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DATE

Thursday, May 28, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Executive Chairman and Chief Executive Officer — Jay L. Schottenstein
• President, Executive Creative Director — Jennifer Foyle
• Executive Vice President, Chief Financial Officer — Michael A. Mathias

TAKEAWAYS

• Consolidated Revenue -- $1.2 billion, a 10% increase, driven by Aerie and Offline momentum with American Eagle (AE) mixed.
• Comparable Sales -- Up 8%, reflecting broad-based growth, with Aerie comparable sales up 25% and AE comparable sales down 2%.
• Operating Income -- $28 million, exceeding prior company guidance.
• Gross Profit -- $456 million, a 41% increase, with gross margin at 38.2%, up 860 basis points versus last year.
• Merchandise Margin -- Improved by 710 basis points, primarily due to the previous year's inventory write-down.
• SG&A Expense -- Increased by 11%, primarily from planned advertising investments across brands.
• EPS -- $0.14, reflecting profitable operations this quarter.
• Aerie Revenue -- $481 million, representing 34% growth, with broad-based category strength and a 45% comparable in Aerie apparel.
• American Eagle Segment -- Revenue declined 2% and comp sales fell 2%, as softness in women’s bottoms and seasonal categories offset strength in men’s and women’s tops.
• Inventory Position -- Ended with inventory at cost up 27% and units up 5%, with the increase in cost reflecting incremental tariffs and comparison to last year’s write-down.
• CapEx -- $61 million in the quarter, reflecting long-term business investments.
• Shareholder Returns -- $74 million returned through $21 million in dividends and $53 million in buybacks (3 million shares repurchased).
• Liquidity -- Ended with $103 million in cash and total liquidity of approximately $620 million, including revolver availability.
• Q2 Guidance -- Expects comparable sales growth in the mid to high single digits: Aerie and Offline projected high teens to low twenties, AE expected flat to negative low single digits.
• Q2 Operating Income Outlook -- $45 million to $50 million; guidance includes a $20 million incremental tariff headwind and SG&A up in the mid-teens for ongoing advertising investments.
• Tariff Impact -- Tariff rate is planned at 10% in Q2 and 15% for the remainder of the year, with an outstanding $190 million tariff refund application and an anticipated $140 million net cash benefit (not included in guidance).
• Full-Year Operating Profit Guidance -- $390 million to $410 million, with mid single-digit consolidated comp sales expected.
• Brand Campaigns -- Launched high-visibility campaigns including a 100% “Aerie Real” campaign and new influencer initiatives, both exceeding engagement targets; no AI-generated bodies used in Aerie marketing.
• Store Activity -- AE expects 20-25 net closures in 2026, while Aerie and Offline target 40 new openings and over 80 AE remodels planned.
• Back-to-School Positioning -- Testing and inventory adjustments underway in women’s bottoms at AE, with early indication of an improvement and increased fashion in denim and shorts ahead of peak season.

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RISKS

• Michael A. Mathias cited tariffs as a headwind, stating, “Tariffs, being a 150 to 200 basis point impact. Headwind.”
• AE brand faced “softer trends in women's bottoms including denim along with pressure on seasonal categories, during a colder spring,” resulting in a 2% revenue decline.
• Guidance acknowledges “some expectation for some needed AE brand markdowns to ensure clearance inventory at the end of the quarter is in the optimal position” for back-to-school, pointing to gross margin pressure.
• American Eagle store closures of 20-25 planned for the year, indicating targeted rationalization of physical footprint.

SUMMARY

The company outlined a mid to high single-digit comparable sales growth expectation for next quarter, with Aerie and Offline driving growth and AE showing stabilization efforts. Management confirmed $190 million in tariff claims filed, with over $100 million recovered to date, but excluded any resulting benefit from current financial guidance. Company-wide marketing investments focus on new influencer programs, digital and performance initiatives, and strict product quality and authenticity, with engagement up across both established and new customer files. Operating income for the full year is projected between $390 million and $410 million with inventory levels actively managed to support new assortments and seasonality changes.

