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What changed in AMERICAN EAGLE OUTFITTERS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AMERICAN EAGLE OUTFITTERS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+289 added−284 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-13)

Top changes in AMERICAN EAGLE OUTFITTERS INC's 2024 10-K

289 paragraphs added · 284 removed · 189 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+20 added−31 removed24 unchanged
Biggest changeCompany-Owned Stores Our Company-owned retail stores are located in shopping malls, lifestyle centers, and street locations in the United States, Canada, Mexico, Hong Kong and Japan. Refer to Note 17. “Impairment, Restructuring and COVID-19 Related Charges,” to the Consolidated Financial Statements included in this Annual Report for additional information regarding impairment charges related to our Company-owned stores.
Biggest change“Impairment, Restructuring and Other Charges,” to the Consolidated Financial Statements included in this Annual Report for additional information regarding impairment charges related to our Company-owned stores. The following table provides the number of our Company-owned stores in operation as of February 3, 2024 and January 28, 2023.
We strive to partner with suppliers who respect local laws and share our dedication to utilize best practices in human rights, labor rights, environmental practices, and workplace safety. We are a certified, validated member of the Customs-Trade Partnership Against Terrorism program (“CTPAT”), a designation we have held since 2004.
We strive to partner with suppliers who respect local 7 laws and share our dedication to utilize best practices in human rights, labor rights, environmental practices, and workplace safety. We are a certified, validated member of the Customs-Trade Partnership Against Terrorism program (“CTPAT”), a designation we have held since 2004.
Baldwin served in human resources leadership roles focused on the growth and expansion of Starbucks Corporation and building a culture of inclusion at Diageo North America Inc. 12 Jennifer M.
Baldwin served in human resources leadership roles focused on the growth and expansion of Starbucks Corporation and building a culture of inclusion at Diageo North America, Inc. Jennifer M.
These include “ship to home,” which can be fulfilled either through our distribution center or our store sites (buy online, ship from stores) when purchased online or through our app; “store pick-up,” which consists of online orders being fulfilled either in store or curbside, and “store-to-door” where customers order within our store, and the goods are shipped directly to their home.
These include “ship to home,” which can be fulfilled either through our distribution center or our store sites (buy online, ship from stores) when purchased online or through our apps; “store pick-up,” which consists of online orders being fulfilled either in store or curbside, and “store-to-door” where customers order within our store, and the goods are shipped directly to their home.
Crew Group, Inc., from 2003 to 2009. Early in her career, Ms. Foyle was the Women’s Divisional Merchandise Manager for Gap Inc. from 1999 to 2003 and held various roles at Bloomingdales from 1988 to 1999. Michael A. Mathias , age 48, has served as our Executive Vice President and Chief Financial Officer since April 2020.
Crew Group, Inc., from 2003 to 2009. Early in her career, Ms. Foyle was the Women’s Divisional Merchandise Manager for Gap Inc. from 1999 to 2003 and held various roles at Bloomingdales from 1988 to 1999. Michael A. Mathias , age 49, has served as our Executive Vice President and Chief Financial Officer since April 2020.
We operate stores in the United States, Canada, Mexico, Hong Kong, and Japan. We also have license agreements with third parties to operate American Eagle and Aerie stores and online marketplace businesses throughout Asia, Europe, India, Latin America, and the Middle East.
We operate stores in the United States, Canada, Mexico, and Hong Kong. We also have license agreements with third parties to operate American Eagle and Aerie stores and online marketplace businesses throughout Asia (including India), Europe, Latin America, and the Middle East.
Foyle , age 56, has served as our President, Executive Creative Officer – AE and Aerie since June 2021 and as Chief Creative Officer, AEO Inc. and Global Brand President – Aerie from September 2020 to June 2021. Prior thereto she served as our Global Brand President - Aerie since 2015. Ms.
Foyle , age 57, has served as our President, Executive Creative Officer – AE and Aerie since June 2021 and as Chief Creative Officer, AEO Inc. and Global Brand President – Aerie from September 2020 to June 2021. Prior thereto she served as our Global Brand President - Aerie since 2015. Ms.
Our compensation programs are composed of three key elements: • Competitive base pay rates , which are aligned to specific roles and skills, local market rates, and relevant experience; 10 • Incentive bonuses for full-time associates , which are structured to deliver financial rewards for the delivery of monthly, quarterly, or annual results; and • Annual stock awards for over 450 leaders and key individual contributors throughout areas of the business, including the senior management team, which provide a commonality of interest between our leaders and shareholders.
Our compensation programs are composed of three key elements: • Competitive base pay rates , which are aligned to specific roles and skills, market rates, and relevant experience; • Incentive bonuses for full-time associates , which are structured to deliver financial rewards for the delivery of monthly, quarterly, or annual results; and • Annual stock awards for over 550 leaders and key individual contributors throughout areas of the business, including the senior management team, which provide a commonality of interest between our leaders and shareholders.
Our brands are connected under the core tenet of REAL , which is inclusive, optimistic, and empowering and celebrates self-expression. Our purpose is to show the world that there's REAL power in the optimism of youth.
Our brands are connected under the core tenet of REAL , which is inclusive, optimistic, and empowering and celebrates self-expression. Our purpose is to show the world that there's REAL power of optimism.
Built on the success of Aerie's leggings and sports bras, OFFLINE™'s unique take on an active lifestyle celebrates real life - when some days you feel like you can take on the world and other days you need that extra push to get off the couch.
Built on the success of Aerie's leggings and sports bras, OFFLINE's unique take on an active lifestyle celebrates real life - when some days you feel like you can take on the world and other days you need that extra push to get off the couch.
During Fiscal 2022, we prioritized growth through developing our people, our brands, and our operations. Our growth of people focused on supporting the health and well-being of our associates, customers and communities while also reimagining connection and collaboration and remaining diligent in the execution of our corporate social responsibility objectives.
During Fiscal 2023, we prioritized growth through developing our people, our brands, and our operations. Our growth of people focused on supporting the health and well-being of our associates, customers and communities while also supporting connection and collaboration and remaining diligent in the execution of our corporate social responsibility objectives.
Inspections are also made by our employees and agents at manufacturing facilities to identify quality issues prior to shipment of merchandise. 7 We uphold an extensive factory inspection program to monitor compliance with our Supplier Code of Conduct.
Inspections are also made by our employees and agents at manufacturing facilities to identify quality issues prior to shipment of merchandise. We maintain an extensive factory inspection program to monitor compliance with our Supplier Code of Conduct.
Our AE brand stores average approximately 6,400 gross square feet and our Aerie brand stand-alone stores, inclusive of OFFLINE™ stand-alone stores, average approximately 5,800 gross square feet.
Our AE brand stores average approximately 6,800 gross square feet and our Aerie brand stand-alone stores, inclusive of OFFLINE stand-alone stores, average approximately 5,900 gross square feet.
Additionally, our investor presentations are available under the Investor Relations section of our website at www.aeo-inc.com . These materials are available no later than the time they are presented at investor conferences. We have included our website addresses throughout this report as inactive textual references only.
Additionally, our investor presentations are available under the Investor Relations section of our website at www.aeo-inc.com . These materials are available no later than the time they are presented at investor conferences. 12 We have included the above website addresses and other website addresses throughout this report as inactive textual references only.
Baldwin , age 52, has served as our Chief Human Resources Officer since September 2021. Prior to joining us, Ms.
Baldwin , age 53, has served as our Chief Human Resources Officer since September 2021. Prior to joining us, Ms.
The following table provides the changes in the number of our Company-owned stores for the past five fiscal years: Fiscal Year Beginning of Year Opened Closed End of Year 2022 1,133 87 (45 ) 1,175 2021 1,078 103 (48 ) 1,133 2020 1,095 40 (57 ) 1,078 2019 1,055 66 (26 ) 1,095 2018 1,047 29 (21 ) 1,055 Licensed Operations Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given geographic area and to source products from us.
The following table provides the changes in the number of our Company-owned stores for the past five fiscal years: Fiscal Year Beginning of Year Opened Closed End of Year 2023 1,175 42 (35 ) 1,182 2022 1,133 87 (45 ) 1,175 2021 1,078 103 (48 ) 1,133 2020 1,095 40 (57 ) 1,078 2019 1,055 66 (26 ) 1,095 Licensed Operations Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given geographic area and to source products from us.
Item 1. B usiness. Company Overview American Eagle Outfitters, Inc. (the “Company,” "AEO," “we,”, "us," and “our”) is a leading global specialty retailer. We operate and license over 1,400 retail stores worldwide and are online at www.ae.com and www.aerie.com in the United States and internationally.
Item 1. B usiness. Company Overview American Eagle Outfitters, Inc. (the “Company,” "AEO," “we,”, "us," and “our”) is a leading global specialty retailer. We operate and license nearly 1,500 retail stores worldwide and are online at www.ae.com and www.aerie.com in the United States ("U.S.") and internationally.
Our focus on associate development led to a full-time promotion rate of approximately 26% for Fiscal 2022 as compared to a 24% five-year Company average. INCLUSION, DIVERSITY, EQUITY & ACCESS At AEO, we believe that our success is the result of our focus on being an inclusive, diverse, equitable and accessible Company.
Our focus on associate development led to a full-time promotion rate of approximately 25% for Fiscal 2023 compared to our 24% five year Company average. INCLUSION, DIVERSITY, EQUITY & ACCESS At AEO, we believe our success is the result of our focus on being an inclusive, diverse, equitable and accessible Company.
TALENT MANAGEMENT PROGRAMS We utilize an integrated set of talent management tools and programs, rooted in our values, that thread through the entire talent life cycle.
TALENT MANAGEMENT PROGRAMS We utilize an integrated set of talent management tools and programs, rooted in our values, that thread through the entire talent lifecycle.
These reports are available as soon as reasonably practicable, free of charge, after such material is electronically filed with or furnished to the SEC. Alternatively, you may access these reports at the SEC’s website at www.sec.gov.
These reports and materials are made available as soon as reasonably practicable, free of charge, after such reports and materials are electronically filed with or furnished to the SEC. Alternatively, you may access these reports at the SEC’s website at www.sec.gov.
We offer a broad assortment of high-quality, on-trend apparel, accessories, and personal care products at affordable prices for men and women under the American Eagle brand, and intimates, apparel, active wear, and swim collections under the Aerie brand. We sell directly to consumers through our retail channel, which includes our stores and concession-based shop-within-shops.
We offer a broad assortment of high-quality, on-trend apparel, accessories, and personal care products at affordable prices for men and women under the American Eagle ("AE") brand, and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. We sell directly to consumers through our retail channel, which includes our stores and concession-based shops-within-shops.
The information on our website or any other websites is not incorporated by reference in this Annual Report and should not be considered part of this Annual Report.
The information contained on or accessible through any of our websites or any other websites is not incorporated by reference in this Annual Report and should not be considered part of this Annual Report.
Additionally, our Todd Snyder and Unsubscribed brands and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure they have been included in the Corporate and Other category. See Note 16. “Segment Reporting,” of the Notes to the Consolidated Financial Statements included herein for additional information.
Additionally, our Todd Snyder and Unsubscribed brands and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure they are presented under the Other caption. See Note 15. “Segment Reporting,” of the Notes to the Consolidated Financial Statements included herein for additional information.
Our corporate governance materials, including our corporate governance guidelines: the charters of our audit, compensation, and nominating and corporate governance committees; and our code of ethics may also be found under the Investor Relations section of our website at www.aeo-inc.com . A copy of the corporate governance materials is also available upon written request.
Our corporate governance materials, including our corporate governance guidelines: the charters of our audit, compensation, and nominating governance and corporate social responsibility committees; and our code of ethics may also be found under the Investor Relations section of our website at www.aeo-inc.com . Copies of these corporate governance materials are also available upon written request.
During Fiscal 2022, in addition to increasing the representation of POC throughout the organization, we believe that we made significant progress on our IDEA initiatives at AEO, including: • The announcement of our second class of 15 recipients of the Steven Davis Scholarship for Social Justice (renamed in honor of the late Steven Davis, a Director of the AEO Board who passed away in 2022).
During Fiscal 2023 we believe that we made significant progress on our IDEA initiatives at AEO, including: • The announcement of our third class of 15 recipients of the Steven Davis Scholarship for Social Justice (renamed in honor of the late Steven Davis, a Director of the AEO Board who passed away in 2022).
Seasonality Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively.
We intend to use, renew, and enforce our trademarks in accordance with our business plans. 11 Seasonality Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively.
(2) Includes 34 OFFLINE™ stand-alone stores and 28 OFFLINE™ side-by-side stores connected to an Aerie brand location.
(2) Includes 39 OFFLINE stand-alone stores and 33 OFFLINE side-by-side stores connected to an Aerie brand location.
Our consistently strong internal employee satisfaction scores, corporate exit survey data, and external Glassdoor ratings demonstrate the achievement of this goal. 8 Our culture model is composed of Listening, Observing, Supporting, and Informing: • Listening to our associates, customers and candidates through reviews of culture surveys, exit surveys, Glassdoor reporting, LinkedIn responses, and hotline reporting; we also conduct open-door engagement, Company-wide town halls, and roundtables on a periodic basis. • Observing who we are and what our associates are doing by regularly reviewing our demographic data and retention rates. • Supporting a positive Company culture through programs and processes for eligible associates that promote our strong values and address leadership development opportunities, work-life integration, well-being initiatives, fair pay initiatives, family support, and inclusion and diversity programs. • Informing and clearly communicating our values, modeling the behaviors we expect, and providing training and feedback.
Our culture model is composed of Listening, Observing, Supporting, and Informing: • Listening to our associates, customers and candidates through reviews of culture surveys, exit surveys, on-boarding surveys, third-party reporting, LinkedIn responses, and hotline reporting; we support open door engagement and conduct Company-wide town halls and leader-directed roundtables on a periodic basis. • Observing who we are and what our associates are doing by regularly reviewing data that includes retention rates. 8 • Supporting a positive Company culture through programs and processes for eligible associates that promote our strong values and address leadership development opportunities, work-life integration, well-being initiatives, fair pay initiatives, family support, and inclusion and diversity programs. • Informing and clearly communicating our values, modeling the behaviors we expect, and providing training and feedback.
