AMERICAN EAGLE OUTFITTERS INC [AEO] Filings

10-Q 1 aeo-20240803.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-33338

American Eagle Outfitters, Inc.

(Exact name of registrant as specified in its charter)


Delaware		No. 13-2721761
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

77 Hot Metal Street, Pittsburgh, PA		15203-2329
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (412) 432-3300

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AEO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 192,063,586 shares of Common Stock were outstanding at August 28, 2024.

AMERICAN EAGLE OUTFITTERS, INC.

TABLE OF CONTENTS


		Page Number
	PART I - FINANCIAL INFORMATION

	Forward Looking Statements	4

Item 1.	Financial Statements	6
	Consolidated Balance Sheets: August 3, 2024, February 3, 2024, and July 29, 2023	6
	Consolidated Statements of Operations: 13 and 26 weeks ended August 3, 2024 and July 29, 2023	7
	Consolidated Statements of Comprehensive Income: 13 and 26 weeks ended August 3, 2024 and July 29, 2023	8
	Consolidated Statements of Stockholders' Equity: 13 and 26 weeks ended August 3, 2024 and July 29, 2023	9
	Consolidated Statements of Cash Flows: 26 weeks ended August 3, 2024 and July 29, 2023	11
	Notes to Consolidated Financial Statements	12
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	N/A
Item 4.	Mine Safety Disclosures	N/A
Item 5.	Other Information	41
Item 6.	Exhibits	42

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Quarterly Report") contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on the views and beliefs of management of American Eagle Outfitters, Inc. (the “Company," “AEO,” “we,” “us,” and “our"), as well as assumptions and estimates made by management. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not intend to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those contained in this Quarterly Report and in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2024 filed with the Securities and Exchange Commission (the "SEC") on March 15, 2024 (the "Fiscal 2023 Form 10-K") that may not be in the control of management. 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.

All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “potential,” and similar expressions may identify forward-looking statements. Our forward-looking statements include, but are not limited to, statements about:

•

the planned opening of approximately five to 15 American Eagle stores and approximately 25 to 40 Aerie and OFFLINE stores, which will be a mix of stand-alone and Aerie side-by-sides, during Fiscal 2024;

•

the anticipated selection of approximately 80 to 90 American Eagle and Aerie stores in North America for remodeling during Fiscal 2024;

•

the potential closure of approximately 10 to 20 American Eagle stores at the expiration of their lease term, primarily in North America, during Fiscal 2024;

•

the success of our core American Eagle and Aerie brands through our omni-channel and licensed outlets within North America and internationally;

•

the success of our business priorities and strategies;

•

the continued validity of our trademarks;

•

our performance during the back-to-school and holiday selling seasons;

•

the reduction of operating expenses and capital expenditures;

•

the accuracy of the estimates and assumptions we make pursuant to our critical accounting policies and estimates;

•

the payment of a dividend in future periods;

•

our ability to fund our current and long-term cash requirements through current cash holdings and available liquidity, including under our revolving credit facility;

•

the possibility that product costs are adversely affected by foreign trade issues (including import tariffs and other trade restrictions with China and other countries), currency exchange rate fluctuations, increasing prices for raw materials, supply chain issues, political instability or other reasons;

•

the possibility of changes in global economic and financial conditions, and resulting impacts on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits;

•

the effect of inflation on our business;

•

the possibility that we may be required to take additional impairment or other restructuring charges;

•

the impact of any global pandemic on general economic conditions; and

•

the ability of our distribution centers and stores to maintain adequate staffing to meet increased customer demand.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:

•

the risk that general macroeconomic conditions, including the effect of inflationary economic pressures and other business factors will continue to negatively impact discretionary consumer spending and, in turn, adversely impact our revenues and margins;

•

the risk that our inability to anticipate and respond to changing consumer preferences and fashion trends and fluctuations in consumer demand in a timely manner could adversely impact our business and results of operations;

•

the risk that seasonality may cause sales to fluctuate and negatively impact our results of operations;

•

the risks associated with operating in a highly competitive industry, and facing significant pricing pressures from existing and new competitors;

•

the risk that 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;

