostly really all driven, for the most part, by the incremental advertising investment. H2 SG&A is really actually in line with sales. As we talk about a mid-single-digit comp and mid to high single digit total revenue, total SG&A is right now pretty much in line with revenue. We'll leverage the advertising line as we anniversary that spend. We have a little bit of compensation that comes into play with a little lower than average incentive accruals last year. Nothing extraordinary, really the combination of those two factors has SG&A in H2 up again, commensurate with that revenue guide.

Speaker #6: Back half SG&A is really actually in line with sales. So, as we talk about a mid-single-digit comp and kind of mid- to high-single-digit total revenue, then total SG&A is right now pretty much in line with revenue.

Speaker #6: We will leverage the advertising line as we anniversary that spend. We have a couple a little bit of compensation that comes into play with a little lower than average incentive accruals last year.

Speaker #6: Nothing extraordinary, but really the combination of those two factors has SG&A in the back half up again, kind of commensurate with that revenue guide.

Speaker #6: More work happening there on all compensation lines, services, travel, usual suspects to find some more efficiencies in that number. But to hopefully exceed that guide, network continues like it has been for the last three years.

Mike Mathias: More work happening there on all compensation lines, services, travel, and usual suspects to find some more efficiencies in that number, to hopefully exceed that guide. That work continues like it has been for the last 3 years. It's a good position to be in at the moment. Yes, your total year between the H1 being up in the teens, H2 being up more like in that commensurate with sales level, you get to roughly about a 10% increase in SG&A in this guide. Looking forward to next year, we'll talk about that later, but work continues on the expense lines. Advertising is not planned to be up in the H1. We're going to manage it the same way we're talking about here in the Q3 and Q4. We'll provide more color on next year, much later this year.

Speaker #6: But it's a good position to be in at the moment. And then, yes, your total year—between that, the first half being up in the teens, the back half being up more in line with the sales level—you get to roughly about a 10% kind of increase in SG&A in this guide.

Speaker #6: And then looking forward to next year—we'll talk about that later. But work continues on the expense lines. Advertising is not planned to be up in the first half.

Speaker #6: We're going to kind of manage it the same way we're talking about here in the third and fourth quarter. Then we'll provide more color on next year much later this year.

Speaker #5: Sure. So, some of our more recent initiatives that we're really excited about—one is our new influencer program in AE and Aerie. Both are exceeding expectations.

Jennifer Foyle: Sure. Some of our initiatives that we're really excited about, one is our new influencer program in AE and Aerie. Both are exceeding expectations. That's where we really win. We have our customers engage, marketing our brand, and again, it's exceeding expectations. We've made a strategic hire there on the AE side. We're excited for her to join, who's going to really take that program to the next level. That's first. We just announced Lamine, so he's coming our way, and welcome World Cup. We're excited about launching him. He's been great, and he really suits our brand and loves our clothes. Lamine near in. We just had our partnership with "Off Campus," the collab with Prime Video. As everyone knows, that show's been a hit. We've really been able to hit pop culture with these shows.

Speaker #5: And that's where we really win, right? We have our customers engaged, marketing our brand, and again, it's exceeding expectations. We've made a strategic hire there on the AE side.

Speaker #5: We're excited for her to join. Who's going to really take that program to the next level? So that's first. We just announced Lamine, so he's coming our way.

Speaker #5: And welcome World Cup. So we're excited about launching him. He's been great. And he really suits our brand and loves our clothes. So Lamine, near in.

Speaker #5: And then we just had our partnership with Off-Campus, the collab with Prime Video. As everyone knows, that show's been a hit. We've really been able to hit pop culture with these shows—last year with 'The Summer I Turned Pretty.'

Speaker #5: And you'll see more of that. So can't really reveal our colors for back to school, but I do want to remind you that our prime focus every day is our product.

Jennifer Foyle: Last year with The Summer I Turned Pretty, and you'll see more of that. Can't really reveal our colors for back to school, but I do want to remind you that our prime focus every day is our product, and that's where we win. We're up to some really good things on the product side for American Eagle, and I'm really excited to deliver. One of our newest deliveries actually just hit, and that's what I was referring to, that we had some nice results with that. More to come.

Speaker #5: And that's where we win. So we're up to some really good things on the product side for American Eagle. And I'm really excited to deliver.

Speaker #5: One of our newest deliveries actually just hit. And that's what I was referring to that we had a pretty nice some nice results with that.

Speaker #5: So more to come.

Speaker #7: Great. Thanks very much.

Speaker #1: The next question will come from John Kipor with Goldman Sachs. Please go ahead.