Associate development is supported through numerous programs, including AEO Academy, an online training platform that provides eligible associates with continuous learning opportunities. AEO Academy has nearly 2,900 modules, which aggregate were completed over one million times during Fiscal 2022, with a total of 14.9 million views on the platform since it was launched in late Fiscal 2019.
We support associate development through numerous programs, including AEO Academy, an online training platform that provides eligible associates with continuous learning opportunities. AEO Academy has over 2,900 modules, which in the aggregate were completed 600,000 times during Fiscal 2023, with over 14.9 million views on the platform since it was launched in late Fiscal 2019.
Our Real Good promise extends to the OFFLINE™ collections with some of our best-selling fleece, leggings and tees made with the planet in mind. As of January 28, 2023, we operated 295 Aerie brand stand-alone stores, inclusive of 34 OFFLINE™ stand-alone stores and 28 OFFLINE™ side-by-side stores connected to an Aerie brand location.
Our Real Good promise extends to the OFFLINE collections with some of our best-selling fleece, leggings and tees made with the planet in mind. As of February 3, 2024, we operated 310 Aerie brand stand-alone stores, inclusive of 39 OFFLINE stand-alone stores and 33 OFFLINE side-by-side stores connected to an Aerie brand location.
We compete with various local, national, and global apparel retailers, as well as the casual apparel and footwear departments of department stores and discount retailers, primarily on the basis of quality, fashion, service, selection, and price.
Competition The global retail apparel industry is highly competitive both in stores and online. We compete with various local, national, and global apparel retailers, as well as the casual apparel and footwear departments of department stores and discount retailers, primarily on the basis of quality, fashion, service, selection, and price.
During Fiscal 2022, we purchased substantially all of our merchandise from non North American suppliers. We sourced merchandise through approximately 330 vendors located throughout the world, primarily in Asia, and did not source more than 10% of our merchandise from any single factory or supplier.
Merchandise Suppliers We design our merchandise, which is manufactured by third-party factories. During Fiscal 2023, we purchased substantially all of our merchandise from non-North American suppliers. We sourced merchandise through approximately 356 vendors located throughout the world, primarily in Asia, and did not source more than 10% of our merchandise from any single factory or supplier.
Our agreements require our licensing partners, buying/sourcing agents, vendors, and factories to operate in compliance with all applicable laws and regulations, and we are not aware of any violations that could reasonably be expected to have a material adverse effect on our consolidated business or operating results. Human Capital Management Our people come first.
Our agreements require our licensing partners, buying/sourcing agents, vendors, and factories to operate in compliance with all applicable laws and regulations including the Uyghur Forced Labor Prevention Act ("UFLPA"), and we are not aware of any violations that could reasonably be expected to have a material adverse effect on our consolidated business or operating results.
He served as our Chief Executive Officer from March 1992 until December 2002 and prior to that time, he served as a Vice President and Director of our predecessors since 1980. He has also served as Chairman of the Board and Chief Executive Officer of Schottenstein Stores Corporation (“SSC”) since March 1992 and as President since 2001. Prior thereto, Mr.
He has also served as the Chairman of the Company and its predecessors since March 1992. He served as our Chief Executive Officer from March 1992 until December 2002 and prior to that time, he served as a Vice President and Director of our predecessors since 1980.
Additionally, some products are shipped directly to stores, which reduces transit times and lowers operating costs. We contract with third-party distribution centers in Mexico, Hong Kong and Japan to service our Company-owned stores and e-commerce operations in those regions. Regulation We and our products are subject to regulation by various federal, state, local, and foreign regulatory authorities.
We contract with third-party distribution centers in Mexico and Hong Kong to service our Company-owned stores and e-commerce operations in those regions. Regulation We and our products are subject to regulation by various federal, state, local, and foreign regulatory authorities.
We recognize that benefits are highly personal, and we offer a broad suite of inclusive plans and programs to our workforce, understanding that their needs and priorities vary. Starting on their hire, re-hire, or promotion date, our full-time associates have access to a variety of medical, dental and vision plan offerings.
We recognize that benefits are highly personal, and we offer a broad suite of inclusive plans and programs to our workforce, understanding that their needs and priorities vary. Subject to the satisfaction of certain eligibility requirements, our full-time associates have access to a variety of medical, dental and vision plan offerings.
Our registered trademarks are renewable indefinitely, and their registrations are properly maintained in accordance with the laws of the country in which they are registered. We intend to use, renew, and enforce our trademarks in accordance with our business plans.
Our registered trademarks are renewable indefinitely, and their registrations are properly maintained in accordance with the laws of the country in which they are registered.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as well as other information that we file with or furnish to the SEC, are available under the Investor Relations section of our website at www.aeo-inc.com .
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, that we electronically file with or furnish to the SEC, pursuant to Section 13(a) or Section 15(d) of the Exchange Act, as well as our definitive proxy materials filed with the SEC pursuant to Section 14 of the Exchange Act, are all available under the Investor Relations section of our website at www.aeo-inc.com .
Consistent talent reviews, performance evaluations, equitable pay practices and succession planning have contributed to a full-time voluntary and mutual turnover rate, including our store associates, of approximately 28% for Fiscal 2022, which is consistent with our retail peer group and compares to a 27% five-year Company average.
Consistent talent reviews, performance evaluations, equitable pay practices and succession planning have contributed to a full-time voluntary and mutual turnover rate of approximately 27% for Fiscal 2023, which includes our store associates, as compared to our 26% five year Company average.
We also have registered or have applied to register substantially all of these trademarks with the registries of the foreign countries in which our stores, e-commerce sites, and/or manufacturers are located and/or where our product is shipped. We have registered AMERICAN EAGLE OUTFITTERS®, AMERICAN EAGLE®, AEO®, LIVE YOUR LIFE®, AERIE®, and various eagle designs with the Canadian Intellectual Property Office.
We also have registered or have applied to register substantially all of these trademarks with the registries of the foreign countries in which our stores, e-commerce sites, and/or manufacturers are located and/or where our product is shipped.
The scholarship program is supported by an investment of $5 million, providing annual full scholarships to 15 associates who are actively driving anti-racism, equality and social justice initiatives; • Continuing our commitment to using both qualitative and quantitative data to inform our strategies and priorities, we released an expanded IDEA survey capturing our entire — population and leveraged information gathered through mandatory inclusive workplace training programs developed by our training partner Emtrain.
The scholarship program is supported by an investment of $5 million, providing annual full scholarships to 15 associates who are actively driving anti-racism, equality and social justice initiatives. • Continuing our commitment to using both qualitative and quantitative data to inform our strategies and priorities, we obtained IDEA-related data through training and voluntary survey responses from our largest population of associates to date.
In the United States and in other countries around the world, we also have registered, or have applied to register, a number of other marks used in our business, including TODD SNYDER®, TAILGATE®, UNSUBSCRIBED®, AE77®, AIRTERRA™, QUIET LOGISTICS®, and our pocket stitch designs.
In the United States and in other countries around the world, we also have registered, or have applied to register, a number of other marks used in our business, including TODD SNYDER®, UNSUBSCRIBED®, AE77®, and AE 24/7™, and our pocket stitch designs also have been registered as protected marks and/or have been adjudicated by courts in the U.S. as protected marks.
Schottenstein served as Vice Chairman of SSC from 1986 to 1992. He has been a Director of SSC since 1982. Mr. Schottenstein also has served since March 2005 as Executive Chairman of the Board of Designer Brands Inc. (f/k/a DSW Inc.) (NYSE: DBI) and formerly served as that company’s Chief Executive Officer from March 2005 to April 2009.
Schottenstein also has served since March 2005 as Executive Chairman of the Board of Designer Brands Inc. (f/k/a DSW Inc.) (NYSE: DBI) and formerly served as that company’s Chief Executive Officer from March 2005 to April 2009. He has also served as a member of the Board of Directors for Albertsons Companies, Inc. (NYSE: ACI) since 2006 to 2022.
Inventory and Distribution Merchandise is shipped directly from our vendors, and deconsolidated through trans loaders to our Company-owned distribution centers in Hazleton, Pennsylvania and Ottawa, Kansas, our Quiet Logistics regional distribution centers strategically located throughout the United States, or our Canadian distribution center in Mississauga, Ontario.
Inventory and Distribution Merchandise is shipped directly from our vendors and deconsolidated to our Company-owned distribution centers in Hazleton, Pennsylvania and Ottawa, Kansas, our regional distribution centers strategically located throughout the United States, or our Canadian distribution center in Mississauga, Ontario. Additionally, some products are shipped directly to stores, which reduces transit times and lowers operating costs.
In the United States alone, as of January 28, 2023, approximately 44% of our associates self-identified as people of color (“POC”). Specifically, our United States population is approximately 55% White, 25% Hispanic, 10% Black, 4% Asian, 1% American Indian or Native Hawaiian, 4% two or more races or other, and 1% not reported.
In the U.S. alone, as of February 3, 2024, approximately 47% of our associates self-identified as people of color (“POC”). Specifically, our U.S. population is approximately 52% White, 27.5% Hispanic, 10.5% Black, 4% Asian, 1% American Indian or Native Hawaiian, 4% two or more races or other, and 1% not reported. Globally, approximately 80% of our associates self-identified as women.
January 28, January 29, 2023 2022 AE Brand: United States 715 741 Canada 75 78 Mexico 56 48 Hong Kong 16 13 Japan 3 — Total AE Brand (1) 865 880 Aerie Brand: United States 248 206 Canada 29 22 Mexico 16 14 Hong Kong 2 2 Total Aerie Brand (2) 295 244 Todd Snyder 10 5 Unsubscribed 5 4 Total Consolidated 1,175 1,133 (1) Includes 186 Aerie side-by-side stores connected to an AE brand location, four locations with AE brand, Aerie brand and OFFLINE™ connected as one store, and two OFFLINE™ side-by-side stores connected to an AE brand location.
Fiscal Years Ending February 3, January 28, 2024 2023 AE Brand: United States 696 715 Canada 75 75 Mexico 64 56 Hong Kong 16 16 Japan - 3 Total AE Brand (1) 851 865 Aerie Brand: United States 262 248 Canada 30 29 Mexico 16 16 Hong Kong 2 2 Total Aerie Brand (2) 310 295 Todd Snyder 16 10 Unsubscribed 5 5 Total Consolidated 1,182 1,175 (1) Includes 187 Aerie side-by-side stores connected to an AE brand location, five locations with AE brand, Aerie brand and OFFLINE connected as one store, and two OFFLINE side-by-side stores connected to an AE brand location.
Fiscal Year Our fiscal year is a 52- or 53-week year that ends on the Saturday nearest to January 31. As used herein, "Fiscal 2023" refers to the 53-week period that will end on February 3, 2024.
Fiscal Year Our fiscal year is a 52- or 53-week year that ends on the Saturday nearest to January 31.
He has also served as a member of the Board of Directors for Albertsons Companies, Inc. (NYSE: ACI) since 2006 to 2022. He has also served as an officer and director of various other entities owned or controlled by members of his family since 1976.
He has also served as an officer and director of various other entities owned or controlled by members of his family since 1976.
Each store is a unique experience that respects and highlights the heritage of the space and the surrounding community. We are making wise choices through plant-first practices, emphasizing local makers, natural fibers, and a desire to produce pieces that stand the test of time in both style and quality. As of January 28, 2023, we operated five Unsubscribed stores.
We are making wise choices through plant-first practices, emphasizing local makers, natural fibers, and a desire to produce pieces that stand the test of time in both style and quality. As of February 3, 2024, we operated five Unsubscribed stores. We offer Unsubscribed products online at www.unsubscribed.com .
Members earn dollar rewards in the form of discount savings certificates. Rewards earned are valid through the stated expiration date, which is 60 days from the issuance date of the reward. Rewards not redeemed during the 60-day redemption period are forfeited. Merchandise Suppliers We design our merchandise, which is manufactured by third-party factories.
Under the Program, members accumulate points based on purchase activity and earn rewards by reaching certain point thresholds. Members earn dollar rewards in the form of discount savings certificates. Rewards earned are valid through the stated expiration date, which is 60 days from the issuance date of the reward. Rewards not redeemed during the 60-day redemption period are forfeited.
Our United States and Canadian distribution centers and our Quiet Logistics regional distribution centers are fully omni-channel and service both stores and digital businesses. We offer the ability for customers to return products seamlessly via any channel regardless of where the products were originally purchased. We also offer a variety of channels to fulfill customer orders.
We offer the ability for customers to return products seamlessly via any channel regardless of where the products were originally purchased. We also offer a variety of channels to fulfill customer orders.
Schottenstein , age 68, has served as our Executive Chairman, Chief Executive Officer since December 2015. Prior thereto, Mr. Schottenstein served as our Executive Chairman, Interim Chief Executive Officer from January 2014 to December 2015. He has also served as the Chairman of the Company and its predecessors since March 1992.
From 2014 to 2016, he served as President and Managing Partner of SY Ventures. Jay L. Schottenstein , age 69, has served as our Executive Chairman and Chief Executive Officer since December 2015. Prior thereto, Mr. Schottenstein served as our Executive Chairman, Interim Chief Executive Officer from January 2014 to December 2015.
With the #AerieREAL™ movement, we celebrate our community by advocating for body positivity and the empowerment of all women. As part of our Real Good promise, we create swimsuits, bras, and underwear with materials made from recycled polyester, recycled nylon fabric or sustainably sourced cotton.
As part of our Real Good promise, we create swimsuits, bras, and underwear with materials made from recycled polyester, recycled nylon fabric or sustainably sourced cotton. 4 OFFLINE by Aerie offers a complete collection of activewear and accessories made for real movement and real comfort.
We offer American Eagle products online at www.ae.com. 4 Aerie and OFFLINE™ by Aerie Built on a platform of power, positivity and no photo retouching - inspiring people to love their real selves. Aerie is a fast-growing lifestyle brand offering intimates, apparel, activewear, and swim collections.