•

the risk that impairment to goodwill, intangible assets, and other long-lived assets, including impairments relating to our Quiet Platforms business, could adversely impact our profitability;

•

the risk that our inability to grow and optimize our digital channels and leverage omni-channel capabilities could adversely impact our business;

•

the risk that failure to define, launch and communicate a brand-relevant customer experience could have a negative impact on our growth and profitability;

•

the risks that our inability to execute on our key business priorities could have a negative impact on our growth and profitability;

•

the risk that our current international operations and efforts to further expand internationally expose us to risks inherent in operating in other countries;

•

the risk that failure to protect our reputation could have a material adverse effect on our brands;

•

the risk that 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;

•

the risks associated with our inability to implement and sustain adequate information technology systems could adversely impact our profitability and the loss of disruption of information technology systems could have a material adverse effect on our business;

•

the risks related to our electronic processing of sensitive and confidential personal and business data, including cyberattacks, data breaches, other security incidents, or disruption of information technology systems or software;

•

risks associated with our international merchandise sourcing strategy, such as import tariffs, increasing prices for raw materials, and political instability, all of which could impact our profitability;

•

the risk that our inability to achieve planned store performance, gain market share in the face of declining shopping center traffic or attract customers to our stores could adversely impact our profitability and our results of operations;

•

the risk that failure to properly manage and allocate our inventory could have an adverse effect on our business, sales, margins, financial condition, and results of operations;

•

the risks associated with our significant lease obligations and are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs and the need to generate significant cash flow to meet our lease obligations;

•

the risk associated with our reliance on key personnel, the loss of whom could have a material adverse effect on our business;

•

the risks associated with the increases in labor costs, including wages, could adversely impact our operational results, financial condition and results of operations;

•

the risks associated with the current legal and regulatory environment could adversely affect our financial condition and results of operations;

•

the risks associated with fluctuations in our tax obligations and effective tax rate could adversely affect us; and

•

the risk that the unfavorable outcome of pending or future litigation could have an adverse impact on our business, financial condition and results of operations.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; Dollars and shares in thousands, except per share amounts)


	August 3,			February 3,			July 29,
	2024			2024			2023
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	191,837		$	354,094		$	175,315
Short-term investments		—			100,000			—
Merchandise inventory		663,659			640,662			636,972
Accounts receivable, net		231,750			247,934			271,333
Prepaid expenses and other		161,199			90,660			117,871
Total current assets		1,248,445			1,433,350			1,201,491
Operating lease right-of-use assets		1,153,354			1,005,293			1,038,505
Property and equipment, at cost, net of accumulated depreciation		722,193			713,336			758,736
Goodwill, net		225,213			225,303			264,964
Non-current deferred income taxes		87,245			82,064			21,990
Intangible assets, net		44,241			46,109			90,312
Other assets		59,625			52,454			55,909
Total assets	$	3,540,316		$	3,557,909		$	3,431,907
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	259,734		$	268,308		$	238,660
Current portion of operating lease liabilities		307,570			284,508			309,517
Accrued compensation and payroll taxes		55,441			152,353			74,509
Unredeemed gift cards and gift certificates		51,791			66,285			51,156
Accrued income and other taxes		41,631			46,114			17,372
Other current liabilities and accrued expenses		78,219			73,604			71,262
Total current liabilities		794,386			891,172			762,476
Non-current liabilities:
Non-current operating lease liabilities		1,015,455			901,122			970,862
Long-term debt, net		—			—			3,225
Other non-current liabilities		36,109			28,856			22,345
Total non-current liabilities		1,051,564			929,978			996,432
Commitments and contingencies		—			—			—
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding		—			—			—
Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 192,013, 196,936, and 197,481 shares outstanding, respectively		2,496			2,496			2,496
Contributed capital		353,608			360,378			334,447
Accumulated other comprehensive loss		(39,271	)		(16,410	)		(11,566	)
Retained earnings		2,320,348			2,214,159			2,158,294
Treasury stock, at cost, 57,553, 52,630, and 52,085 shares, respectively		(942,815	)		(823,864	)		(810,672	)
Total stockholders’ equity		1,694,366			1,736,759			1,672,999
Total liabilities and stockholders’ equity	$	3,540,316		$	3,557,909		$	3,431,907