Rick Patel: Great. Thanks very much.

Operator: The next question will come from Jon Keypour with Goldman Sachs. Please go ahead.

Speaker #8: Hi. Thank you, guys. Thanks for the question. I just had one around the macro. You guys mentioned, I think, a little bit of uncertainty there.

Jon Keypour: Hi. Thank you, guys. Thanks for the question. I just had one around the macro. You guys mentioned, I think, a little bit of uncertainty there. I'm just wondering what you're seeing in your consumer base. Any difference between how the consumer is behaving in Eagle versus in Aerie and offline? Then, just if you could break down maybe AUR and volume between the Eagle and Aerie banners, please. Thank you.

Speaker #8: I'm just wondering what you're seeing in your consumer base. Any difference between how the consumer is behaving in Eagle versus in Aerie and offline?

Speaker #8: And then, just if you could break down maybe AUR and volume between the Eagle and Aerie banners, please. And thank you.

Speaker #7: Do you want to talk about AUR?

Speaker #8: Yeah, I can start with the AUR. I think AUR in the second quarter, Aerie was up. Jen talked about that in her remarks. Again, Aerie's metrics are positive across the board.

Mike Mathias: You want to talk about the AUR?

Jay Schottenstein: You want to talk about the AUR?

Mike Mathias: Yeah. I can start with the AUR. I think AUR in Q2, Aerie was up. Jen talked about that in her remarks. Again, the metrics are positive across the board, so AUR up in Aerie. Slightly down, low single digit in AE. For the company, we were up in total. I think from a consumer perspective, I wouldn't say there's a lot of difference between the brands. Obviously, the engagement with Aerie and the traffic that we're driving in the Aerie brand, along with everything we said earlier around conversion, different customer cohorts all performing for us, clicking on all cylinders. Jen hit the positivity in the American Eagle customer files. That's all going in the right direction. Again, we've seen, I think, some encouraging things here the last couple weeks in May versus how the quarter started.

Speaker #8: So AUR up in Airy. Slightly down, low single digit in AE. So for the company, we were up in total. I think from a consumer perspective, I wouldn't say there's a lot of difference between the brands.

Speaker #8: Obviously, the engagement with Aerie and the traffic that we're driving in the Aerie brand, along with everything we said earlier on conversion, different customer cohorts all kind of performing for us.

Speaker #8: Clicking on all cylinders. Jen hit the positivity in the American Eagle customer file. So that's all going in the right direction. Again, we've seen, I think, some encouraging things here the last couple of weeks in May versus how the quarter started.

Speaker #8: I think it feels like it's all coming together in terms of where we want things to head through the rest of the summer and in back to school and be ready to really capitalize on all this to spend to move those metrics for the results that we were expecting from the brand in the back half.

Jennifer Foyle: I think it feels like it's all coming together in terms of where we want things to head through the rest of the summer and in back to school and be ready to really capitalize on all this, the spend to move those metrics for the results that we're expecting from the brand in the back half.

Speaker #7: Yeah. And about like Airy, and about like the macroeconomics, one thing we're very proud Airy we started that brand inside American Eagle around 2012, 2013.

Jay Schottenstein: Yeah. About Aerie, about the macroeconomics, one thing we're very proud, Aerie, we started that brand inside American Eagle around 2012, 2013, and in seven years, we grew it to a billion-dollar brand. In the last five years, we grew it to a $2 billion brand. It's not a brand that we acquired. It's a brand that we created from start, we're very proud of that because I don't know too many companies in such a short period build a $2 billion a year brand. I give Jen, I give the team a lot of credit. American Eagle's been around. This coming year in 2027, this will be our 50th year.

Speaker #7: And in seven years, we grew it to a $1 billion brand. In the last five years, we grew it to a $2 billion brand.

Speaker #7: It's not a brand that we acquired. It's a brand that we created from the start. And we're very proud of that, because I don't know too many companies that, in such a short period, build a $2 billion-a-year brand.

Speaker #7: So I give Jen I give the team a lot of credit. American Eagle's been around. This coming year, in 2027, this will be our 50th year.

Speaker #7: So one thing we're proud about is if you went back 50 years ago, and saw all the different brands in the mall at that time, and saw where we were positioned just a couple of stores then, and you go back and you say, "Who's around and who's not around?" I think the majority of those brands aren't around.