Aerie Built on a platform of power, positivity and no photo retouching - inspiring people to love their real selves, Aerie is a fast-growing lifestyle brand offering intimates, apparel, activewear, and swim collections. With the #AerieREAL™ movement, we celebrate our community by advocating for body positivity and the empowerment of all people.
Real Rewards by American Eagle and Aerie™ highlights include: • Faster earn rates, which equal more rewards; • Exclusive access to member promotions, discounts, and experiences; • Free shipping perks; and • Special cardmember discounts and tier benefits. Under the Program, members accumulate points based on purchase activity and earn rewards by reaching certain point thresholds.
The Program features a variety of benefits for loyalty members and credit card members. Real Rewards by American Eagle and Aerie™ highlights include: • Faster earn rates, which equal more rewards; • Exclusive access to member promotions, discounts, and experiences; • Enhanced shipping perks; and • Special card-member discounts and tier benefits.
At AEO we also know we not only have the power to touch lives within our Company but also can make a lasting impact in the communities in which we operate. We know that living our values of People, Innovation, Passion, Integrity and Teamwork will allow us to enrich our internal and external communities and sustain our inclusive culture. Development.
At AEO we also know we not only have the power to touch lives within our Company but also can make a lasting impact in the communities in which we operate.
AEO Direct We sell merchandise through our digital channels, www.ae.com , www.aerie.com , www.toddsnyder.com , www.unsubscribed.com , and our AEO apps, both domestically and internationally in approximately 80 countries. We also sell merchandise on various international online marketplaces. The digital channels reinforce each particular brand platform and are designed to complement the in-store experience.
We also sell AE and Aerie brand merchandise on various international online marketplaces. We offer Todd Snyder and Unsubscribed brand products online at www.toddsnyder.com and www.unsubscribed.com , respectively. The digital channels reinforce each particular brand platform and are designed to complement the in-store experience. Over the past several years, we have invested in building our technologies and digital capabilities.
We also operate Todd Snyder New York (“Todd Snyder”), a premium menswear brand, and Unsubscribed, which focuses on consciously made, slow fashion. In Fiscal 2021, we acquired AirTerra, Inc. ("AirTerra") and Quiet Logistics, Inc. ("Quiet Logistics"), creating a new supply chain platform ("Quiet Platforms”).
We also operate Todd Snyder New York (“Todd Snyder”), a premium menswear brand; Unsubscribed, which focuses on consciously made, slow fashion; and Quiet Platforms, which is a regionalized fulfillment center network.
Over the past several years, we have invested in building our technologies and digital capabilities. We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience.
We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing to drive qualified traffic to our site and improving the digital customer experience to drive increased conversion. Omni-Channel In addition to our investments in technology, we have invested in building omni-channel capabilities to better serve customers and gain operational efficiencies.
Omni-Channel In addition to our investments in technology, we have invested in building omni-channel capabilities to better serve customers and gain operational efficiencies. These upgraded technologies provide a single view of inventory across channels, connecting physical stores directly to our digital store and providing our customers with a more convenient and improved shopping experience.
These upgraded technologies provide a single view of inventory across channels, connecting physical stores directly to our digital store and providing our customers with a more convenient and improved shopping experience. Our United States and Canadian distribution centers and our edge fulfillment distribution centers are fully omni-channel and service both stores and digital businesses.
We believe in the power of equipping our leaders and our associates with the necessary resources to create and maintain an inclusive workplace, while aiming to advance the careers of associates from historically marginalized groups.
We believe in equipping our leaders and our associates with the necessary resources to create and maintain an inclusive and equitable workplace, investing in the career progression of associates, and developing a pipeline of future and emerging leaders.
We also operated 186 Aerie side-by-side stores connected to an AE brand location, four locations with an AE brand location, Aerie brand location and OFFLINE™ connected as one store, and two OFFLINE™ side-by-side stores connected to an AE brand location. In addition, Aerie brand merchandise is sold online at www.aerie.com and certain items are sold in AE brand stores.
Included in the 851 AE brand store count described above, we also operated 187 Aerie side-by-side stores connected to an AE brand location, five locations with an AE brand location, Aerie brand location and OFFLINE connected as one store, and two OFFLINE side-by-side stores connected to an AE brand location.
As of January 28, 2023, we operated 10 Todd Snyder stores. We offer Todd Snyder products online at www.ToddSnyder.com . Unsubscribed A truly unique brand offering consciously-made, slow fashion with timeless clothing and accessories, Unsubscribed offers one-of-a-kind vintage pieces that represent socially conscious and ethically produced practices.
Unsubscribed A truly unique brand offering consciously-made, slow fashion with timeless clothing and accessories, Unsubscribed offers one-of-a-kind vintage pieces that represent socially conscious and ethically produced practices. Each store is a unique experience that respects and highlights the heritage of the space and the surrounding community.
We offer Unsubscribed products online at www.unsubscribed.com . Key Business Priorities & Strategy We are focused on our “Real Power. Real Growth.” value creation. AEO has the following strategic priorities: o Fueling Aerie to $2 billion in revenue; and o Driving sustained profitable growth for American Eagle.
During Fiscal 2023 we were focused on our “Real Power. Real Growth.” value creation. AEO had the following strategic priorities: • Fueling Aerie to $2 billion in revenue; and • Driving sustained profitable growth for American Eagle. Real Estate We ended Fiscal 2023 with 1,182 Company-owned stores, and 310 licensed store locations.
As of January 28, 2023, we employed approximately 40,000 associates throughout the world, of whom approximately 32,000 were part-time or seasonal associates. We employed 32,800 associates in the United States, of whom approximately 26,400 were part-time or seasonal associates.
Human Capital Management Our people come first. As of February 3, 2024, we employed approximately 43,100 associates throughout the world, of whom approximately 32,800 were part-time or seasonal associates. We employed approximately 36,000 associates in the United States, of whom approximately 27,700 were part-time or seasonal associates.
The Company will leverage customer-focused capabilities and continue to strengthen its return on investment ("ROI") discipline, while building on the power of AEO’s people, culture and purpose. Real Estate We ended Fiscal 2022 with 1,175 Company-owned stores and 269 licensed store locations.
Key Business Priorities & Strategy In Fiscal 2024 we are focused on our "Powering Profitable Growth" plan with the following strategic priorities: • Amplifying our brands • Executing with financial discipline • Optimizing our operating capabilities The Company will leverage customer-focused capabilities and continue to strengthen its return on investment ("ROI") discipline, while building on the power of AEO’s people, culture and purpose.
Todd Snyder New York A premium menswear brand informed by heritage, yet updated for today, with an emphasis on versatility and comfort. Todd Snyder offers signature essentials, statement pieces, custom suiting and iconic accessories reflective of quintessential American style. From bespoke tailoring to innovative capsule collections - good style can be attainable and playful.
Todd Snyder offers signature essentials, statement pieces, custom suiting and iconic accessories reflective of quintessential American style. From bespoke tailoring to innovative capsule collections - good style can be attainable and playful. As of February 3, 2024, we operated 16 Todd Snyder stores. We offer Todd Snyder products online at www.ToddSnyder.com .
As of January 28, 2023, our international licensing partners operated in 269 licensed retail 6 stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries. We plan to continue to increase the number of locations under license agreements or similar arrangements as part of our disciplined approach to global expansion.
As of February 3, 2024, our international licensing partners operated in 310 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.
We are rooted in authenticity, powered by positivity and inspired by our community. Our collections are designed to inspire self-expression and empower our customers to celebrate their own uniqueness. We have broadened our leadership by producing innovative, sustainable fabrics. As of January 28, 2023, we operated 865 AE stores.
Brands American Eagle American Eagle is a leading American jeans and apparel brand, the go-to destination for casual style, embraced by generations since 1977. We are rooted in authenticity, powered by positivity and inspired by our community. Our collections are designed to inspire self-expression and empower our customers to celebrate their own uniqueness.
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Quiet Logistics is a logistics company that operates a network of in-market fulfillment centers, locating products closer to need, creating inventory efficiencies, cost benefits and affordable same-day and next-day delivery options for customers and stores.
Added
As used herein, "Fiscal 2024" refers to the 52-week period that will end on February 1, 2025, “Fiscal 2023” refers to the 53-week period ended February 3, 2024, “Fiscal 2022” refers to the 52-week period ended January 28, 2023, and "Fiscal 2021" refers to the 52-week period ended January 29, 2022.
Removed
AirTerra is a logistics service and platform that solves e-commerce fulfillment and shipping challenges in a unique and innovative way for retailers and brands of all sizes.
Added
Our brands are expanding products under our Real Good label, which reflects higher environmental standards compared to conventional methods and integrates more sustainable raw materials. Today, nearly all AE jeans are made under the Real Good label. As of February 3, 2024, we operated 851 AE stores. We offer American Eagle products online at www.ae.com.
Removed
Both acquisitions represent an important step in building our supply chain platform, as part of our ongoing supply chain transformation strategy of leveraging scale and innovation to help us manage costs and improve service.
Added
These locations are included within the 851 AE store count described above. In addition, Aerie brand merchandise is sold online at www.aerie.com and certain items are sold in AE brand stores. Todd Snyder New York A premium menswear brand informed by heritage, yet updated for today, with an emphasis on versatility and comfort.
Removed
“Fiscal 2022” refers to the 52-week period ended January 28, 2023, “Fiscal 2021” refers to the 52-week period ended January 29, 2022, and “Fiscal 2020” refers to the 52-week period ended January 30, 2021. Brands American Eagle American Eagle is a leading American jeans and apparel brand, the go-to destination for casual style, embraced by generations of youth since 1977.
Added
The gross square footage of our Company-owned stores decreased by 1% to 7.2 million during Fiscal 2023. 5 Company-Owned Stores Our Company-owned retail stores are located in shopping malls, lifestyle centers, and street locations in the United States, Canada, Mexico, and Hong Kong. Refer to Note 16.
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OFFLINE™ by Aerie offers a complete collection of activewear and accessories made for real movement and real comfort.
Added
We plan to continue to increase the number of locations under license agreements or similar arrangements as part of our disciplined approach to global expansion. 6 AEO Direct We sell merchandise through our digital channels, www.ae.com , www.aerie.com , and our AEO apps, both domestically and internationally in approximately 80 countries.
Removed
The gross square footage of our Company-owned stores increased by 5.6% to 7.3 million during Fiscal 2022. 5 COVID-19 Impacts related to the ongoing COVID-19 pandemic have had a significant impact on the retail industry, our Company, our customers, and our associates.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, to the extent that multiple state-level laws are introduced with inconsistent or conflicting standards and there is no federal law to preempt such laws, compliance with such laws could be difficult and costly to achieve, or impossible to achieve, and we could be subject to fines and penalties in the event of non-compliance. 24 The Company’s amended and restated bylaws (“Bylaws”) provide, to the fullest extent permitted by law, that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
Biggest changeThe Company’s amended and restated bylaws (“Bylaws”) provide, to the fullest extent permitted by law, that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
Foreign imports subject us to risks relating to changes in import duties, quotas, the introduction of United States taxes on imported goods or the extension of United 20 States income taxes on our foreign suppliers' sales of imported goods through the adoption of destination-based income tax jurisdiction, loss of "most favored nation" status with the United States, shipment delays and shipping port constraints, labor strikes, work stoppages or other disruptions, freight cost increases and economic uncertainties.
Foreign imports subject us to risks relating to changes in import duties, quotas, the introduction of United States taxes on imported goods or the extension of United States income taxes on our foreign suppliers' sales of imported goods through the adoption of destination-based income tax jurisdiction, loss of "most favored nation" status with the United States, shipment delays and shipping port constraints, labor strikes, work stoppages or other disruptions, freight cost increases and economic uncertainties.
Because of this seasonality, factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year. As a result, we may not be able to accurately predict our 14 quarterly sales.
Because of this seasonality, factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year. As a result, we may not be able to accurately predict our quarterly sales.
Public perception about our products or our stores, whether justified or not, could impair our reputation, involve us in litigation, damage our brands and may adversely impact our business, results of operations, and financial condition. The appeal of our brands may also depend on the success of our environmental, social and governance ("ESG") initiatives, which require company-wide coordination and alignment.
Public perception about our products or our stores, whether justified or not, could impair our reputation, involve us in litigation, damage our brands and may adversely impact our business, results of operations, and financial condition. 16 The appeal of our brands may also depend on the success of our environmental, social and governance ("ESG") initiatives, which require company-wide coordination and alignment.
We cannot control the increasing impact of digital channels on 21 shopping center traffic, the loss of an anchor or other significant tenant in a shopping mall in which we have a store, the development of new shopping malls in the United States or around the world, the availability or cost of appropriate locations, competition with other retailers for prominent locations, or the success of individual shopping malls.
We cannot control the increasing impact of digital channels on shopping center traffic, the loss of an anchor or other significant tenant in a shopping mall in which we have a store, the development of new shopping malls in the United States or around the world, the availability or cost of appropriate locations, competition with other retailers for prominent locations, or the success of individual shopping malls.
We are aware of the inherent risks associated with operating, replacing, and modifying these systems, including inaccurate system information and system disruptions. There is a risk that information technology system disruptions and inaccurate system information, if not anticipated and/or promptly and appropriately mitigated, could have a material adverse effect on our results of operations.
We are aware of the inherent risks associated with operating, replacing, and modifying these systems, including inaccurate system information and system disruptions. There is a risk that information technology 17 system disruptions and inaccurate system information, if not anticipated and/or promptly and appropriately mitigated, could have a material adverse effect on our results of operations.
While we aim to comply with applicable data protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that we have violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to significant fines and penalties in the event of non-compliance.
While we aim to comply with applicable privacy and data protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that we have violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to significant fines and penalties in the event of non-compliance.
Part of our future growth is dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether such desirable locations will become available at reasonable costs.
Part of our future growth is dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether 20 such desirable locations will become available at reasonable costs.