Refer to Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Dollars and shares in thousands, except per share amounts)


	13 Weeks Ended						26 Weeks Ended
	August 3,			July 29,			August 3,			July 29,
	2024			2023			2024			2023
Total net revenue	$	1,291,058		$	1,200,879		$	2,434,925		$	2,281,805
Cost of sales, including certain buying, occupancy and warehousing expenses		792,162			747,863			1,471,791			1,415,610
Gross profit		498,896			453,016			963,134			866,195
Selling, general and administrative expenses		345,313			331,872			678,806			644,217
Impairment, restructuring and other charges		—			—			—			21,275
Depreciation and amortization expense		52,474			55,854			105,384			112,582
Operating income	$	101,109			65,290		$	178,944		$	88,121
Interest (income) expense, net		(730	)		951			(4,168	)		1,642
Other (income), net		(1,715	)		(2,150	)		(3,111	)		(5,461	)
Income before income taxes		103,554			66,489			186,223			91,940
Provision for income taxes		26,290			17,919			41,209			24,918
Net income	$	77,264		$	48,570		$	145,014		$	67,022

Basic net income per common share	$	0.40		$	0.25		$	0.74		$	0.34
Diluted net income per common share	$	0.39		$	0.25		$	0.73		$	0.34

Weighted average common shares outstanding - basic		193,661			195,329			195,048			195,214
Weighted average common shares outstanding - diluted		197,757			196,103			199,406			196,822

Refer to Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; Dollars in thousands)


	13 Weeks Ended					26 Weeks Ended
	August 3,			July 29,		August 3,			July 29,
	2024			2023		2024			2023
Net income	$	77,264		$	48,570	$	145,014		$	67,022
Other comprehensive (loss) income:
Foreign currency translation adjustments		(23,549	)		15,211		(22,861	)		21,064
Other comprehensive (loss) income:		(23,549	)		15,211		(22,861	)		21,064
Comprehensive income	$	53,715		$	63,781	$	122,153		$	88,086

Refer to Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; Dollars and shares in thousands, except per share amounts)

13 Weeks Ended August 3, 2024 and July 29, 2023


	Shares Outstanding			Common Stock		Contributed Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders' Equity
Balance at April 29, 2023		197,450		$	2,496	$	324,396		$	2,130,108		$	(811,207	)	$	(26,777	)	$	1,619,016
Stock awards		—			—		10,334			—			—			—			10,334
Repurchase of common stock from employees		(8	)		—		—			—			(83	)		—			(83	)
Reissuance of treasury stock		39			—		(287	)		(148	)		618			—			183
Net income		—			—		—			48,570			—			—			48,570
Other comprehensive income		—			—		—			—			—			15,211			15,211
Cash dividends declared and dividend equivalents ($0.10 per share)		—			—		490			(20,236	)		—			—			(19,746	)
Contributions from non-controlling interests		—			—		(486	)		—			—			—			(486	)
Balance at July 29, 2023		197,481		$	2,496	$	334,447		$	2,158,294		$	(810,672	)	$	(11,566	)	$	1,672,999

Balance at May 4, 2024		196,430		$	2,496	$	345,922		$	2,267,785		$	(848,125	)	$	(15,722	)	$	1,752,356
Stock awards		—			—		6,626			—			—			—			6,626
Repurchase of common stock as part of publicly announced programs, including excise tax		(4,500	)		—		—			—			(95,993	)		—			(95,993	)
Repurchase of common stock from employees		(2	)		—		—			—			(48	)		—			(48	)
Reissuance of treasury stock		85			—		(161	)		(78	)		1,351			—			1,112
Net income		—			—		—			77,264			—			—			77,264
Other comprehensive (loss)		—			—		—			—			—			(23,549	)		(23,549	)
Cash dividends declared and dividend equivalents ($0.125 per share)		—			—		599			(24,623	)		—			—			(24,024	)
Contributions from non-controlling interests		—					622			—			—			—			622
Balance at August 3, 2024		192,013		$	2,496	$	353,608		$	2,320,348		$	(942,815	)	$	(39,271	)	$	1,694,366