Jay Schottenstein: One thing we're proud about is if you went back 50 years ago and saw the different brands in the mall at that time and saw where we were positioned, just a couple stores then, and you go back and you say, Who's around and who's not around? I think the majority of those brands aren't around, and we're stronger than ever. We're very proud of that. The last few weeks have been very encouraging. We're seeing increased traffic in the stores, in American Eagle stores. We're seeing increased sales. We're very optimistic. We think the economy, the US economy, is very strong, and we think it's only going to get better as time goes on. We think with gas prices, hopefully will start settling down very shortly, and with the current affairs, hopefully will come to some type of finish.

Speaker #7: And we're stronger than ever, so we're very proud of that. The last few weeks have been very encouraging. We're seeing increased traffic in the stores, in American Eagle stores.

Speaker #7: We're seeing increased sales. We're very optimistic. We think the US economy is very strong, and we believe it's only going to get better as time goes on.

Speaker #7: We think with gas prices, hopefully, we'll start settling down very shortly. And with the current affairs, hopefully, we'll come to some type of finish.

Speaker #7: Hopefully, it'll be a very good finish for the world. And so we're very optimistic on that. And we think American Eagle's positioned very well.

Jay Schottenstein: Hopefully, it'll be a very good finish for the world. We're very optimistic on that. We think American Eagle is positioned very well. We think our brand offers great value to the consumer, great quality, and we're not seeing the impact of the economy as far as like a negative way. We're optimistic, and I always said, I never ran this business quarter to quarter. I look at the year-end, and I think Jen said it the right way. Our Super Bowl comes at Q3 and Q4. That's where we really gear up, and that's where we always shine. This team is going to shine.

Speaker #7: We think we our brand offers great value to the consumer. Great quality. And we're not seeing the we're not seeing the impact of the economy as far as like a negative way.

Speaker #7: So we're optimistic. And I always said I never ran this business quarter to quarter. I look at the year-end. And I think Jen said it the right way.

Speaker #7: Our Super Bowl comes at third and the fourth quarter. That's where we really gear up. And that's where we always shine. And this team is going to shine.

Speaker #1: Thank you very much. I appreciate it. The next question will come from Janine Stitcher with BTIG. Please go ahead.

Jon Keypour: Thank you very much. I appreciate it.

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

Speaker #9: Yeah. Thanks for taking my question. Jen, I wanted to dig a little more into the bottom side of the business. I think in the past, you've talked about there being just less consensus around maybe the silhouette that consumers were wearing in bottoms.

Janine Stichter: Yeah, thanks for taking my question. Jen, I wanted to dig a little bit more into the bottom side of the business. I think in the past, you've talked about there being just less consensus around maybe the silhouettes that consumers were wearing and bottoms and having to kind of diversify the assortment. Now it seems like we're kind of going the other direction. Just want to make sure I understand, is the issue now that there's more consensus that you need to go deeper into certain key silhouettes and you just didn't have enough? Then I just wanted to clarify, you mentioned you sold a portion of the tariff claim. Have you said how much that was and what's left on that? Thank you.

Speaker #9: And having to kind of diversify the assortment. And now it seems like we're kind of going the other direction. Just to make sure I understand, is the issue now that you need to go deeper into there's more consensus.

Speaker #9: You need to go deeper into certain key silhouettes. And you just didn't have enough. And then I just wanted to clarify, you mentioned you sold a portion of the tariff claim.

Speaker #9: Have you said how much that was? And what's left on that? Thank you.

Speaker #10: Sure. Exactly what you said. We just needed more distortion in some of our newer silos that we were testing, and some of them we owned.

Jennifer Foyle: Sure. Exactly what you said. We just needed more distortion in some of our newer silos that we were testing, and some of them we owned, and we just could have had more. That's what we're right-sizing for back to school. Mike, I don't know.

Speaker #10: And we just could have had more. So that's what we're right-sizing for back to school. And Mike, I don't know.

Speaker #8: Yeah. On the tariff claim, we filed $190 million worth of claims, and we've gotten over $100 million back at the moment. We did, sort of, back at the beginning of the year—not sort of.

Mike Mathias: Yeah, on the tariff claim, we filed the $190 million worth of claims. We've gotten over $100 million back at the moment. We did at the beginning of the year, we sold about $70 million worth of claims for roughly $20 million. Our net number on the $190 million total filings should be $140 million if we do get it all back. And again, we're a little over $100 million back so far, which our portion of that net is around $75 million. That's a lot of numbers. $75 million we've actually got in the bank, net of what we kind of owed the third party that we sold some claims off into.

Speaker #8: At the beginning of the year, we sold about $70 million worth of claims for roughly $20 million. So our net number on the $190 million total filings will be around—should be $140 million if we do get it all back.

Speaker #8: And again, we're a little over $100 million back so far, which—our portion of that net is around $75 million. So that's a lot of numbers.