See “— Operational Risks — Our failure to manage growth in our omni-channel operations and the resulting impact on our distribution and fulfillment networks may have an adverse effect on our results of operations.” Failure to define, launch and communicate a brand-relevant customer experience could have a negative impact on our growth and profitability.
See “— Operational Risks — Our failure to manage growth in our omni-channel operations and the resulting impact on our distribution and fulfillment networks may have an adverse effect on our results of operations.” 15 Failure to define, launch and communicate a brand-relevant customer experience could have a negative impact on our growth and profitability.
Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline. 23 We cannot provide assurance that we will pay dividends, or if paid, that dividend payments will be consistent with historical levels.
Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline. We cannot provide assurance that we will pay dividends, or if paid, that dividend payments will be consistent with historical levels.
Strategic Risks Our inability to grow our digital channels and leverage omni-channel capabilities could adversely impact our business. We have made and expect to continue to make significant investments in building our technologies and digital capabilities in three key areas: mobile technology, digital marketing, and the digital customer experience.
Strategic Risks Our inability to grow and optimize our digital channels and leverage omni-channel capabilities could adversely impact our business. We have made and expect to continue to make significant investments in building our technologies and digital capabilities in three key areas: mobile technology, digital marketing, and the digital customer experience.
In addition, the laws of certain foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States Litigation regarding our trademarks and other intellectual property rights could adversely affect our business, financial condition, and results of operations.
In addition, the laws of certain foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States Litigation regarding our trademarks, copyrights and other intellectual property rights could adversely affect our business, financial condition, and results of operations.
In addition, the impacts of climate change could result in changes in regulations or consumer preferences, which could in turn affect our business, operating results, and financial condition. 15 Impairment to goodwill, intangible assets, and other long-lived assets could adversely impact our profitability.
In addition, the impacts of climate change could result in changes in regulations or consumer preferences, which could in turn affect our business, operating results, and financial condition. Impairment to goodwill, intangible assets, and other long-lived assets could adversely impact our profitability.
The metrics we disclose in our ESG report, such as emissions and water usage, whether they be based on the standards 17 we set for ourselves or those set by others, may influence our reputation and the value of our brand.
The metrics we disclose in our ESG report, such as emissions and water usage, whether they be based on the standards we set for ourselves or those set by others, may influence our reputation and the value of our brand.
A variety of federal, state, local, and foreign laws and regulations, orders, rules, codes, regulatory guidance and certain industry standards regarding privacy, data protection, consumer protection, information security and the processing of personal information and other data apply to our business.
A variety of federal, state, local, and foreign laws and regulations, orders, rules, codes, regulatory guidance and certain industry standards regarding privacy, 22 data protection, consumer protection, information security and the processing of personal information and other data apply to our business.
We believe that our trademarks and service marks, as described in Part I, Item 1, Business, are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to establishing and protecting our trademarks and service marks.
We believe that our trademarks and service marks, as described in Part I, Item 1, Business, are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to 23 establishing and protecting our trademarks and service marks.
We, and our third-party vendors, have been 19 subject to cyber, phishing and social engineering attacks and other security incidents in the past and may continue to be subject to such attacks in the future.
We, and our third-party vendors, have been subject to cyber, phishing and social engineering attacks and other security incidents in the past and may continue to be subject to such attacks in the future.
The uncertain state of the global economy continues to impact businesses around the world, including ours. Inflation and other macroeconomic pressures in the United States and the global economy such as rising interest rates, energy prices 13 and recession fears are creating a complex and challenging retail environment for us and our customers, and consumers may further reduce discretionary spending.
The uncertain state of the global economy continues to impact businesses around the world, including ours. Inflation and other macroeconomic pressures in the United States and the global economy such as rising interest rates, energy prices and recession fears are creating a complex and challenging retail environment for us and our customers, and consumers may reduce discretionary spending.
Declines in consumer spending have and, in the future, may result in decreased demand for our products, increased inventories, lower revenues, higher discounts, pricing pressure and lower gross margins. • We may be negatively impacted by changes in consumer preferences and discretionary spending habits such as consumer behavior reallocating to non-retail discretionary consumer spending. • We may be unable to access financing in the credit and capital markets at reasonable rates. • We conduct transactions in various currencies, which creates exposure to fluctuations in foreign currency exchange rates relative to the United States dollar, in particular the Mexican peso and Canadian dollar.
Declines in consumer spending have and, in the future, may result in decreased demand for our products, increased inventories, lower revenues, higher discounts, pricing pressure and lower gross margins. • We may be negatively impacted by changes in consumer preferences and discretionary spending habits such as consumers reallocating spending to non-apparel retail discretionary consumer spending. • We may be unable to access financing in the credit and capital markets at reasonable rates. • We conduct transactions in various currencies, which creates exposure to fluctuations in foreign currency exchange rates relative to the United States dollar, in particular the Mexican peso and Canadian dollar.
We operate in a highly competitive industry, and we face significant pricing pressures from existing and new competitors. The sale of apparel, accessories, intimates, and personal care products is a highly competitive business with numerous participants, including individual and chain specialty apparel retailers, local, regional, national, and international department stores; discount stores and online businesses.
We operate in a highly competitive industry, and we face significant pricing pressures from existing and new competitors. The sale of apparel, accessories, intimates, and personal care products is a highly competitive business with numerous participants, including individual and chain specialty apparel retailers, fast-fashion retailers, local, regional, national, and international department stores; discount stores and online businesses.
Increasingly, consumers are using mobile-based devices and applications to shop online with us and with our competitors, and to do comparison shopping, as well as to engage with us and our competitors through digital services and experiences that are offered on mobile platforms. In Fiscal 2022, digital sales represented 36% of our total revenue.
Increasingly, consumers are using mobile-based devices and applications to shop online with us and with our competitors, and to do comparison shopping, as well as to engage with us and our competitors through digital services and experiences that are offered on mobile platforms. In Fiscal 2023, digital sales represented 39% of our total revenue.
Our results could be adversely affected by events beyond our control, such as natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events.
Our results could be adversely affected by events beyond our control, such as natural disasters, public health crises, political crises and results of elections, negative global climate patterns, or other catastrophic events.
Our success depends on our ability to execute on our key priorities. Achieving these key business priorities depends on us executing our strategies successfully, and the initiatives that we implement in connection with these goals may not resonate with our customers, or be successful in achieving their intended goals.
Achieving these key business priorities depends on us executing our strategies successfully, and the initiatives that we implement in connection with these goals may not resonate with our customers, or be successful in achieving their intended goals.
Our success depends to a significant extent upon our ability to attract and retain qualified key personnel, including senior management, and, in particular, Jay Schottenstein, our Executive Chairman and CEO as well as Jennifer Foyle, our Chief Creative Officer.
Our success depends to a significant extent upon our ability to attract and retain qualified key personnel, including senior management, and, in particular, Jay Schottenstein, our Executive Chairman and CEO as well as Jennifer Foyle, our President, Executive Creative Officer - AE and Aerie.
Our operations, those of our licensees, our suppliers, or our customers, could be negatively impacted by various events beyond our control, including, without limitation, natural disasters, such as hurricanes, tornadoes, floods, earthquakes, extreme cold events and other adverse weather conditions; public health crises, such as pandemics and epidemics (including, without limitation, the ongoing COVID-19 pandemic); political crises, such as terrorist attacks, war, labor unrest, and other political instability (including, without limitation, the ongoing conflict between Russia and Ukraine); negative global climate patterns, especially in water-stressed regions; or other catastrophic events, such as fires or other disasters occurring at our distribution centers or our vendors' manufacturing facilities, whether occurring in the United States or internationally.
Our operations, those of our licensees, our suppliers, or our customers, could be negatively impacted by various events beyond our control, including, without limitation, natural disasters, such as hurricanes, tornadoes, floods, earthquakes, extreme cold events and other adverse weather conditions; public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war, U.S. and foreign election uncertainty, labor unrest, and other political instability (including, without limitation, the ongoing war between Russia and Ukraine and the war between Israel and Hamas); negative global climate patterns, especially in water-stressed regions; or other catastrophic events, such as fires or other disasters occurring at our distribution centers or our vendors' manufacturing facilities, whether occurring in the United States or internationally.
If global economic and financial market conditions deteriorate, the following factors could have a material adverse effect on our business, operating results and financial condition: • The success of our operations is highly dependent on consumer spending, which can be negatively impacted by economic conditions as well as factors affecting disposable consumer income such as income taxes, payroll taxes, employment, consumer debt, interest rates, increases in energy costs and consumer confidence.
If global economic and financial market conditions deteriorate, the following factors could have a material adverse effect on our business, operating results and financial condition: • The success of our operations is highly dependent on consumer spending, which can be negatively impacted by economic conditions and other factors that affect disposable consumer income, including income taxes, payroll taxes, employment, consumer debt, interest rates, increases in energy costs and consumer confidence.
While we maintain business interruption and property insurance, in the event of a data center shutdown, our insurance may not be sufficient to cover the impact to the business. 18 Furthermore, if our information technology systems are damaged, breached or cease to properly function for any reason, including the poor performance of, failure of, or cyber-attack on third-party service providers, catastrophic events, power outages, cybersecurity breaches, network outages, failed upgrades or similar events, and if our disaster recovery and business continuity plans do not effectively resolve such issues, we may suffer interruptions in our ability to manage or conduct business, as well as reputational harm, and we may be subject to governmental investigations and litigation, any of which may adversely impact our business, results of operations, and financial condition.
Furthermore, if our information technology systems are damaged, breached or cease to properly function for any reason, including the poor performance of, failure of, or cyber-attack on third-party service providers, catastrophic events, power outages, cybersecurity breaches, network outages, failed upgrades or similar events, and if our disaster recovery and business continuity plans do not effectively resolve such issues, we may suffer interruptions in our ability to manage or conduct business, as well as reputational harm, and we may be subject to governmental investigations and litigation, any of which may adversely impact our business, results of operations, and financial condition.
In order to grow and remain competitive, we will need to continue to adapt to future changes in technology to address the changing demands of consumers.
In order to grow and remain competitive, we will need to continue to adapt to future changes in technology, including the development of artificial intelligence, to address the changing demands of consumers.
Additional legal and regulatory requirements have increased the complexity of the regulatory environment and the cost of compliance. Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated. In addition, we cannot predict the impact that may result from changes in the regulatory or administrative landscape.
Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated. In addition, we cannot predict the impact that may result from changes in the regulatory or administrative landscape.
We are subject to other consumer protection laws, including California's Consumer Legal Remedies Act and unfair competition and false advertising laws, the Fair and Accurate Credit Transactions Act and the Telephone Consumer Protection Act, Canada's Anti-Spam Law, the CCPA, the CPRA and other recently enacted consumer data protection laws.
We are also subject to other consumer data and protection/privacy laws, including California's Consumer Legal Remedies Act and unfair competition and false advertising laws, the Fair and Accurate Credit Transactions Act and the Telephone Consumer Protection Act, and Canada's Anti-Spam Law.
Seasonality may cause sales to fluctuate and negatively impact our results of operations. Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively.
Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively.
We face a variety of competitive challenges, including: • Anticipating and quickly responding to changing consumer demands or preferences better than our competitors; • Maintaining favorable brand recognition and effective marketing of our products to consumers in several demographic markets; • Sourcing merchandise efficiently; • Developing innovative, high-quality merchandise in styles that appeal to our customers and in ways that favorably distinguish us from our competitors; • Countering the aggressive pricing and promotional activities of many of our competitors; and • Anticipating and quickly responding to changing consumer shopping preferences and practices, including the increasing shift to digital brand engagement, social media communication, and online shopping.
We face a variety of competitive challenges, including: • Anticipating and quickly responding to changing consumer demands or preferences better than our competitors; • Maintaining favorable brand recognition and effective marketing of our products to consumers in several demographic markets; • Sourcing merchandise efficiently; • Developing innovative, high-quality merchandise in styles that appeal to our customers and in ways that favorably distinguish us from our competitors; • Countering the aggressive pricing and promotional activities of many of our competitors; and • Anticipating and quickly responding to changing consumer shopping preferences and practices, including the increasing shift to digital brand engagement, social media communication, and online shopping. 14 • Safely evaluation and incorporating new technologies, such as artificial intelligence ("AI"), machine learning, and other relevant innovation.
If these laws change without our knowledge, or are violated by importers, designers, manufacturers, distributors or employees, we could experience delays in shipments or receipt of goods or be subject to fines or other penalties, any of which could adversely affect our business.
If these laws change without our knowledge, or are violated by importers, designers, manufacturers, distributors, contractors, vendors, suppliers, or employees, we could experience delays in shipments or receipt of goods or be subject to fines or other penalties, any of which could adversely affect our business, our financial condition and the mark price of our common stock.
Violations of these laws could subject us to sanctions or other penalties that could have an adverse effect on our reputation, operating results and financial condition.
Violations of these laws could subject us to actions of government regulatory authorities, including sanctions, import restrictions, and tariffs, or other penalties that could have an adverse effect on our reputation, operating results and financial condition.
General Risk Factors Additionally, other factors could adversely affect our financial performance, including factors such as our ability to successfully acquire and integrate other businesses; any interruption of our key infrastructure systems, including exceeding capacity in our distribution centers; any disaster or casualty resulting in the interruption of service from our distribution centers or in a large number of our stores; any interruption of our business related to an outbreak of a pandemic disease in a country where we source or market our merchandise; extreme weather conditions or changes in climate conditions or weather patterns; and the effects of changes in interest rates.
The outcome of these proceedings may not be favorable, and one or more unfavorable outcomes could have an adverse impact on our business, financial condition, and results of operations. 24 General Risk Factors Additionally, other factors could adversely affect our financial performance, including factors such as our ability to successfully acquire and integrate other businesses; any interruption of our key infrastructure systems, including exceeding capacity in our distribution centers; any disaster or casualty resulting in the interruption of service from our distribution centers or in a large number of our stores; any interruption of our business related to an outbreak of a pandemic disease in a country where we source or market our merchandise; extreme weather conditions or changes in climate conditions or weather patterns; activist investors; and the effects of changes in interest rates.