• Aerie’s customer file expanded by approximately 1 million new customers, reflecting ongoing traction in acquisition and retention.
• Leadership characterized recent American Eagle softness as “very isolated to bottoms and women's bottoms,” as the men’s category remains positive, and noted “some more positive results in the denim side.”
• Store fleet strategy includes 40 new Aerie/Offline openings and the final major year of AE brand remodels, with continued closures of underperforming AE locations.
• Upcoming cost structure includes SG&A in line with revenue growth in the back half, after significant advertising-driven increases in the first half.
• Management referred to the Aerie brand surpassing $2 billion in trailing 12-month revenue, achieved via in-house growth and not through acquisition.

INDUSTRY GLOSSARY

• AUR: Average unit retail -- selling price per item sold.
• AOV: Average order value -- average dollar amount per customer transaction.
• B&O expense: Buying and occupancy expense -- costs related to procurement and physical space utilization.
• Chase capabilities: Rapid inventory adjustment processes to capture demand from successful styles or categories.
• Comp sales: Comparable sales, referring to growth from stores and digital channels open at least one year.
• Super Bowl: Internal term for peak sales season, notably Q3 back-to-school period at American Eagle.

Full Conference Call Transcript

Jay L. Schottenstein: Thanks, Alex, and 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 in 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. We are extremely pleased with the continued momentum in 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. Off line 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 3rd 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. These are areas we understand well, and we are actively addressing. While May started slowly for the AE brand, we are 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 are positioning us well for the future. 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 brand.

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 1 year. Every investment we make supports our long term growth agenda, and creates value for AEO.

We are 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 making. We all believe strongly in the opportunities that lie ahead.

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. With that, I will turn the call over to Jen.

Jennifer Foyle: 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. 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 the success has been a head to toe approach across intimate sleep and apparel. 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 3 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. 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, 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 silhouette 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 it is well on its way to becoming its own activewear brand. While we remain encouraged by the momentum at Aerie, we do recognize the environment remains competitive and sustaining growth at the scale requires continued discipline innovation, and execution.

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. 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 are aligned 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. We have been dedicated to rebuilding the AE men's business.

And our efforts have resulted in its 3rd consecutive quarter of positive growth with growth across tops and bottoms, This reflects the team's efforts to improve product assortments and generate 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. 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 am 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 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. 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 are 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.

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. Together, we are actively working to drive healthy, more consistent performance at AEO over time. And with that, I will turn the call over to Mike Mathias.

Michael A. Mathias: Thanks, Jennifer, 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. We delivered on our revenue and operating income expectations, driven by the continued outstanding momentum at Aerie and Offline. As Jay and Jennifer described, we are actioning on the opportunities for improvement within the AE brand performance. We are 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% to last year with comparable sales growing 8%. Aerie's strong business continued with total sales growing by 34%, comparable sales up 25% with growth across channels.

2% with comparable sales also declining 2% AE brand digital performance was flat, the comp results 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. 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. 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.

And other income increased due to unrealized gain on investments. Depreciation was flat year over year at $51 million We recorded a first quarter operating profit of $28 million The first quarter tax rate was approximately 17%, and EPS was $0.14. Consolidated ending inventory at cost was up 27% units up 5%. 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. In the first quarter, as Jay noted, continued to make long term investments in our business while returning cash to shareholders. First quarter CapEx totaled $61 million the company returned $74 million to shareholders during the quarter.

Dollars 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 second quarter, we expect comparable sales growth in the mid to high single digits, with area and offline continuing in the high teens to low twenties and American Eagle in the flat to negative low single digit range.

Our operating income expectation is in the range of $45 million 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 2nd quarter and the balance of the year is planned at 15%. We have applied for roughly $190 million in tariff refunds and anticipate a $140 million net cash benefit. However, it is 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. In the second half of the year, we will cycle tariffs and investments in advertising began midyear 2025. We expect CapEx to remain in the range of $250 million 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 will continue to manage with discipline, reallocating investment across the portfolio to create value.

We will continue to control what we can control, what is still a complicated and evolving macro environment. And with that, we will open it up for questions.

Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then 2. Please limit yourself to 1 question. At this time, we will pause momentarily. To assemble the roster. And the first question will come from Jay Sole with UBS. Please go ahead.

