American Eagle Outfitters, Inc.

The American Eagle Outfitters first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Judy Meehan. You may begin.

Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Boyle, President, Executive Creative Director for American Eagle and Aerie, Michael Rimpel, Chief Operating Officer, and Mike Macias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually released may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at aeo-inc.com in the investor relations section. Here you can also find the first quarter investor presentation. As a note, due to the significant impact COVID-19 had on fiscal 2020 financial results, our first quarter fiscal 2021 results are compared to the first quarter of fiscal 2019, which we believe is a more meaningful comparison. And now I will turn the call over to Jay.

Good afternoon and thanks for joining us today. I'm extremely pleased with the pace of our business and the outstanding financial performance in the first quarter. Even as we compare to the pre-pandemic 2019, Our results are truly remarkable and validate the strength of our value creation plan. We exceeded expectations in essentially all areas of the business, giving us a strong start to the year. We hit record first quarter revenue of over $1 billion and the highest first quarter operating income in our history of $133 million, which was up 170% from 2019. Importantly, we saw strength across both the American Eagle and Aerie brands. We ran an extremely healthy business with margins hitting the highest levels in many years. The actions we took in 2020, including our strategic growth pillars, combined with a favorable external environment are having a very meaningful impact on our business. Starting with our first pillar, accelerating Aerie to $2 billion. This quarter provided even more evidence that Aerie is the most exciting brand in retail today. On nearly 90% revenue growth, operating earnings rose well over 700%. Aerie is truly hitting its stride. We have increased digital penetration, expanded geographically, and pushed new and explosive categories like offline, leggings, and additional apparel items. As Jen will review, we continue to gain new customers at a fast clip for spending more on our brand. At this pace, we expect to hit our $2 billion target faster than expected, fueling significant earnings growth. Second, reigniting AE, as I said back in January, American Eagle is a strong and highly profitable brand with significant opportunity for both growth and profit improvements. The first quarter demonstrated that potential. We are seeing a favorable response to our product and new marketing. While the jeans category continues to dominate, across the brand we hit high margin rates with promotional well-contained. I'm very proud of the great progress under Jen's leadership. I know we are only at the beginning of realizing American Eagle's full potential. Next, customer-facing priorities delivered in the first quarter fueled by our leading Omni capabilities. Digital growth was terrific as momentum continued. We also saw an improvement in our store business as consumers are starting to get out more. Our loyalty launch is a home run and producing a stronger customer experience, positive margin contribution, and higher ROI. The supply chain delivered great results, even in the face of logistic headwinds. Deliveries were on time and we were able to successfully chase into top performing items. The multi-year investment we've made in these areas continue to pay off. Our fifth pillar to strengthen ROI discipline is clearly evident in our results. First quarter growth in our profitability is a testament to incredible collaboration across teams. We're not taking our eye off the ball. and remain focused on ensuring strong financial management is a top priority. And lastly, ESG initiatives. I'll highlight our environmental goals where we continue to make great progress. We are reducing water, utilizing more sustainable raw materials, and reducing energy to ultimately achieve carbon neutrality in our own facilities by 2030. We know sustainability is important to our customers. and supported us too. Reporting on our commitment to social responsibility and IND, this month we awarded our first 15 real change scholarships for social justice. We are excited to support educational pursuits of our amazing associates who are actively driving anti-racism, equality, and social. Before I turn it to Jen, clearly 2021 is off to a great start. I am so proud of the excellent execution across all areas of the company. The past several months truly validates my belief that we have more opportunity than at any time in the past. We have two of the best brands in the industry with significant momentum, and we have the right teams and leadership in place to achieve our goals. The macro environment is favorable with pent-up demand and new trends that play to our strength. At this pace, we expect to achieve our 2023 goal of $550 million of operating income way ahead of schedule. With that, I'll turn the call over to Jen.