Furthermore, the significant cash flow required to satisfy our obligations under the leases increases our vulnerability to adverse changes in general economic, industry, and competitive conditions, and could limit our ability to fund working capital, incur indebtedness, and make capital expenditures or other investments in our business.
Furthermore, the significant cash flow required to satisfy our obligations under the leases increases our vulnerability to adverse changes in general economic, industry, and competitive conditions, and could limit our ability to fund working capital, incur indebtedness, and make capital expenditures or other investments in our business. 21 We rely on key personnel, the loss of whom could have a material adverse effect on our business.
However, advances in information technology capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability, or the failure or inability of our vendors, to adequately protect personal or other sensitive information and there can be no assurance that we or our vendors will not suffer a cyberattack, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data, or that any such data compromise or unauthorized access will be discovered in a timely fashion.
However, advances in information technology capabilities (including AI), increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability, or the failure or inability of our vendors, to adequately protect personal or other sensitive information and there can be no assurance that we or our vendors will not suffer a cyberattack, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data (including input into a third-party generative AI platform), or that any such data compromise or unauthorized access will be discovered or remediated in a timely fashion. 18 We rely on associates, contractors and other third parties who may attempt to circumvent our security measures in order to obtain such information and may purposefully or inadvertently cause a breach involving such information.
In addition, our competitors are also investing in omni-channel initiatives, some of which may be more successful than our initiatives. Our inability to respond to changes in consumer behavior and our competitive environment, or to successfully maintain and expand our omni-channel business may have an adverse impact on our results of operations.
Our inability to respond to changes in consumer behavior and our competitive environment, or to successfully maintain and expand our omni-channel business may have an adverse impact on our results of operations.
Our future success depends, in part, upon our ability to identify and respond to fashion trends and changing consumer preferences in a timely manner. Lead times for many of our design and purchasing decisions may make it more difficult for us to respond rapidly to new or changing apparel trends or consumer acceptance of our products.
Lead times for many of our design and purchasing decisions may make it more difficult for us to respond rapidly to new or changing apparel trends or consumer acceptance of our products.
If our associates are unable to work because of ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted.
In addition, most of our corporate office associates are working on a hybrid schedule (in office/telework). If our associates are unable to work because of ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted.
While we work to identify trends and consumer preferences on an ongoing basis and offer inventory and shopping experiences that meet such trends and preferences, we may not do so effectively and/or on a timely basis. As a result, we are vulnerable to changes in consumer demand, pricing shifts and the timing and selection of merchandise purchases.
While we work to identify trends and consumer preferences on an ongoing basis and offer inventory and shopping experiences that meet such trends and preferences, we may not do so effectively and/or on a timely basis.
We are also exposed to risks caused by new or ongoing armed conflicts. For example, the recent conflict between Russia and Ukraine has caused and continues to cause disruption, instability and volatility in global markets. The conflict has caused and may continue to cause adverse global economic conditions resulting from escalating geopolitical tensions and inflationary pressures, among other factors.
For example, the ongoing war between Russia and Ukraine and the war between Israel and Hamas have caused and continue to cause disruption, instability and volatility in global markets. These conflicts have caused and may continue to cause adverse global economic conditions resulting from escalating geopolitical tensions and inflationary pressures, among other factors.
Such activity might take the form of a physical act that impedes the flow of imported goods or the insertion of a harmful or injurious agent into an imported shipment. We cannot predict the likelihood of any such activities or the extent of their adverse impact on our operations.
Such activity might take the form of a physical act that impedes the flow of imported goods or the insertion of a harmful or injurious agent into an imported shipment.
Our international merchandise sourcing strategy subjects us to risks that could adversely impact our business and results of operations. We design our merchandise, which is manufactured by third-party suppliers worldwide.
Insurers may also deny us coverage as to any future claim. Any of these results could harm our growth prospects, financial condition, business, and reputation. Our international merchandise sourcing strategy subjects us to risks that could adversely impact our business and results of operations. We design our merchandise, which is manufactured by third-party suppliers worldwide.
We utilize security tools and controls and also rely on our third-party vendors to use sufficient security measures, including encryption and authentication technology, in an effort to protect personal and other sensitive information.
In addition, certain new technologies, including AI, present new and significant cybersecurity safety risks that much be analyzed and addressed before implementation. We utilize security tools and controls and also rely on our third-party vendors to use sufficient security measures, including encryption and authentication technology, in an effort to protect personal and other sensitive information.
State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention, sharing, transfer, and security of personally identifiable information and data.
Our failure to comply with privacy laws and regulations could have a material adverse effect on our business. State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention, sharing, transfer, and security of personally identifiable information and data.
Changes in the regulatory or administrative landscape could adversely affect our financial condition and results of operations. We are subject to numerous domestic and foreign laws and regulations affecting our business, including those related to labor, employment, worker health and safety, competition, privacy, consumer protection, import/export, anti-corruption, including the Foreign Corrupt Practices Act, and climate change.
We are subject to numerous domestic and foreign laws and regulations affecting our business, including those related to labor, employment, worker health and safety, taxes, tariffs, competition, privacy, data security, artificial intelligence, consumer protection, import/export, marketing, pricing, anti-corruption, including the Foreign Corrupt Practices Act, and climate change.
Some of these competitors have robust digital consumer experiences and highly efficient delivery systems. Furthermore, the decrease in mall traffic is putting a greater reliance on the digital channel and thus increasing the competitive threat.
Furthermore, the decrease in mall traffic is putting a greater reliance on the digital channel and thus increasing the competitive threat.
Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our associates, our third-party vendors or their personnel or other parties.
For example, as artificial intelligence continues to evolve, cyber-attackers could also use artificial intelligence to develop malicious code and sophisticated phishing attempts. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our associates, our third-party vendors or their personnel or other parties.
Changes in fashion trends, if unsuccessfully identified, forecasted or responded to markdowns or write-offs, could negatively impact our ability to achieve or maintain profitability and have a material adverse effect on our business, particularly unanticipated changes such as those that resulted from the COVID-19 pandemic, could also negatively impact our brand image with our customers and result in diminished brand loyalty.
Changes in fashion trends, if unsuccessfully identified, forecasted or responded to markdowns or write-offs, could negatively impact our ability to achieve or maintain profitability and have a material adverse effect on our business partners.
If our marketing and customer experience programs, including our loyalty program, are unsuccessful, or if our competitors are more effective with their programs than we are, our growth and profitability may be negatively affected. 16 Our efforts to execute on our key business priorities could have a negative impact on our growth and profitability.
We strive to build strong emotional connections with our customers and to enrich the customer experience. If our marketing and customer experience programs, including our loyalty program, are unsuccessful, or if our competitors are more effective with their programs than we are, our growth and profitability may be negatively affected.
Nevertheless, the actions we have taken, including to establish and protect our trademarks and service marks, may not be adequate to prevent others from imitating our products or to prevent others from seeking to block sales of our products. Other parties may also claim that some of our products infringe on their trademarks, copyrights or other intellectual property rights.
We are not aware of any material claims of infringement or material challenges to our right to use any of our trademarks. Nevertheless, the actions we have taken, including to establish and protect our trademarks and service marks, may not be adequate to prevent others from imitating our products or seeking to block sales of our products.
Our ability to find qualified suppliers who uphold our standards and provide access to products in a timely and efficient manner in the volume we may demand, can present a significant challenge, especially with respect to suppliers located and goods sourced outside the United States Further, United States foreign trade policies, tariffs, and other impositions on imported goods, trade sanctions imposed on certain countries and entities, the limitation on the importation of goods containing certain materials from other countries and other factors relating to foreign trade are beyond our control.
Our ability to find qualified suppliers who uphold our standards and provide access to products in a timely and efficient manner in the volume we may demand, in compliance with applicable laws, can present a significant challenge, especially with respect to suppliers located and goods sourced outside the United States.
We have made significant capital investments in these areas but there is no assurance that we will realize expected returns on those investments or be successful in growing our digital channels. As omni-channel retailing continues to evolve, our customers are increasingly more likely to shop across multiple channels that work in tandem to meet their needs.
We have made significant capital investments in these areas but there is no assurance that we will realize expected returns on those investments or be successful in growing and optimizing digital channels.
There can be no assurance that the Company will pay dividends in the future on a regular basis or otherwise. In the event our financial condition or other factors necessitate, our board may choose to delay or suspend the payment of our dividends again in the future.
In addition, our Board may also suspend the payment of dividends at any time if it deems such action to be in the best interests of the Company and its stockholders. There can be no assurance that the Company will pay dividends in the future on a regular basis or otherwise.
During Fiscal 2022 interest rates and energy costs increased, and consumer confidence reached an all time low. Additionally, there are fears of a potential recession during Fiscal 2023. Any of these factors could lead to a decrease in consumer spending.
During Fiscal 2023, interest rates continued to increase, and consumer confidence remained below pre-COVID-19 levels. Additionally, risks relating to a potential recession during Fiscal 2024 remain. Any of these factors could lead to a decrease in consumer spending.
Also, changes in laws and regulations could make operating our business more expensive 25 or require us to change the way we do business. Our employees, contractors, vendors and suppliers could take actions that violate our policies and procedures which could have a material adverse effect on our reputation, our financial condition and the market price of our common stock.
Also, changes in laws and regulations could make operating our business more expensive or require us to change the way we do business.
Changing consumer preferences has resulted and may continue to result in new competition for our products. The substantial sales growth in the digital channel within the last several years has increased competition due to new entrants in the market and has resulted in pricing pressures from new entrants and established competitors.
The substantial sales growth in the digital channel within the last several years has increased competition due to new entrants and established competitors, particularly in terms of customer engagement, delivery speed, shipping charges and return privileges. Some of these competitors have robust digital consumer experiences and highly efficient delivery systems.
Legal, Tax, and Regulatory Risks We are subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other legal obligations, could have a material adverse effect on our business.
In the event our financial condition or other factors necessitate, our Board may choose to delay or suspend the payment of our dividends again in the future. Legal, Tax, and Regulatory Risks We are subject to stringent and changing laws, regulations, and standards, related to data privacy, protection, and security.
Removed
The ongoing COVID-19 pandemic has had, and may in the future have, an adverse effect on our business and results of operations. The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, created significant volatility and disruption of financial markets, and has had an adverse impact on our business and financial performance.
Added
As a result, we are vulnerable to changes in consumer demand, pricing shifts and the timing and selection of merchandise purchases. 13 Our future success depends, in part, upon our ability to identify and respond to fashion trends and changing consumer preferences in a timely manner.
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The COVID-19 pandemic also has impacted and may in the future interrupt and further increase costs for our supply chain and could require additional changes to our operations.
Added
In particular, unanticipated changes such as those that resulted from events beyond our control, such as the COVID-19 pandemic, could also negatively impact our brand image with our customers and result in diminished brand loyalty. Seasonality may cause sales to fluctuate and negatively impact our results of operations.
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Transportation shortages, labor shortages and port congestion globally have in the past delayed and could in the future delay inventory orders and, in turn, deliveries to our customers and availability in our company-operated stores and e-commerce sites.
Added
Competition in the apparel industry is particularly enhanced in the digital marketplace, where there are new entrants in the market, greater pricing pressure and heightened customer expectations and competitive pressure related to, among other things, customer engagement, delivery speed, shipping charges and return privileges.
Removed
These supply chain and logistics disruptions have impacted our inventory levels and net revenues in prior periods and could impact our financial results in future periods. The COVID-19 pandemic also directly threatens the health of our associates and consumers. The operation of all of our stores is critically dependent on our associates who staff these locations.
Added
In addition, fast fashion, value fashion and off-price retailers have shifted customer expectations of pricing for well-known brands and have contributed to additional promotional and pricing pressure in recent years. Changing consumer preferences has resulted and may continue to result in new competition for our products.
Removed
In the event that an associate tests positive for COVID-19, we have had to, and may in the future have to, temporarily close one or more stores, offices or distribution centers for cleaning and/or quarantine one or more associates, or due to the unavailability of impacted associates, which could negatively impact our financial results.
Added
In addition, digital operations are subject to numerous risks, including reliance on third-party computer hardware/software and service providers, data breaches, violations of evolving laws and regulations, including those relating to online privacy, credit card fraud, telecommunication failures, electronic break-ins and similar compromises, artificial intelligence and machine learning, and disruption of internet service.
Removed
The extent of the impact of the COVID-19 pandemic on our business will depend on future developments, which remain highly uncertain and difficult to predict, including the duration, severity and sustained geographic spread of the pandemic; additional waves of increased infections; the virulence and spread of different strains of the virus; and the extent to which associated prevention, containment, remediation and treatment efforts, including global vaccination programs and vaccine acceptance, are successful.
Added
Changes in U.S. and foreign governmental regulations may also negatively impact our ability to deliver products to our customers through our digital channels. Failure to successfully respond to these risks may adversely affect sales as well as damage the reputation of our brands.
Removed
We strive to build strong emotional connections with our customers and to enrich the customer experience.
Added
As omni-channel retailing continues to evolve, our customers are increasingly more likely to shop across multiple channels that work in tandem to meet their needs. In addition, our competitors are also investing in omni-channel initiatives, some of which may be more successful than our initiatives.
Removed
We rely on associates, contractors and other third parties who may attempt to circumvent our security measures in order to obtain such information and may purposefully or inadvertently cause a breach involving such information.
Added
Our inability to execute on our key business priorities could have a negative impact on our growth and profitability. Our success depends on our ability to execute on our key priorities.
Removed
Insurers may also deny us coverage as to any future claim. Any of these results could harm our growth prospects, financial condition, business, and reputation. Telework may negatively impact our operations or increase our risk exposures. Most of our corporate office associates are working remotely.
Added
While we maintain business interruption and property insurance, in the event of a data center shutdown, our insurance may not be sufficient to cover the impact to the business.