Analyst (Jay Sole): Great. Thank you so much. Maybe I would love to dig into the American Eagle Women's business. Jennifer talked about how women's tees and fashion tops were good. But women's bottoms was weak. Can you just give us a little bit more color here? Like, what were the some of the styles that maybe you need to lean into a bit more? And last year, when they were issued the first half of the year, you corrected them real quick. And back to school ended up being really strong. It sounded like you are saying you are refining your bottoms architecture for back to school.

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.

Jennifer Foyle: Absolutely. Yeah. We are really pleased with the fashion business. We have been really working hard, you know, in tops and tees and it is exceptional run rates there, but not enough to offset a highly focused and concentrated area we need to turn around and engage in. And the team has already pivoted. In fact, more recently, we have seen some more positive results in the denim side of the business. And we are 100% focused there. We know where the problem is. We are going to pivot, and we have already done testing for back to school. We know what rises are working. We know what fits are working.

And we are excited to enter into our Super Bowl, which is, as you know, Q3 is when we lead in denim. And that it was just highly focused there. that is all I can say. And like I said, the more recent results are proving well for us. And excited to see what is to come. Alright. Thank you so much.

Operator: Next question will come from Marni Shapiro with Retail Tracker.

Analyst (Marni Shapiro): Hey, guys. Congratulations on Aerie and Offline. 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 last shoppers, new shoppers? Or are people just buying more when they come into the store?

Jennifer Foyle: All of the above, Marni. it is really we are striking on all chords. Honestly, I we really hit a home run here. And, you know, I just wanna give you know, kudos to the team. Last year at this time, as you know, we really had to pivot and turn this business around. And, certainly, we you know, 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. And, just all product categories are working. it is just our head to toe outfitting.

They are engaged in our outfitting. They know what, we really are set up to win. I mean, I do not know if you have been to the store, but if you look at it, it is just really a mix and match environment. it is like a candy shop. that is what I pay every time. I go into a store. it is exciting to see and we are just highly focused on those wins. And how we are going to enter into back-to-school. And I am really excited about what I am seeing. The marketing gets better with age. The team is they never cease to fail me.

I mean, every time I look at what is coming next, I cannot believe that it even looks better than the last. So our winning formula as you know, our winning formula is our customer base. They believe in our platform, Real. We launched a 100% real and Mhmm. 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. So, I am excited to see what is to come here. We have more categories coming your way. New categories. We are testing into a lot of new ideas, and yeah, we are just going to keep this momentum going.

Michael A. Mathias: And Marni, just from a pure metrics perspective, just add on to what Jennifer said, it is it is traffic, it is conversion, AUR. it is AOV. it is existing customers, it is new customers. So, you know, that all the above comment is all the metrics are green across the board on that front.

Analyst (Marni Shapiro): that is fantastic. Best of luck. I will leave it to somebody else, but Jennifer. The low rise drapey jeans that are in American Eagle right now with the orange flowers on them. You need, like, so cute, a bunch more pair per store. Thanks, guys. Goodbye.

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

Analyst (Matthew Boss): Great. So at Aerie, Jennifer, could you speak to new customer acquisition that you are seeing with 3 consecutive comps now of double digits? And just the opportunity that you see for incremental market share from here. And then, Mike, could you elaborate on the drivers of gross margin contraction in the second quarter if we are thinking about markdowns, freight and tariffs? And just puts and takes to consider in the back half of the year?

Michael A. Mathias: I can start with that gross margin question, Matthew. So for the second quarter, yeah, I think when you think about the second quarter over against last year, last year, we were pretty healthy, kind of good rate of history, with the write down and the kind of pull forward of markdowns we executed in the first quarter last year. This year, with the, tariff assumption we are using, it is somewhere between a 150 to 200 basis points of tariff impact in quarter still for Q2. Against no impact last year.

And we are and the expenses and gross margin on the kind of mid to high single digit revenue guide, we do expect those B&O expenses and gross margin to leverage again in the second quarter, so that is a positive side. Tariffs, 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 to ensure clearance inventory at the end of the quarter is in the optimal position as we head into that you know, back to school Super Bowl period, as Jennifer likes to describe it.

