American Eagle Outfitters, Inc.

Greetings and welcome to the American Eagle Outfitters second quarter 2022 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 Meehan. Thank you, ma'am. You may begin at this time your presentation.

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 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 second quarter investor presentation. And now I will turn the call over to Jay.

Good afternoon. Thank you for joining us today. This is clearly an unprecedented time in retail. We are cycling extraordinary and uneven demand patterns brought on by stimulus and COVID over the last few years. And we are navigating through a highly volatile macro environment. Our second quarter results reflected these challenges as revenue came in below our plan and markdowns weighted on profit margins. On the first quarter call, we highlighted the actions we were taking in response to changing demand and to reposition our business for an improved second half. This included a firm goal to right-size our inventory and reset our expense base to be more aligned with demand in the second quarter. Significant progress was made across both these initiatives. On the inventory side, we cleared all excess spring and summer goods and entered the third quarter with better inventory levels and fresh back-to-school and fall merchandise. We also action expense reductions across the organization. As Mike will review, we are taking further steps to drive improved profitability and cash generation. This includes a hiring freeze, further reductions in non-critical expenses, and lower capital spending. We have also paused our quarterly cash dividend. We have returned $265 million in cash to shareholders through a combination of dividends and share repurchases. marking our highest level of returns since 2015. While we will take the rest of this year to strengthen our cash position, we are committed to continuing to return cash to shareholders as a fundamental principle. On a separate note, we made strategic changes to our leadership structure to enhance focus on consumer experience and our growth initiatives. We combined store and digital operations to enable a more holistic and cohesive view of the customer. The new structure will create efficiencies and strengthen the brand experience as we execute seamlessly across channels. This includes more focus on our international business, where I see tremendous opportunity for our brands. I'm pleased with the positive momentum we've been building over the past few years. This change will facilitate a more strategic approach as we further optimize key markets, including Canada and Mexico, while fueling our licensed partners for continued expansion over the long term. As we navigate through near-term macro challenges, we have not taken our eyes off the strong potential for future growth. Aerie's incredible brand platform continues to see exceptional multi-year growth, with second quarter revenue reflecting industry-leading 25% three-year compound annual growth rate. I remain extremely bullish on the outlook for Aerie and offline and their future potential. American Eagle is a dominant chain brand and the go-to destination for youth with very strong brand affinity and recognition. Innovation, new products, fueling new fashion trends, and further global expansion are key areas of focus to drive profitable growth. We continue to invest in bringing our customers a seamless and engaging shopping experience across digital and stores. Our logistic business, Quiet Platforms, is providing significant benefit to our operations while also expanding its third-party revenue base by offering innovative and more cost-efficient logistics solutions. The growth in the business so far confirms our initial investment thesis Onquire's value proposition of a differentiated fulfillment model. I am encouraged by the business and excited about the long-term growth potential. And I'm proud of the continued progress we are making on our ESG initiatives. We look forward to publishing our first ESG report next week, introducing standards, dyes, reporting, and increased transparency. Our brands are healthy and our business is resilient. Comparisons will eventually stabilize and the supply chain landscape continue to improve, restoring agility in our operation. In the meantime, we will stay conservative and focused on the core fundamentals that have brought us success in the past, creating great product, compelling marketing, building unique brands with strong customer connection, and chasing into demand. The actions we have taken to reset this year's were a significant undertaking. I'm thankful to our teams for acting quickly and purposely. Yet, we know there is more to do in these unprecedented times. We are focused on driving continuous improvement across the business. With that, I'll turn the call over to Jack.