Removed
Our inability to successfully integrate Quiet Logistics’ business and operations may adversely affect the combined company’s future results. We believe the acquisition of Quiet Logistics will result in certain anticipated benefits, including inventory efficiencies, affordable same-day and next-day delivery options, and other cost-effective in-market fulfillment services for the Company by utilizing state-of-the-art technology and robotics.
Added
We and our third-party vendors may not anticipate, detect, or prevent all types of attacks until after they have already been launched because the techniques used to obtain unauthorized access are increasingly sophisticated, constantly evolving and may not be known in the market.
Removed
The combined company may fail to realize these anticipated benefits for a variety of reasons, including the following: • failure to successfully manage relationships with employees, distributors and suppliers; • revenue attrition in excess of anticipated levels; • potential incompatibility of technologies and systems; 22 • failure to leverage the increased scale of the combined company quickly and effectively; • potential difficulties integrating and harmonizing financial reporting systems; • the loss of key employees; and • failure to effectively coordinate sales and marketing efforts to efficiently utilize the acquired capabilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease approximately 200,000 square feet of office space in New York, New York for our designers and sourcing and production teams. The lease for this space expires in 2026. We lease a building in Mississauga, Ontario with approximately 294,000 square feet, which houses our Canadian distribution center. The lease expires in 2028.
Biggest changeWe lease approximately 200,000 square feet of office space in New York, New York for our designers and sourcing and production teams. The leases for this space expire through 2026. We lease a building in Mississauga, Ontario with approximately 294,000 square feet, which houses our Canadian distribution center. The lease expires in 2028.
Each of the above identified properties is shared by certain of our reportable and operating segments, including American Eagle, Aerie, Todd Snyder and Unsubscribed brands. We lease distribution facilities in seven cities throughout the United States totaling 2.7 million square feet, with varying terms expiring through 2030. These facilities are used by our Quiet Platforms operating segment.
Each of the above identified properties is shared by certain of our reportable and operating segments, including American Eagle, Aerie, Todd Snyder and Unsubscribed brands. We lease regional distribution facilities in six cities throughout the United States totaling 2.1 million square feet, with varying terms expiring through 2030. These facilities are used by our Quiet Platforms operating segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeConsistent with Item 103 of Regulation S-K, we have elected to disclose those environmental proceedings with a governmental entity as a party where the Company reasonably believes that such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1.0 million or more. Refer to Note 2.
Biggest changeConsistent with Item 103 of Regulation S-K, we have elected to disclose those environmental proceedings with a governmental entity as a party where the Company reasonably believes that such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1.0 million or more. Applying this threshold, there are no environmental matters to disclose for Fiscal 2023.
“Summary of Significant Accounting Policies – Legal Proceedings and Claims” of the Notes to the Consolidated Financial Statements included herein for additional information. Item 4. Mine Saf ety Disclosures. Not Applicable. 27 PART II
Refer to Note 2. “Summary of Significant Accounting Policies – Legal Proceedings and Claims” of the Notes to the Consolidated Financial Statements included herein for additional information. Item 4. Mine Saf ety Disclosures. Not Applicable. 27 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+1 added−1 removed4 unchanged
Biggest changeTotal Number of Maximum Number of Total Average Shares Purchased as Shares That May Number of Price Paid Part of Publicly Yet Be Purchased Period Shares Purchased Per Share Announced Programs Under the Program (1) (2) (1) (3) (3) October 30, 2022 through November 26, 2022 — $ — — 12,977,130 November 27, 2022 through December 31, 2022 547 $ 14.21 — 12,977,130 January 1, 2023 through January 28, 2023 — $ — — 12,977,130 Total 547 $ 14.21 — 12,977,130 (1) There were no shares repurchased as part of our publicly announced share repurchase program during the 13 weeks ended January 28, 2023 and there were 547 shares repurchased for the payment of taxes in connection with the vesting of share-based payments.
Biggest changeTotal Number of Maximum Number of Total Average Shares Purchased as Shares That May Number of Price Paid Part of Publicly Yet Be Purchased Period Shares Purchased Per Share Announced Programs Under the Program (1) (2) (1) (3) (3) October 29, 2023 through November 25, 2023 — $ — — 12,977,130 November 26, 2023 through December 30, 2023 — $ — — 12,977,130 December 31, 2023 through February 3, 2024 1,000,000 $ 20.24 1,000,000 30,000,000 Total 1,000,000 $ 20.24 1,000,000 30,000,000 (1) There were 1.0 million shares repurchased as part of our publicly announced share repurchase program during the 14 weeks ended February 3, 2024.
Item 5. Market for Registrant’s Common Equity, Related S tockholder Matters, and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock is traded on the NYSE under the symbol “AEO.” As of March 8, 2023, there were 448 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related S tockholder Matters, and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock is traded on the NYSE under the symbol “AEO.” As of March 8, 2024, there were 447 stockholders of record.
As of the end of Fiscal 2022, this group consisted of the following companies: Abercrombie & Fitch Co.; Bath and Body Works, Inc.; Burberry Group PLC; Capri Holdings Limited; Chico’s FAS, Inc.; Express, Inc., Fossil Group, Inc.; The Gap, Inc.; Guess?, Inc.; Hanesbrands Inc.; Kontoor Brands; Levi Strauss & Co.; lululemon athletica, inc.; PVH CORP.; Ralph Lauren Corporation; Tapestry, Inc.; Under Armour Inc.; Urban Outfitters, Inc; and Victoria's Secret & Co.
As of the end of Fiscal 2023, this group consisted of the following companies: Abercrombie & Fitch Co.; Burberry Group PLC; Capri Holdings Limited; Chico’s FAS, Inc.; Express, Inc.; The Gap, Inc.; Guess?, Inc.; Hanesbrands Inc.; Kontoor Brands; Levi Strauss & Co.; lululemon athletica, inc.; PVH CORP.; Ralph Lauren Corporation; Tapestry, Inc.; Under Armour Inc.; Urban Outfitters, Inc; and Victoria's Secret & Co.
The comparison of the cumulative total returns for each investment assumes that $100 was invested in our common stock and the respective index on February 3, 2018 and includes reinvestment of all dividends.
The comparison of the cumulative total returns for each investment assumes that $100 was invested in our common stock and the respective index on February 2, 2019 and includes reinvestment of all dividends.
(2) Average price paid per share excludes any broker commissions paid. (3) During Fiscal 2019, our Board authorized the public repurchase of 30.0 million shares under a new share repurchase program, which expires on February 3, 2024. I tem 6. Reserved 30
(2) Average price paid per share excludes any broker commissions paid. (3) On February 1, 2024, our Board authorized the public repurchase of 30.0 million shares under a new share repurchase program, which expires on February 3, 2029.
However, when including associates who own shares through our employee stock purchase plan, and others holding shares in broker accounts under street name, we estimate the stockholder base at approximately 105,000. Dividends A dividend of $0.18 per share was paid in the first and second quarters of Fiscal 2022 resulting in a dividend yield of 2.5%.
However, when including associates who own shares through our employee stock purchase plan, and others holding shares in broker accounts under street name, we estimate the stockholder base at approximately 160,000. Dividends A quarterly cash dividend of $0.10 per share was paid in the first, second, and third quarters of Fiscal 2023.
Subsequent to the fourth quarter of Fiscal 2022, our Board declared a $0.10 per share dividend, payable on April 21, 2023 to stockholders of record at the close of business on April 6, 2023.
Subsequent to the fourth quarter of Fiscal 2023, our Board declared a $0.125 per share dividend, payable on April 26, 2024 to stockholders of record at the close of business on April 12, 2024.
A quarterly cash dividend of $0.1375 per share dividend was paid in the first quarter of Fiscal 2021 and a $0.18 per share dividend was paid in the second, third, and fourth quarters of Fiscal 2021 resulting in a dividend yield of 2.3% for Fiscal 2021.
A quarterly cash dividend of $0.125 was paid in the fourth quarter of Fiscal 2023 resulting in a dividend yield of 2.7%. A dividend of $0.18 per share was paid in the first and second quarters of Fiscal 2022 resulting in a dividend yield of 2.5%.
The plotted points are based on the closing price on the last trading day of the fiscal year indicated. 2/3/2018 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 American Eagle Outfitters, Inc. 100.00 122.30 87.00 138.08 139.59 100.12 S&P MidCap 400 Index 100.00 97.60 108.22 128.21 143.05 147.76 Peer Group 100.00 97.17 97.19 114.63 128.37 123.36 We compared our cumulative total return to a custom peer group that aligns with our compensation peer group, as disclosed in our Proxy Statement for the 2022 Annual Meeting of Stockholders.
The plotted points are based on the closing price on the last trading day of the fiscal year indicated. 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 2/3/2024 American Eagle Outfitters, Inc. 100.00 71.14 112.91 114.14 81.86 111.62 S&P MidCap 400 Index 100.00 110.89 131.36 146.57 151.40 162.73 Peer Group 100.00 101.17 115.24 123.40 120.54 141.58 We compared our cumulative total return to a custom peer group that aligns with our compensation peer group, as disclosed in our Proxy Statement for the 2023 Annual Meeting of Stockholders.
After the separation, L Brands, Inc. was renamed Bath & Body Works, Inc., which is also included in the peer group for 2022. 29 Issuer Purchases of Equity Securities The following table provides information regarding our repurchases of common stock during the 13 weeks ended January 28, 2023.
Our peer group was updated for Fiscal 2023 to remove Bath & Body Works, Inc., and Fossil Group, Inc. 29 Issuer Purchases of Equity Securities The following table provides information regarding our repurchases of common stock during the 14 weeks ended February 3, 2024.
Removed
Our peer group was updated for Fiscal 2022 to include Victoria's Secret & Co., which separated from L Brands, Inc. in 2021.
Added
During Fiscal 2019 (the 52-weeks ended February 1, 2020), our Board authorized the public repurchase of 30.0 million shares of our common stock. Authorization for the repurchase of the remaining 12.0 million shares otherwise available for repurchase under the Fiscal 2019 authorization expired on February 3, 2024. 30

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Fiscal Years Ended January 28, January 29, January 30, 2023 2022 2021 Total net revenue 100.0 % 100.0 % 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 65.0 60.3 69.5 Gross profit 35.0 39.7 30.5 Selling, general and administrative expenses 25.4 24.4 26.0 Impairment, restructuring and COVID-19 – related charges 0.4 0.2 7.4 Depreciation and amortization expense 4.2 3.3 4.3 Operating income (loss) 5.0 11.8 (7.2 ) Debt-related charges 1.3 — — Interest expense, net 0.3 0.7 0.7 Other income, net (0.2 ) (0.1 ) (0.1 ) Income (loss) before income taxes 3.6 11.2 (7.8 ) Provision (benefit) for income taxes 1.1 2.8 (2.2 ) Net income (loss) 2.5 % 8.4 % (5.6 ) % 35 Non-GAAP Information This Results of Operations section contains operating income, net income and net income per diluted share presented on a non-GAAP basis, which are non-GAAP financial measures (“non-GAAP” or “adjusted”).
Biggest changeFiscal Years Ending February 3, 2024 January 28, 2023 (in thousands) (Percentage of revenue) (in thousands) (Percentage of revenue) Total net revenue $ 5,261,770 100.0 % $ 4,989,833 100.0 % Cost of sales, including certain buying, occupancy and warehouse expenses 3,237,192 61.5 3,244,585 65.0 Gross profit 1 2,024,578 38.5 1,745,248 35.0 Selling, general and administrative expenses 1,433,300 27.2 1,269,095 25.4 Impairment and restructuring charges 1 141,695 2.7 22,209 0.4 Depreciation and amortization expense 226,866 4.4 206,897 4.2 Operating income 1 222,717 4.2 247,047 5.0 Debt related charges - 0.0 64,721 1.3 Interest (income) expense, net (6,190 ) (0.1 ) 14,297 0.3 Other income, net (10,951 ) (0.2 ) (10,465 ) (0.2 ) Income before income taxes $ 239,858 4.5 $ 178,494 3.6 Provision for income taxes 69,820 1.3 53,358 1.1 Net income 1 $ 170,038 3.2 % $ 125,136 2.5 % Diluted net income per common share 1 $ 0.86 $ 0.64 (1) Please see “Non-GAAP Information” below for non-GAAP financial measures.
Cash Flows Used for Financing Activities During Fiscal 2022, cash used for financing activities consisted of $200.0 million used to repurchase the Company's common stock under an accelerated share repurchase agreement, $136.4 million used for the principal paid in connection with the exchange of our 2025 Notes, $64.8 million used for cash dividends paid at a quarterly rate of $0.18 per share during the first and second quarters and $9.8 million used for the repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments.
During Fiscal 2022, cash used for financing activities consisted of $200.0 million used to repurchase the Company's common stock under an accelerated share repurchase agreement, $136.4 million used for the principal paid in connection with the exchange of our 2025 Notes, $64.8 million used for cash dividends paid at a quarterly rate of $0.18 per share during the first and second quarters and $9.8 million used for the repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments.
Omni-Channel Sales Performance — Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within this MD&A when we believe that they enhance the understanding of the matter being discussed.
Omni-Channel Sales Performance — Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within this MD&A when we believe that they 31 enhance the understanding of the matter being discussed.
The Company’s definite-lived intangible assets, which consist primarily of trademark assets, are generally amortized over 10 to 15 years. The Company evaluates definite-lived intangible assets for impairment in accordance with ASC 360 when events or circumstances indicate that the carrying value of the asset may not be recoverable.
The Company’s definite-lived intangible assets, which consist primarily of trademark assets, are generally amortized over 10 to 15 years. The 44 Company evaluates definite-lived intangible assets for impairment in accordance with ASC 360 when events or circumstances indicate that the carrying value of the asset may not be recoverable.
Recent accounting pronouncements the Company has adopted or is currently evaluating prior to adoption, including the dates of adoption or expected dates of adoption, as applicable, and anticipated effects on the Company’s audited Consolidated Financial Statements, are included in Note 2. “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included herein.