So those are your puts and takes in terms of gross margin, some headwind in a little bit of markdown pressure in AE to get clean for back to school, and then expense leverage, to the good side.

Jennifer Foyle: And our new customer acquisition's up roughly 1 million, which is incredible. And the beauty of Aerie is well, we just mentioned it. Our not only is our new customer acquisition up, our retained customers are up, they are staying with us. We remain very sticky. And, again, it just goes back to our platform. You know? Our just our emotional connection, it just drives it is unbelievable, this community. And I did not mention, but, you know, we have a new influencer program that actually hit it out of the ballpark We beat our expectations 3 weeks in, and this is really hitting home with this community of ours. So, just going to continue to build on that success.

Michael A. Mathias: And then, Matthew, just to jump back in on the back half gross margin just to give you some, you know, the flavor or there is some more detail to the guide. Starting with that mid single digit comp expectation across the portfolio, As you know, everybody knows we will be lapping tariffs in the back half. So it becomes apples to apples. The reason that 15% assumption for tariffs in the back half And there is some favorability to, like, our original guide there, which we were thinking about IEPA tariff rates still at the same time or, you know, with our original guide back in Sarah.

But we did have built in a little bit of expectation into our plans for some potential freights ocean air freight rates pressure. So that is kind of a wash between the tariff assumptions in that placeholder for freight, and we will see how that all pans out here as we pass toward the back half of the year. Product margin in total, we are expecting to get some benefit across the brands and across the portfolio. And at the end so and B&O expense leverage and gross margin kind of relatively flat, maybe a bit of leverage. So at the end of the gross margin in total then we are expecting expansion.

We are expecting improvement in the back half. And if you think about our full year guide then, kind of first half, back half, we are positioned at that mid single digit to get back to operating rate improvement. So income growing ahead of revenue, improving operating rates, and that would be our expectation as we lap tariffs lap the advertising investments, rebalance those investments, set up advertising to leverage then in the back half really on any revenue growth the dollars are planned relatively flat.

We will get back to, again, you know, implied in the guide is some is almost a double digit income expectation for the back half on the mid single digit revenue. it is helpful color. Best of luck. Thanks, Bob.

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

Analyst (Dana Telsey): 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, the beginning of back to school, should we expect to see any uptick in AE? In American Eagle, I mean, Aerie, 25% amazing. And then, Jennifer, as you think about the other product categories beyond bottoms at American Eagle, What are you seeing in how do you see the women's business doing? And then just lastly, on new on stores, and store closures, for American Eagle. Where are you, and where are you in the refreshes, how are they performing? Thank you.

Michael A. Mathias: I can start, Dana. Start with actually the last part of that first, just the work backwards. So store closures, we are 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. And then the remodel program for 80 could be north of 80 projects there that is still being refined, but, but that will get us almost to the end of that, maybe 1 more year of kind 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 will keep an eye on that. On the American Eagle brand, we said flat to down low single. And the guides is really pretty consistent with what we are seeing May to date. But as I think, we said in our prepared remarks, the first couple weeks of May were a little tougher, almost continuing a couple, you know, couple tougher weeks in the back half of April, but these last 2 weeks of May have been really encouraging kind of, you know, week going into Memorial Day now on the back end of Memorial Day, being still consistent with uptick in trends.

So mix of the brands is sort of flat to slightly down in AE, and, you know, 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 Janet and Judy.

Jennifer Foyle: Yeah. And just building off of what Mike just said, more recently, we have seen a turnaround in women's. We still have the rest of this quarter to go, but some near end learnings that we are certainly applying for back to school. You know, we did have other bottom categories that were highly successful. We just did not have enough distortion in them. So you will 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. And then, of course, we believe in our denim testing. We do it very well.

And, we think we have the right fits and flares for back to school. You are gonna see more excitement in denim, ranking some fashion silhouettes into our top 10. Really, lot of excitement there. So, Marni, we have more excitement for you, but we are we are 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. 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. And I think the teams are armed and ready.

All of this fashion that is working we have chased back into. We can execute very swiftly on cut and sew t shirts, bare knits, and the teams done a great job of getting us back into what is working. Thank you.