Refer to Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; Dollars and shares in thousands, except per share amounts)

26 Weeks Ended August 3, 2024 and July 29, 2023


	Shares Outstanding			Common Stock		Contributed Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders' Equity
Balance at January 28, 2023		195,064		$	2,496	$	341,775		$	2,137,126		$	(849,604	)	$	(32,630	)	$	1,599,163
Stock awards		—			—		24,984			—			—			—			24,984
Repurchase of common stock from employees		(748	)		—		—			—			(10,396	)		—			(10,396	)
Reissuance of treasury stock		2,066			—		(27,481	)		(3,330	)		32,220			—			1,409
Redemption of Convertible Senior Notes		1,099			—		(6,281	)		(2,137	)		17,108			—			8,690
Net income		—			—		—			67,022			—			—			67,022
Other comprehensive income		—			—		—			—			—			21,064			21,064
Cash dividends declared and dividend equivalents ($0.20 per share)		—			—		1,016			(40,387	)		—			—			(39,371	)
Contributions from non-controlling interests		—			—		434			—			—			—			434
Balance at July 29, 2023		197,481		$	2,496	$	334,447		$	2,158,294		$	(810,672	)	$	(11,566	)	$	1,672,999

Balance at February 3, 2024		196,936		$	2,496	$	360,378		$	2,214,159		$	(823,864	)	$	(16,410	)	$	1,736,759
Stock awards					—		27,062			—			—			—			27,062
Repurchase of common stock as part of publicly announced programs, including excise tax		(6,000	)		—		—			—			(130,941	)		—			(130,941	)
Repurchase of common stock from employees		(533	)		—		—			—			(13,290	)		—			(13,290	)
Reissuance of treasury stock		1,610			—		(35,166	)		10,996			25,280			—			1,110
Net income					—		—			145,014			—			—			145,014
Other comprehensive (loss)					—		—			—			—			(22,861	)		(22,861	)
Cash dividends declared and dividend equivalents ($0.250 per share)					—		1,204			(49,821	)		—			—			(48,617	)
Contributions from non-controlling interests					—		130			—			—			—			130
Balance at August 3, 2024		192,013		$	2,496	$	353,608		$	2,320,348		$	(942,815	)	$	(39,271	)	$	1,694,366

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)


	26 Weeks Ended
	August 3,			July 29,
	2024			2023
Operating activities:
Net income	$	145,014		$	67,022
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		109,764			115,296
Share-based compensation		27,362			25,355
Deferred income taxes		(8,145	)		14,492
Loss on impairment of assets		-			10,759
Changes in assets and liabilities:
Accounts receivable		14,638			(29,143	)
Merchandise inventory		(33,750	)		(62,702	)
Operating lease assets		102,006			124,825
Operating lease liabilities		(112,528	)		(160,051	)
Other assets		(80,600	)		20,509
Accounts payable		(7,872	)		3,899
Accrued compensation and payroll taxes		(96,761	)		22,389
Accrued and other liabilities		(18,988	)		(4,759	)
Net cash provided by operating activities		40,140			147,891
Investing activities:
Capital expenditures for property and equipment		(96,945	)		(91,959	)
Sale of available-for-sale investments		100,000			-
Other investing activities		(8,384	)		(6,492	)
Net cash (used for) investing activities		(5,329	)		(98,451	)
Financing activities:
Repurchase of common stock as part of publicly announced programs		(130,941	)		-
Repurchase of common stock from employees		(13,290	)		(10,396	)
Proceeds from revolving line of credit		-			30,000
Principal payments on revolving line of credit		-			(27,000	)
Net proceeds from stock options exercised		2,963			1,095
Cash dividends paid		(48,617	)		(39,371	)
Other financing activities		(4,615	)		(742	)
Net cash (used for) financing activities		(194,500	)		(46,414	)
Effect of exchange rates changes on cash		(2,568	)		2,080
Net change in cash and cash equivalents		(162,257	)		5,106
Cash and cash equivalents - beginning of period		354,094			170,209
Cash and cash equivalents - end of period	$	191,837		$	175,315

Refer to Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Interim Financial Statements

The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc., a Delaware corporation, at August 3, 2024 and July 29, 2023 and for the 13 and 26 week periods ended August 3, 2024 and July 29, 2023 have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report. Therefore, these Consolidated Financial Statements should be read in conjunction with our Fiscal 2023 Form 10-K. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and those described in the notes that follow) considered necessary for a fair presentation have been included. The existence of subsequent events has been evaluated through the filing date of this Quarterly Report.