Speaker #8: $75 million we've actually gotten the bank net of what we kind of owed the third party that we sold some claims off to. And then the $140 would be if everything is refunded by the end of the second quarter here, that's how much cash we would receive.

Mike Mathias: The $140 would be if everything is refunded by the end of Q2 here, that's how much cash we would receive.

Speaker #7: And has it been $190?

Speaker #8: Right. So that'll be—so we did not—so, yeah, we did not guide. Yeah. It's good. Thanks, Jay. None of that is in our guidance.

Jay Schottenstein: It hasn't been recognized yet.

Mike Mathias: Right. We did not guide.

Speaker #8: So, the $45 to $50 million does not include any benefit from that. That would all be an incremental outcome at the end of the quarter when we report.

Jay Schottenstein: We have not recognized it yet.

Mike Mathias: Yeah. Good. Thanks, Jay. None of that is in our guidance, so the $45 to $50 does not include any benefit from that. That would all be an incremental outcome at the end of the quarter when we report.

Speaker #9: Got it. Thank you.

Speaker #1: The last question today will come from Tom Nikich with Needham. Please go ahead.

Janine Stichter: Got it. Thank you.

Operator: The last question today will come from Tom Nikic with Needham. Please go ahead.

Speaker #11: Hey, thanks for taking my question. Just wanted to ask as we look out to the back half of this year, it sounds like you're addressing I guess some of the issues that are leading to the declines that the American Eagle brand in the first half.

Tom Nikic: Hey, thanks for taking my question. Just wanted to ask, as we look out to H2 of this year, sounds like you're addressing, I guess, some of the issues that are leading to the declines at the American Eagle brand in H1. Should we assume that embedded in your guidance is that the American Eagle brand gets back to positive comp growth in H2 and against tougher compares, we would get slower comp growth at Aerie relative to what we saw in H1? Thanks.

Speaker #11: So, should we assume that embedded in your guidance is that the American Eagle brand gets back to positive comp growth in the back half?

Speaker #11: And against tougher comparers, we would get slower comp growth at airy relative to what we saw in the first half? Thanks.

Speaker #10: Yeah, yeah, I'll let Mike answer some of this, but I would tell you this: I expect positive comp growth, and so does this team.

Jay Schottenstein: You know something, I'll let Mike answer some of this, but I will tell you this. I expect a positive comp growth, and so does this team. This team under Jen takes everything very seriously. They've been tearing everything apart for the last few months, figuring out how can we get better and stronger. Where do we learn? Like Jen said, our Q3 and Q4 is where we shine, and she's going to shine, and we expect it to shine in both Aerie and American Eagle. Period.

Speaker #10: This team under Jen takes everything very seriously. They've been tearing everything apart for the last few months figuring out, "How can we get better and stronger?

Speaker #10: Where do we learn? Like Jen said, our third and fourth quarter is where we shine, and she's going to shine, and we expect it to shine.

Speaker #10: In both Aerie and American Eagle. Period.

Speaker #11: And we'll reiterate again, it's very isolated to bottoms—and women's bottoms. Men's bottoms was actually positive. Jeans in men's was positive. So it's a very targeted area of opportunity, and the teams are all over it. To back up and reiterate Jen's description earlier.

Mike Mathias: Look, we'll reiterate again, it's very isolated to bottoms and women's bottoms. Men's bottoms was actually positive. Jeans in men's was positive. It's just a very targeted area of opportunity and the teams are all over to reiterate Jen's description earlier. The specific brand assumptions for the H2, yes, we're expecting AE to be in the low single-digit range in that guide. If you listen to what Jay just said, he's expecting more than that. We all are. Then Aerie, yes, moderating to more of a low double digits, maybe even high single to low double, depending on the mix. That would kind of get you to that mid-teen Or, I'm sorry, mid-single digits total across the portfolio. That's what's assumed in our guide.

Speaker #11: The specific brand assumptions for the back half, yes, we're expecting AE to be in the low single-digit range in that guide. If you listen to what Jay just said, he's expecting more than that.

Speaker #11: We all are. And then, airy, yes, moderating to more of like a low double-digit. Maybe even high single to low double, depending on the mix.

Speaker #11: And that would kind of get you to that mid-single-digit total across the portfolio. That's what's assumed in our guide.

Speaker #10: Got it. Thanks very much, and best of luck with the rest of the year.

Speaker #9: Thank you.

Speaker #10: Thank you.

Tom Nikic: Got it. Thanks very much, and best of luck the rest of the year.

Speaker #11: Thank you.

Jennifer Foyle: Thank you.

Jay Schottenstein: Thank you.

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

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