Operator: The next question will come from Adrianne Shapira with Barclays. Please go ahead.

Analyst (Angus): This is Angus on for Adrianne Shapira. So you mentioned improving conversion. As a key opportunity at AE. Can you just unpack where you are seeing the biggest gap today whether that is stores versus digital and what specific actions you are taking to close that gap near term? And then 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 am sure it is mostly tariffs, but just how comfortable you feel with inventory positioning into the back half.

Jennifer Foyle: Yes. Sure. It was more I would say we leaned where we had some conversion opportunity was definitely stores. Again, like I said, more recently, we have seen the digital channel really have an incredible uptick for the AE business. So what we have been doing is doing, again, testing, by store grade, by groups, seeing the price value quality equation, where it is working for us, where we can compete. And, we have had some really good results from some stores, and we applied them more recently, and we have seen some wins.

So, again, we continually look at you know, for these golden nuggets, turn the business around, and I think we have seen some of that, these green shoots. And we are certainly gonna apply, those learnings.

Michael A. Mathias: And then on inventory, yeah, we are in good position at the end of the quarter. I will start with the units up 5% in relation to our kinda 8% 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 those unit the units and cost dollars. And then with the write down last year that we took, normalizing for those 2 things, our cost dollars would be up more in the high single digit range. So a couple reconciling items. Picture 27% to high single with units up 5.

Analyst: Great. Thank you.

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

Analyst (Jonah Kim): Just 1 on marketing. How are you allocating the marketing spend across? Aerie and Eagle? just would love to have you break down there. And then the second follow-up second question, how are you thinking about comping the comp with just Aerie being so strong in posting really good results in the second half? What are key strategies around comping the comp there? Thank you so much.

Jennifer Foyle: Of course. Look. This is what Aerie does best. I do wanna remind you, we grew the business a billion dollars in 5 years. I mean, I think that is a record number. I am certainly impressed with this team. And how we continue to look at opportunities on how to comp our business. I can remember maybe 1, maybe 2 quarters where we saw some softness. This business has been unbelievable year over year? And we are constantly challenging ourselves. You are only as good as yesterday, and that is how we think about it every day. We have to have better product, better marketing, better campaigns.

You know, quality. that is what this whole company I mean, all of our brands. We continually focus on quality and how we can compete on our terms And Aerie does it impeccably well, and we have some room to grow in on the AE side. But I think the team's leaned in. And, you know, the area team feels very good about what we are going up against.

Michael A. Mathias: On the advertising front, you know, spend it up across both brands. Aerie more commensurate with the sales increase. So as we are sales are up 30% and, you know, in our forward plans with within our guidance, advertising is up in relation to that. A little a little ahead of sales just to fuel, obviously, this pretty tremendous trend. So very good flows through on that investment. As we have been talking about now for 3 quarters and into the second quarter, this incremental investment in AE that Jennifer highlighted the benefits of customer file consideration, potentially spend.

The teams are doing a lot of evaluation, surveys, etcetera, on the effectiveness of this, not just from a quantitative perspective every day, but what we think those metrics could lead to here with 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 and, that consideration elevating with the marketing campaigns that we have been investing in. We had the second quarter here is the last quarter of kind of incrementality on that spend. We get into the third and fourth quarter and total spend across 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. And we are rebalancing then a little between brands in the back half, but then definitely in terms of how we are spending the dollars. And Jen mentioned the shift to conversion. So a lot of what we have been doing is these bigger campaigns, the Sydney Sweeney campaign, the stagecoach stuff in the first quarter with Ella Langley and Bailey Zimmerman. We have Liminiam all coming as well, as Jennifer talked about in her remarks. And, but the back half spend is more weighted toward digital media performance marketing, influencer spend. More day to day traffic driving, elements.

So I think that is where the conversion will play into because that traffic is has a higher propensity to convert. So we are rebalancing how those dollars will be spent in the third starting really in the third quarter which we feel, you know, it set us up for success and you know, be able to hit the revenue expectations that we have for ourselves in the back half.

Analyst: Got it. Thank you.

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

Analyst (Rick Patel): Thank you. Good afternoon. It looks you are 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? 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?

