American Eagle Outfitters, Inc.

Greetings and welcome to the American Eagle Outfitters fourth 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. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Judy Meeham. Thank you, ma'am. You may begin your presentation.

Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Foyle, President, Executive Creative Director for AE and Aerie, Michael Rumpel, Chief Operating Officer, and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filing. 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, reconciliation of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www.aeo-inc.com in the investor relations section. Here you can also find the fourth quarter investor presentation. And now I'll turn the call over to Jay.

Good afternoon and thanks for joining us today. 2021 was a remarkable year, well exceeding our expectations. I'm incredibly grateful to our associates who worked tirelessly through the year's macro challenges to deliver outstanding results. In 2021, we hit a number of significant milestones, including crossing $5 billion in revenue for the first time ever. Annual record revenue has increased $1.3 billion or 33% from 2020. Additionally, compared to pre-pandemic 2019 revenue grew 16 percent and we achieved significant margin expansion and profit flow through we saw greater consistency across the business and growth across brands channels and geographic regions this was a terrific result and reflects a financially strong agile customer focused and efficient organization fueled by strong demand for our brands improved product margin and cost efficiencies, we achieved adjusted operating income of $603 million. This included additional freight costs related to factory closures due to COVID, which hit largely in the fourth quarter. Despite these pressures, 2021 was our best profit results since 2007. Without additional freight costs, profits would have hit an all-time high. Momentum and strong demand continued in the fourth quarter, driving record revenue of $1.5 billion. As I mentioned, profit flow through was constrained by elevated freight costs. I'm proud of these results, particularly in light of the supply chain challenges that hit the retail industry. With momentum across our business and key strategies working, we exceeded our 2023 financial targets, which were communicated back in January of last year. We now have our eyes set on a new target of $800 million in operating profit, including $5.8 billion in revenue and a 13.5% operating margin. Our real power, real growth plan is delivering structural improvements to our business that is enabling us to fuel growth with greater agility and focus. Starting with Aerie, Once again, we posted a record year, including the fourth quarter, marking the 29th consecutive quarter of double-digit growth. Operating profits more than tripled from pre-pandemic 20,019 levels as Erie reached a turning point in its growth path. Our active wear expansion offline is hitting it out of the park. Excitement for the Erie Real movement is unmatched, and we seek significant opportunity to continue to grow airy as we penetrate key markets. At American Eagle, the transformation has been nothing short of incredible. Under Jen's leadership, we're running a stronger, more focused, and more profitable brand. The numbers speak for themselves, with operating profits up over 50% from 2019 and revenue up 2%, exceeding our plan. Our product assortments have been strengthened and inventory optimization is enabling us to prioritize our best-selling products. We've also made early progress in our real estate optimization strategy, closing unproductive stores and energizing the business around high-quality stores and digital. Supply chain innovation has been a key enabler of our strong performance across brands. The acquisition of Air Terra and Quiet Logistics are part of the transformation that will solidify many of the benefits cost savings and efficiencies we have seen in our p l to date while providing a new growth platform for the company michael will speak about this more but we are very excited about this opportunity and the interest we are seeing from other retailers lastly social responsibility has always been woven through the fabric of aeo as we work to build a better world this is evident through our purpose-led values charitable giving and a commitment to fostering a workplace culture where everyone is respected and empowered. In 2021, AEO led charitable donations of over $16 million, our highest ever. Over the last several years, we pledged to accelerate sustainability efforts across our operation, and we are making great progress. We look forward to greater disclosure and transparency of our ESG practices. in 2022 to highlight our work and measurable impact in these important areas. I'd like to thank our teams for their excellent execution and unwavering focus on driving our business forward. Thanks to their efforts, we have entered 2022 a stronger company. The macro environment remains challenging, which we are taking into account in our plans for the year. Yet we expect our results to reflect meaningful progress over prior years, setting a new baseline for profitability. With that, I'll turn it over to Jen.