Recent Accounting Pronouncements Recent accounting pronouncements the Company has adopted or is currently evaluating prior to adoption, including the dates of adoption or expected dates of adoption, as applicable, and anticipated effects on the Company’s audited Consolidated Financial Statements, are included in Note 2. “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included herein. 45
Deferred tax assets and liabilities are measured using the tax 34 rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse.
Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse.
Buying, occupancy and warehousing costs and services consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operations.
Buying, occupancy and warehousing costs and services consists of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operations.
This MD&A generally discusses Fiscal 2022 and Fiscal 2021 and provides year-to-year comparisons between Fiscal 2022 and Fiscal 2021. Discussions of Fiscal 2020 and year-to-year comparisons between Fiscal 2021 and Fiscal 2020 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II.
This MD&A generally discusses Fiscal 2023 and Fiscal 2022 and provides year-to-year comparisons between Fiscal 2023 and Fiscal 2022. Discussions of Fiscal 2021 and year-to-year comparisons between Fiscal 2022 and Fiscal 2021 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II.
Debt Related Charges In Fiscal 2022, debt related charges of $64.7 million consists primarily of $60.4 million of induced conversion expense related to the exchanges of our 2025 Notes, along with certain other costs related to actions we took to strengthen our capital structure.
In Fiscal 2022, debt related charges of $64.7 million consisted primarily of $60.4 million of induced conversion expense related to the exchanges of our 2025 Notes, along with certain other costs related to actions we took to strengthen our capital structure.
Management has reviewed these critical accounting policies and estimates with the Audit Committee of our Board. Revenue Recognition. In accordance with Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , we record revenue for store sales upon the purchase of merchandise by customers.
Management has reviewed these critical accounting policies and estimates with the Audit Committee of our Board. Revenue Recognition. In accordance with Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we record revenue for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise.
Our Chief Operating Decision Maker (defined as our CEO) analyzes segment results and allocates resources between segments based on adjusted operating income (loss), which is a non-GAAP financial measure. See "Non-GAAP Information" within Part II. Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 16.
We have two reportable segments, American Eagle and Aerie. Our Chief Operating Decision Maker (defined as our CEO) analyzes segment results and allocates resources between segments based on adjusted operating income, which is a non-GAAP financial measure. See "Non-GAAP Information" within Part II. Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 15.
Current Trends and Outlook Inflation During Fiscal 2022, our quarterly results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior, which constrained revenue and increased margin pressure to clear through excess inventory. Given ongoing external uncertainties, we have taken additional actions to improve financial performance, including more extensive expense and capital expenditure reductions.
Current Trends and Outlook Macroeconomic Conditions and Inflation During Fiscal 2022 and Fiscal 2023, our results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior, which constrained revenue and increased margin pressure to clear through excess inventory. Given ongoing external uncertainties, we have taken additional actions to improve financial performance, including more operating efficiency initiatives.
(2) $64.7 million of pre-tax debt related charges related primarily to induced conversion expense on the exchanges of our 2025 Notes, along with certain other costs related to actions taken to strengthen our capital structure.
(2) $64.7 million pre-tax debt related charges related primarily to the induced conversion expense on the exchange of our convertible notes, along with certain other costs related to actions we took to strengthen our capital structure.
The Credit Agreement provides senior secured asset-based revolving credit for loans and letters of credit up to $700 million, subject to customary borrowing base limitations (the "Credit Facility). The Credit Facility expires on June 24, 2027.
The Credit Agreement provides senior secured asset-based revolving credit for loans and letters of credit up to $700 million, subject to customary borrowing base limitations (the "Credit Facility). The Credit Facility expires on June 24, 2027. All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries.
The Company records merchandise receipts when control of the merchandise has transferred to the Company. We review our inventory in order to identify slow-moving merchandise and generally use markdowns to clear merchandise. Additionally, we estimate a markdown reserve for future planned markdowns related to current inventory.
We review our inventory in order to identify slow-moving merchandise and generally use markdowns to clear merchandise. Additionally, we estimate a markdown reserve for future planned markdowns related to current inventory.
We also sell merchandise on various international online marketplaces. The digital channels reinforce each particular brand and are designed to complement the in-store experience. Over the past several years, we have invested in building our technologies and digital capabilities.
We also sell AE and Aerie brand merchandise on various international online marketplaces. We offer Todd Snyder and Unsubscribed brand products online at www.toddsnyder.com and www.unsubscribed.com, respectively. The digital channels reinforce each particular brand and are designed to complement the in-store experience. Over the past several years, we have invested in building our technologies and digital capabilities.
We also maintain an asset-based revolving credit facility that allows us to borrow up to $700 million, which will expire in June 2027. In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due 2025 (the “2025 Notes”). As of January 28, 2023, approximately $8.8 million aggregate principal amount of the 2025 Notes remain outstanding.
We also maintain an asset-based revolving credit facility that allows us to borrow up to $700 million, which will expire in June 2027. In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due 2025 (the "2025 Notes"). The 2025 Notes were fully redeemed during Fiscal 2023.
Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined using historical average return percentages.
The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined using historical average return percentages. Revenue is not recorded on the issuance of gift cards.
“Segment Reporting,” of the Notes to the Consolidated Financial Statements included herein for additional information. 31 Key Performance Indicators Our management evaluates the following items, which are considered key performance indicators, in assessing our performance: Comparable Sales — Comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period.
Key Performance Indicators Our management evaluates the following items, which are considered key performance indicators, in assessing our performance: Comparable Sales — Comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period.
This revenue is recorded as a component of total net revenue when earned. 33 Revenue associated with Quiet Platforms is recognized as the services are performed. Merchandise Inventory. Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses.
Revenue associated with Quiet Platforms is recognized as the services are performed. Merchandise Inventory. Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when control of the merchandise has transferred to the Company.
Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in accordance GAAP, which require us to make estimates and assumptions that may affect the reported consolidated financial condition and results of operations should actual results differ from these estimates and assumptions.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. 43 Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that may affect the reported consolidated financial condition and results of operations should actual results differ from these estimates and assumptions.
We believe that our assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income (loss). Results of Operations Overview Fiscal 2022 demand was soft, reflecting the impact of inflationary pressure and a related shift in consumer spending patterns.
We believe that our assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income (loss).
Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses. Selling, General, and Administrative Expenses Selling, general, and administrative expenses increased 4% to $1.269 billion for Fiscal 2022, compared to $1.222 billion for Fiscal 2021.
Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Cash returned to shareholders through dividends and share repurchases was $264.8 million and $113.9 million in Fiscal 2022 and Fiscal 2021, respectively. Capital Expenditures for Property and Equipment Fiscal 2022 capital expenditures were $260.4 million, compared to $233.8 million in Fiscal 2021.
Cash returned to shareholders through dividends and share repurchases was $104.1 million and $264.8 million in Fiscal 2023 and Fiscal 2022, respectively. Capital Expenditures for Property and Equipment For Fiscal 2023, capital expenditures totaled $174.4 million.
Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. The Company recognizes royalty revenue generated from its license or franchise agreements based upon a percentage of merchandise sales by the licensee/franchisee.
A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. The Company recognizes royalty revenue generated from its license or franchise agreements based upon a percentage of merchandise sales by the licensee/franchisee. This revenue is recorded as a component of total net revenue when earned.
The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.
Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets. Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions.
The table below reconciles the GAAP financial measure to the non-GAAP financial measure discussed above.
The table below reconciles the GAAP financial measure to the non-GAAP financial measure discussed above for Fiscal 2023: American Eagle Outfitters Inc.
Refer to Note 2, "Summary of Significant Accounting Policies," and Note 15, "Income Taxes," to the Consolidated Financial Statements included herein for additional information regarding our accounting for income taxes. Net Income (Loss) Net income decreased $294.5 million to $125.1 million for Fiscal 2022 from $419.6 million for Fiscal 2021.
Refer to Note 2, "Summary of Significant Accounting Policies," and Note 14, "Income Taxes," to the Consolidated Financial Statements included herein for additional information regarding our accounting for income taxes.
We expect to be able to fund our capital expenditures through current cash holdings and cash generated from operations. Revolving Credit Facility In June 2022, we entered into an amended and restated credit agreement (the "Credit Agreement").
We expect to be able to fund our capital expenditures through current cash holdings and cash generated from operations.
Net income (loss) per diluted share for Fiscal 2022 was $0.64, which included $64.7 million ($0.24 per diluted share) of debt-related charges and $22.2 million ($0.09 per diluted share) of pre-tax impairment and restructuring charges.
Net income per diluted share for Fiscal 2022 was $0.64, which included $64.7 million ($0.24 per diluted share) of pre-tax debt-related charges and $22.2 million ($0.09 per diluted share) of pre-tax impairment and restructuring charges. 39 Non-GAAP Information This Results of Operations section contains gross profit, operating income, net income and net income per diluted share presented on a non-GAAP basis, which are non-GAAP financial measures (“non-GAAP” or “adjusted”).
For the Fiscal Year Ended January 28, 2023 Operating Income Net Income Earnings per Diluted Share GAAP Basis $ 247,047 $ 125,136 $ 0.64 Add: Impairment and restructuring charges (1) 22,209 18,221 0.09 Add: Debt-related charges (2) — 49,679 0.24 Non-GAAP Basis $ 269,256 $ 193,036 $ 0.97 (1) $22.2 million of pre-tax impairment and restructuring charges including $20.6 million of asset impairment charges and $1.6 million of restructuring charges including corporate and field severance.
GAAP to Non-GAAP Reconciliation (Dollars in thousands, except per share amounts) 52 Weeks Ended January 28, 2023 Earnings per Operating Income (1) Debt-related charges (2) Income Tax Expense Effective Tax Rate Net Income Diluted Share GAAP Basis $ 247,047 $ 64,721 $ 53,358 29.9% $ 125,136 $ 0.64 % of Revenue 5.0 % Add: Impairment and restructuring charges $ 22,209 18,221 $ 0.09 Less: Debt-related charges $ - $ (64,721 ) 49,679 $ 0.24 Tax effect of the above (3) $ 19,030 (2.6)% Non-GAAP Basis $ 269,256 $ - $ 72,388 27.3% $ 193,036 $ 0.97 % of Revenue 5.4 % 3.9 % (1) Quiet Platforms impairment of $2.8 million consisting of $2.3 million of ROU asset and $0.5 million of property and equipment related to the closure of the Jacksonville, FL distribution center and severance of $1.0 million related to employees of that distribution center.
We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience.
We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience. Shifting Strategy 32 As e-commerce penetration and growth has normalized coming out of the COVID-19 pandemic, the supply chain landscape has continued to evolve.
The effective income tax rate this year is primarily impacted by nondeductible executive compensation and the Note Exchanges, as a portion of the induced conversion expense was not deductible. Our effective income tax rate is also dependent upon the overall mix of earnings in jurisdictions with different tax rates.
Our effective income tax rate is also dependent upon the overall mix of earnings in jurisdictions with different tax rates.
For further information about the risks 32 associated with global economic conditions and the effect of economic pressures on our business, see “Risk Factors” in Part I, Item 1A of this Annual Report. Quiet Platforms In Fiscal 2021, the Company completed the acquisition of AirTerra and Quiet Logistics.
For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see “Risk Factors” in Part I, Item 1A of this Annual Report. Omni-Channel and Digital Capabilities We sell merchandise through our digital channels, www.ae.com, www.aerie.com, and our AEO apps, both domestically and internationally in approximately 80 countries.
Executive Overview We are a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under our American Eagle® and Aerie® brands. We have two reportable segments, American Eagle and Aerie.
Introduction This MD&A is organized as follows: • Executive Overview • Key Performance Indicators • Current Trends and Outlook • Results of Operations • Non-GAAP Information • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements Executive Overview We are a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under our American Eagle® and Aerie® brands.
By brand, American Eagle comparable sales decreased 9% and comparable sales for Aerie decreased 3%. Gross profit decreased 12% to $1.745 billion and declined by 470 basis points to 35.0% as a percentage of revenue. Net income was $0.64 per diluted share this year, compared to $2.03 per diluted share last year.
By brand, American Eagle comparable sales increased 1% and comparable sales for Aerie increased 8%. • Gross profit increased 16% to $2.025 billion and increased by 350 basis points to 38.5% as a percentage of revenue.
As of January 28, 2023, we were in compliance with the terms of the Credit Agreement and had $7.9 million outstanding in stand-by letters of credit. Share Repurchases During Fiscal 2019, our Board authorized the repurchase of 30.0 million shares under a share repurchase program.
The obligations under the Credit Agreement are secured by certain assets of the Company and certain subsidiaries. As of February 3, 2024, we were in compliance with the terms of the Credit Agreement and had $7.7 million outstanding in stand-by letters of credit.
Investing activities for Fiscal 2021 primarily included $358.1 million for the acquisition of businesses related to Quiet Platforms (net of $3.9 million cash acquired), as well as $233.8 million in capital expenditures for property and equipment. For further information on capital expenditures, refer to Capital Expenditures for Property and Equipment below.
Cash Flows Used for Investing Activities Investing activities for Fiscal 2023 primarily consisted of capital expenditures for property and equipment and the purchase of available-for-sale securities. For Fiscal 2022, investing activities primarily consisted of capital expenditures for property and equipment. For further information on capital expenditures, refer to "Capital Expenditures for Property and Equipment" below.
The change in net income was attributable to the factors described above. As a percentage of total net revenue, net income was 2.5% and 8.4% for Fiscal 2022 and Fiscal 2021, respectively.
Net Income Fiscal Years Ending Increase/(Decrease) February 3, January 28, 2024 2023 (in thousands) (In thousands) (Percentage) Net income $ 170,038 $ 125,136 $ 44,902 36 % Net income as a percentage of net revenue 3.2 % 2.5 % 70 basis points The change in net income was attributable to the factors described above.
Comparison of Fiscal 2022 to Fiscal 2021 Total Net Revenue Total net revenue for Fiscal 2022 was relatively flat to last year at $4.990 billion this year compared to $5.011 billion for Fiscal 2021. For Fiscal 2022, total comparable sales decreased 7% compared to a 30% increase for Fiscal 2021.