Michael A. Mathias: Yeah. Hey. Thanks, Rick. The SG&A result for the year, you have got the 11% increase in Q1, We are guiding mid teens here for the second quarter. Whole first half year is really all driven for the most part, by the incremental advertising investment. 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. That will leverage the advertising line as we anniversary that spend.

A couple you know, a little bit of compensation that comes into play with a little lower than average incentive accruals last year. You know, not nothing extraordinary, but then really, the combination of those 2 factors as SG&A in the back half up again, kind of commensurate with that revenue guide. 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, continues like it has been for the last 3 years. But so a good position to be in at the moment.

And then, yes, your total year between that, you know, the first half being up in the teens, the back half being up more like that commensurate with sales level. Get to love for you about a 10% increase in SG&A in this guide. And then looking forward to next year, we will talk about that later, but, you know, work continues on the expense lines. Advertising is not planned to be up in the first half. We are gonna kind of manage the same way we are talking about here in the third and fourth quarter, then we will provide more color on next year. Much later this year.

Jennifer Foyle: Sure. So our more recent-- some of our initiatives that we are really excited about 1 is our new influencer program in AE and Aerie. Both are exceeding expectations, and that is where we really win. right? We have our customers engaged marketing our brand and again, it is exceeding expectations. We have made a strategic hire there on the AE side. We are excited for her to join. who is gonna really take that, program to the next level. So that is first. We just announced Lamine Yamal, so he is coming our way, and welcome to the World Cup.

So we are excited about launching him. he is been great, and he really suits our brand and loves our clothes. So, Lamine Yamal, 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 have really been able to hit pop culture with these shows last year with The Summer I Turned Pretty, and you will see more of that So I cannot really reveal our colors for back to school, but I do wanna remind you that our prime focus every day is our product, and that is where we win.

So we are up to some really good things on the product side for American Eagle. And, I am really excited to deliver. 1 of our newest deliveries actually just hit, and that is what I was referring to. That we had a pretty nice some nice results with that. So more to come.

Analyst: Thanks very much.

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

Analyst (Jon Kippur): I just had 1 around the macro. You guys mentioned, I think, a little bit of uncertainty there. I am just wondering what you are seeing in your consumer base. Any difference between how the consumer is behaving in Eagle versus in Aerie and offline? And then just if you could break down maybe AUR and volume between the Eagle and Aerie banners, please? And thank you.

Michael A. Mathias: You wanna talk about the Eagle Yes. Start with the AUR. I think AUR in the second quarter Aerie was up. Jennifer talked about that in her remarks. Again, Aerie, the metrics are positive across the board. So you are up in Aerie. Slightly down low single digit in AE. So for the company, we are up in total. I think from a, from a consumer perspective, I would not say there is a lot of difference between the brands. Obviously, the engagement with Aerie and the traffic that we are driving in the Aerie brand along with everything we said earlier on conversion, different customer cohorts all kind of performing for us.

Clicking on all cylinders, Jennifer hit positivity in the American Eagle customer file. So that is all going in the right direction. Again, we have seen, I think, some encouraging things here the last couple weeks of May versus how the quarter started. Yeah. I think it feels like it is all coming together in terms of where we want things to head through the rest of the summer and then back to school and be ready to you know, really capitalize on all this spend to, you know, move those metrics for the results that we were expecting from the brand in the back half.

Jay L. Schottenstein: Yeah. And about Aerie and about and on the macroeconomics. You know, 1 thing we are very proud of Aerie, we started that brand inside American Eagle around 2012-2013, and in 7 years, we grew it to a billion dollar brand. In the last 5 years, we grew it to, like, a $2 billion brand. it is not a brand that we acquire. A brand that we created from start. And we are very proud of that because I do not know too many companies that in such a short period build a $2 billion-a-year brand. So, you know, I give Jennifer I give the team a lot of credit.

You know, American Eagle's been around this coming year in 2027, this will be our 50th year. So 1 thing we are proud about is if you if you went back 50 years ago, and saw the different brands that were in the mall at that time and saw where we were positioned, you know, just a couple of stores. And you go back, and you say, who is around and who is not around. I think the majority of those brands are not around, and we are stronger than ever. So we are very proud of that. The last few weeks have been very encouraging.