The Company operates under the American Eagle® ("AE") brand and the Aerie® brand, which includes the OFFLINE by Aerie® brand. We also operate Todd Snyder New York ("Todd Snyder"), a premium menswear brand, and Unsubscribed, which focuses on consciously made slow fashion.

Founded in 1977, the Company is a leading multi-brand specialty retailer that operates nearly 1,500 retail stores in the United States ("U.S.") and internationally, online through our digital channels at www.ae.com and www.aerie.com, www.toddsnyder.com, www.unsubscribed.com and through more than 300 international store locations managed by third-party operators. Through its portfolio of brands, the Company offers high quality, on-trend clothing, accessories, and personal care products at affordable prices. We sell directly to consumers through our retail channel, which includes our stores and concession-based shop-within-shops. We operate stores in the U.S., Canada, Mexico, and Hong Kong. We also have license agreements with third parties to operate American Eagle and Aerie stores throughout Asia, Europe, India, Latin America, and the Middle East. The Company's online business, AEO Direct, ships to approximately 80 countries worldwide.

As e-commerce penetration and growth has normalized coming out of the COVID-19 pandemic, the supply chain landscape has continued to evolve. In Fiscal 2023, as part of its profit improvement initiative, the Company 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. The network and related growth plans have been updated to reflect this refined focus.

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. Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels, competitive factors, weather and general economic and political conditions.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and consolidated entities where the Company's ownership percentage is less than 100%. Non-controlling interest is included as a component of contributed capital within the Consolidated Balance Sheets and Consolidated Statements of Stockholders' Equity and was not material for any period presented. All intercompany transactions and balances have been eliminated in consolidation. At August 3, 2024, the Company operated in two reportable segments, American Eagle and Aerie.

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 2024" refers to the 52-week period that will end on February 1, 2025. “Fiscal 2023” refers to the 53-week period ended on February 3, 2024.

Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires that segment expenses deemed significant to the Chief Operating Decision Maker ("CODM") typically incorporated in measuring profit or loss of the segment should be disclosed. The guidance also requires that the difference between segment revenues and these significant segment expenses is disclosed. Any annually disclosed segment information is now required to be reported in interim periods as well. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Public entities are required to apply the amendment retrospectively to prior periods presented in the financial statements. The Company plans to adopt ASU 2023-07 effective for its Fiscal 2024 and for the interim periods beginning in Fiscal 2025.

Refer to Note 12 to the Consolidated Financial Statements for additional information regarding Segment Reporting.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires increased transparency in tax disclosures, specifically by expanding requirements for rate reconciliation and income taxes paid information. Additionally, the amendment requires disclosures of income/(loss) from continuing operations before taxes disaggregated between domestic and foreign, and income tax expense/(benefit), disaggregated by federal, state, and foreign. Disclosure requirements about the nature and estimated range of the reasonably possible change in unrecognized tax benefits over the next year have been removed as part of this amendment. The guidance is effective for fiscal years beginning after December 15, 2024. The Company plans to adopt ASU 2023-09 effective for Fiscal 2025.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding Income Taxes.

Foreign Currency Translation

In accordance with Accounting Standards Codification ("ASC") 830, Foreign Currency Matters, the Company translates assets and liabilities denominated in foreign currencies into U.S. dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. The Company translates revenues and expenses denominated in foreign currencies into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the consolidated results of operations, whereas related translation adjustments are reported as an element of other comprehensive income (loss) in accordance with ASC 220, Comprehensive Income.

We are exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. During the 13 and 26 weeks ended August 3, 2024, an unrealized loss of $23.5 million and $22.9 million, respectively was included in other comprehensive (loss) income, which were primarily related to the fluctuations of the USD to Mexican peso and USD to Canadian dollar exchange rates.