Comparison of Fiscal 2023 to Fiscal 2022 Total Net Revenue Total net revenue for Fiscal 2023 increased $272 million this year to $5.262 billion compared to $4.990 billion for Fiscal 2022. The increase this year included $57 million from the 53 rd week in Fiscal 2023.
As a percentage of total net revenue, selling, general, and administrative expenses increased 100 basis points to 25.4%, compared to 24.4% for Fiscal 2021. The increase in expenses was primarily related to increased store wages and corporate compensation, professional services and advertising, partially offset by lower incentive compensation accruals.
Selling, General, and Administrative Expenses Fiscal Years Ending Increase/(Decrease) February 3, 2024 January 28, 2023 (in thousands) (in thousands) (Percentage) Selling, general and administrative expenses $ 1,433,300 $ 1,269,095 $ 164,205 13 % Selling, general and administrative expenses as a percentage of net revenue 27.2 % 25.4 % 180 basis points 35 The increase in expenses was primarily related to: • an increase in incentive compensation accruals of approximately $60 million, as we accrued performance-based incentives this year based on improvements in profitability compared to no accrual last year; • increased store compensation up $24 million due to increased wage rates, the impact of the 53rd week, and new store openings, partially offset by efficiencies in our store labor model; and • an increase in advertising, professional services, corporate and store related expenses.
As of January 28, 2023, we had approximately $170.2 million in cash and cash equivalents. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.
Refer to Note 9 to the Consolidated Financial Statements for additional information regarding our long-term debt. 41 We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.
For Fiscal 2023, we expect capital expenditures to be in the range of $150 million to $200 million related to the continued support of our expansion efforts, stores, information technology upgrades to support growth and investments in e-commerce, as well as to support and enhance our supply chain and Quiet Platforms.
See below for a breakdown of expenditures: 42 Fiscal Years Ending Increase/(Decrease) February 3, January 28, 2024 2023 (In thousands) (In thousands) (Percentage) Store, fixture, and visual investments $ 87,625 $ 148,501 $ (60,876 ) (41 ) % Information technology initiatives 57,355 70,024 (12,669 ) (18 ) Supply chain infrastructure 27,616 39,453 (11,837 ) (30 ) Other home office projects 1,841 2,400 (559 ) (23 ) Capital Expenditures $ 174,437 $ 260,378 $ (85,941 ) (33 ) % For Fiscal 2024, we expect capital expenditures to be in the range of $200 million to $250 million related to the continued support of our expansion efforts, stores, information technology upgrades to support growth and investments in e-commerce, as well as to support and enhance our supply chain.
Depreciation and Amortization Expense Depreciation and amortization expense increased 24% to $206.9 million for Fiscal 2022 from $166.8 million for Fiscal 2021, driven by increased capital spending in Fiscal 2022. As a percentage of total net revenue, depreciation and amortization expense was 4.2% compared to 3.3% in Fiscal 2021.
Adjusted operating income increased 39% to $375.4 million and increased by 170 basis points to 7.1% as a percentage of revenue. • Net income increased 36% to $170.0 million and increased by 70 basis points to 3.2% as a percentage of total revenue. Diluted earnings per share increased to $0.86 for Fiscal 2023 compared to $0.64 for Fiscal 2022.
Removed
Item 7 of our annual report on Form 10-K for the fiscal year ended January 29, 2022. Introduction This MD&A is organized as follows: Executive Overview General description of the Company’s business and certain segment information. Key Performance Indicators Overview of key performance indicators reviewed by management to gauge the Company’s results.
Added
Item 7 of our annual report on Form 10-K for the fiscal year ended January 28, 2023.
Removed
Current Trends and Outlook Discussion of trends and uncertainties facing the Company, including those related to inflation, recent acquisitions and the Company's long-term plans for growth. In addition, this section also provides a summary of the Company’s performance over Fiscal 2022 and Fiscal 2021.
Added
“Segment Reporting,” of the Notes to the Consolidated Financial Statements included herein for additional information.
Removed
Results of Operations Provides an analysis of certain components of the Company’s Consolidated Statements of Operations for Fiscal 2022 as compared to Fiscal 2021. Non-GAAP Information Discussion of certain financial measures that have been determined to not be in accordance with accounting principles generally accepted in the United States (“GAAP”).
Added
In Fiscal 2023, as part of our profit improvement initiative, we began to streamline and shift the operations of Quiet Platforms to better align with AEO's long term strategy. As a result of these changes, Quiet Platforms has refined its focus on its core capabilities as a regionalized fulfillment center network.
Removed
This section includes certain reconciliations from GAAP to non-GAAP financial measures and additional details on these financial non-GAAP measures, including information as to why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.
Added
The network has been updated to reflect this refined focus. The impact of the Quiet Platforms business changes resulted in $119.6 million impairment, restructuring and other charges in Fiscal 2023. Our international business has also experienced changes in market conditions as a result of unbalanced recovery from the COVID-19 pandemic.
Removed
Liquidity and Capital Resources Discussion of the Company’s financial condition and changes in financial condition and liquidity for Fiscal 2022 and Fiscal 2021.
Added
The Company has made the decision to exit the Japan market fully as of the end of Fiscal 2023. Relative to Hong Kong, the Company has implemented a strategy to right-size our presence in the market given a slower than anticipated recovery.
Removed
Critical Accounting Policies and Estimates Discusses where information may be found about accounting policies and estimates considered to be important to the Company’s consolidated results of operations and financial condition, which typically require significant judgment and estimation on the part of the Company’s management in their application.
Added
The impact of the change to our international strategy resulted in $21.8 million of impairment, restructuring and other charges recorded in Fiscal 2023. Profit Improvement Program We launched our profit improvement program during Fiscal 2023, which focused on a comprehensive review of our cost structure.
Removed
With these acquisitions, the Company expects to be able to execute on operational efficiencies to create a supply chain platform, which we refer to as Quiet Platforms, with significant long-term growth potential. Omni-Channel and Digital Capabilities We sell merchandise through our digital channels, www.ae.com, www.aerie.com, www.toddsnyder.com, www.unsubscribed.com, and our AEO apps, both domestically and internationally in approximately 80 countries.
Added
Early actions have been focused on the components of gross margin and contributed to margin expansion in Fiscal 2023. Other significant work streams have been identified, actioned and incorporated into our Fiscal 2024 plans.
Removed
COVID-19 Past and future impacts of the COVID-19 pandemic may disrupt the operations of our partners, suppliers, and vendors, which could lead to or exacerbate existing supply chain disruptions, shipping delays, freight cost increases, and labor shortages.
Added
The results of these initiatives are expected to yield gross margin expansion, as well as SG&A and depreciation leverage, resulting in an improved operating profit rate. 33 Results of Operations Overview Fiscal 2023 showed continued progress on our strategic priorities to grow our brands and drive improved profit flow-through.
Removed
We are monitoring ongoing developments, and we will take further actions that we believe are in the best interests of our associates and customers, as needed. For further information about the risks associated with the COVID-19 pandemic, see “Risk Factors” in Part I, Item 1A of this Annual Report.
Added
Additionally, actions taken on our profit improvement initiatives resulted in improved gross margins year over year. • Total net revenue increased $272 million to $5.262 billion compared to $4.990 billion last year. • Total comparable sales increased 3%.
Removed
Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends.
Added
Adjusted gross profit increased 17% to $2.036 billion and increased by 370 basis points to 38.7% as a percentage of revenue. • Operating income decreased 10% to $222.7 million and decreased by 80 basis points to 4.2% as a percentage of total revenue.
Removed
In this environment, margin pressure was more amplified as we worked to clear through excess spring and summer goods. Given ongoing uncertainties in the macroeconomic environment, we have taken additional steps to position the business for improved financial performance.
Added
Adjusted net income increased 55% to $299.9 million and increased by 180 basis points to 5.7% as a percentage of revenue. Adjusted diluted earnings per share increased to $1.52 for Fiscal 2023 compared to $0.97 for Fiscal 2022.
Removed
This includes further resetting inventory plans for the back half of the year, expanding the scope of expense and capital expenditure reductions. Total net revenue was relatively flat to last year at $4.990 billion this year, compared to $5.011 billion last year. Total comparable sales decreased 7%.
Added
For Fiscal 2023, total comparable sales increased 3% compared to a 7% decrease for Fiscal 2022. Additionally, last year included an incremental $41 million of 34 revenue from excess end-of-season selloffs, which we did not anniversary this year, impacting revenue growth across brands and channels for the current year.
Removed
On an adjusted basis, net income per diluted share this year was $0.97, compared to last year at $2.19. Adjusted net income per diluted share this year excluded $0.24 of debt-related charges and $0.09 of impairment and restructuring charges.
Added
Traffic and transactions both increased in the mid-single digits, with average unit retail increasing in the low-single digits, partially offset by lower units per transaction. Both digital and store revenue increased 6%, reflecting strong traffic across channels.
Removed
Adjusted net income per diluted share last year excluded $0.07 of amortization of the non-cash discount on our convertible notes, $0.04 of asset impairment charges, and $0.04 of reorganization charges related to our European Union ("EU") license operations. Adjusted net income per diluted share is a non-GAAP financial measure. Please see “Non-GAAP Information” below.
Added
Fiscal Years Ending Increase/(Decrease) February 3, 2024 January 28, 2023 (in thousands) (Percentage) (in thousands) (Percentage) (in thousands) (Percentage) American Eagle $ 3,361,579 63.9 % $ 3,262,893 65.4 % $ 98,686 3 % Aerie 1,670,000 31.7 1,506,798 30.2 163,202 11 Other 489,056 9.3 469,371 9.4 19,685 4 Intersegment Eliminations (258,865 ) (4.9 ) (249,229 ) (5.0 ) (9,636 ) 4 Total net revenue $ 5,261,770 100.0 % $ 4,989,833 100.0 % $ 271,937 5 % American Eagle.
Removed
For the Fiscal Year Ended January 29, 2022 Operating Income Net Income Earnings per Diluted Share GAAP Basis $ 591,065 $ 419,629 $ 2.03 Add: Asset impairment charges (1) 11,944 8,944 0.04 Add: EU license operations reorganization (2) — 8,917 0.04 Add: Convertible debt (3) — 13,867 0.07 Non-GAAP Basis $ 603,009 $ 451,357 $ 2.19 (1) $11.9 million of pre-tax asset impairment charges.
Added
The increase in net revenue was driven by increased traffic and transactions across channels. This increase was partially offset by $23 million of incremental revenue from excess end-of-season selloffs last year, which we did not anniversary this year. Total comparable sales increased 1% year-over-year, primarily due to digital traffic and transactions increasing in the mid-single digits year-over-year. Aerie.
Removed
(2) $11.9 million of pre-tax reorganization charges related to our EU license operations. (3) Amortization of the non-cash discount on the 2025 Notes included in interest expense, net on the Consolidated Statements of Operations prior to the adoption of ASU 2020-06.
Added
The increase in net revenue was primarily due to 54 net new store openings since Fiscal 2021, as well as a 8% comparable sales increase. These amounts were partially offset by $17 million of incremental revenue from excess end-of-season selloffs in the prior year, which we did not anniversary this year. Other.
Removed
American Eagle Total net revenue for Fiscal 2022 for the American Eagle brand was $3.263 billion compared to $3.556 billion for Fiscal 2021. For Fiscal 2022, American Eagle brand comparable sales were down 9% compared to a 35% increase for Fiscal 2021.
Added
Net revenue increased compared to Fiscal 2022 due to an increase in Todd Snyder brand revenue of $31 million, partially offset by lower revenue from Quiet Platforms.
Removed
Aerie Total net revenue for Fiscal 2022 for the Aerie brand was $1.507 billion compared to $1.376 billion for Fiscal 2021. For Fiscal 2022, Aerie brand comparable sales decreased 3% compared to a 27% increase in Fiscal 2021. 36 Gross Profit Gross profit decreased 12% to $1.745 billion for Fiscal 2022 from $1.992 billion for Fiscal 2021.
Added
Gross Profit Fiscal Years Ending Increase/(Decrease) February 3, 2024 January 28, 2023 (in thousands) (in thousands) (Percentage) Gross Profit $ 2,024,578 $ 1,745,248 $ 279,330 16 % Gross Margin 38.5 % 35.0 % 350 basis points The increase in gross profit was primarily driven by: • an increase in merchandise margin of $340 million driven by increased net revenue from both American Eagle and Aerie, as well as an improvement in markup, primarily driven by $60 million of lower inbound transportation costs this year; partially offset by $11 million of inventory write-down charges related to restructuring our international operations (refer to the Impairment, Restructuring and Other charges caption below for additional information); and • a decrease in distribution, warehousing, and delivery costs of $20 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAn unrealized gain of $8.2 million is included in accumulated other comprehensive loss as of January 28, 2023. This is primarily related to the fluctuations of the U.S. dollar to Mexican peso and US dollar to Canadian dollar exchange rates. This sensitivity analysis has inherent limitations.
Biggest changeAn unrealized gain of $16.2 million is included in accumulated other comprehensive loss as of February 3, 2024. This is primarily related to the fluctuations of the U.S. dollar to Mexican peso and US dollar to Canadian dollar exchange rates. This sensitivity analysis has inherent limitations.
We do not utilize hedging instruments to mitigate foreign currency exchange risks. A hypothetical 10% movement in the Canadian dollar and Mexican peso exchange rate could result in a $23.3 million foreign currency translation fluctuation, which would be recorded in accumulated other comprehensive income in the Consolidated Balance Sheets.
We do not utilize hedging instruments to mitigate foreign currency exchange risks. A hypothetical 10% movement in the Canadian dollar and Mexican peso exchange rate could result in a $25 million foreign currency translation fluctuation, which would be recorded in accumulated other comprehensive income in the Consolidated Balance Sheets.
The analysis disregards the possibility that rates of multiple foreign currencies will not always move in the same direction relative to the value of the U.S. dollar over time. 41
The analysis disregards the possibility that rates of multiple foreign currencies will not always move in the same direction relative to the value of the U.S. dollar over time. 46

Other AEO 10-K year-over-year comparisons