We are seeing we are seeing increased traffic in the stores and American Eagle stores. We are seeing increased sales. Very optimistic You know, there is we think the economy US economy is very strong. And we think it is only gonna get better as time goes on. You know, we think with gas prices, hopefully, we will start selling down very shortly. And with the you know, current affairs, hopefully, we will come to some type of some type of finish. Hopefully it will be a very good finish for the world. And so we are very optimistic on that. And, you know, we think of American Eagle's positioned very well.

You know, we think we, our brand offers great value to the consumer. Great quality, and we are not seeing the we are not seeing the impact of the economy on, you know, as far as, like, a negative way. So, you know, we are optimistic and I always said, I never ran this business quarter to quarter. I look at the year end, and I think Jennifer said it the right way. Our Super Bowl comes at third and the fourth quarter. that is where we really gear up, and that is where we always shine. And this team is gonna shine. Thank you very much. I appreciate it.

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

Analyst (Janine Stitch): Yes. Hey. Thanks for taking my question. Jennifer, I want to dig a little bit more into the bottom side of the business. I think in the past, you have talked about there being just less consensus around the silhouette that consumers were wearing in bottoms and having kind of diversify the assortment. And now it seems like we are kind of going the other direction. Just wanna make sure I understand. Is the issue now that you need to go deeper into—there is more consensus that you need to go deeper into certain key silhouettes, and you just did not have enough? And 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 is left on that? Thank you.

Jennifer Foyle: Sure. Exactly what you said. We just needed more distortion in some of our newer silhouettes that we were testing, and some of them we owned. And we just could have had more. So that is what we are rightsizing for back to school And, Mike?

Michael A. Mathias: Yeah. On the tariff claim, we so we filed the $190 million worth of claims We have gotten over $100 million back at the moment. We did sort of back at the beginning of the year sort of. We at the beginning of the year, we sold about $70 million worth of claims for roughly a $20 million net number. So our net number on the $190 million total filings will be around should be a $140 million if we do get it all back. And, again, we are a little over $100 million back so far, which our portion of that net is around $70 million.

So it is a lot of numbers. $75 million we have actually got the bank net of what we kinda owed the third party that we sold some claims off into to. And then the $140 million would be if everything is refunded by the end of the second quarter here, that is how much cash we would, receive. And it has not been recognized yet. Right. So that will be so we did not we still yeah. We did not guide-- did not recognize it. Yeah. it is 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.

Analyst: Got it. Thank you.

Operator: The last question today will come from Tom Nikic with Needham & Company. Please go ahead. Hey. Hey. Thanks for taking my question.

Analyst (Tom Nikic): Just wanted to ask, as we look out to the back half of this year, you know, sounds like you are addressing I guess, you know, some of the, you know, some of the issues that are leading to the declines at the American Eagle brand in the first half. So should we assume that the American Eagle that is embedded in your guidance is that the American Eagle brand, gets back to positive comp growth. In the back half. And against tougher compares, we would get slower comp growth at Aerie relative to what we saw in the first half. Thanks.

Jay L. Schottenstein: Yeah. Yeah. Yeah. You know something? I will 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 Jennifer takes everything very seriously. They have 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 third and fourth quarter is where we shine. And she's gonna shine, and we expect it to shine. In both Aerie and American Eagle. Period.

Jennifer Foyle: And, like, we will reiterate again. it is very isolated to bottoms and women's bottoms. Men's bottoms was actually positive. Jeans and men's was positive. So it is just a very targeted area of opportunity, and the teams are all over it to back up, you know, to reiterate Jay's description earlier.

Michael A. Mathias: The specific brand assumptions for the back half, yes, we are expecting AE to be in the low single digit range in that guide. You listen to what Jay just said, he is expecting more than that. We all are. And then Aerie, yes, moderating to more of, like, a low double digits, maybe even high single to low double, depending on the mix. That would kinda get you to that mid t or I am sorry, mid single digits total across the portfolio. that is what is assumed in our guide. Got it. Thanks very much, and best of luck for the rest of the year.

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