American Eagle Outfitters, Inc.

Greetings and welcome to the American Eagle Outfitters fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Judy Meehan. Thank you, Ms. Meehan. You may begin.

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 Rempel, 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 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 www.aeo-inc.com in the investor relations section. Here you can also find the fourth quarter investor presentation. And now I will turn the call over to Jay.

Good afternoon. Thanks for joining us today. 2022 was a dynamic year, with numerous external crossroads. As we lacked outstanding results in 2021, we faced a difficult macro environment with rising inflation, higher interest rates, continued supply chain disruption, and a highly promotional retail environment. I am proud of how our teams executed throughout the year. Early on, we took swift and aggressive actions to reduce inventory levels, cut expenses, and capital spending. This contributed to a significant recovery in profitability and free cash flow during the second half of the year. We also posted our second highest revenue periods on record in both the fourth quarter at $1.5 billion and the year at $5 billion. Our fourth quarter results exceeded expectations and adjusted operating income of $96 million was above last year. We strengthen our financial position and exchange nearly all of our outstanding convertible debt to end the year with a healthier balance sheet and improved liquidity. Moving to the American Eagle brand, I'm incredibly proud of the work the AE team has done over the last several years to improve profitability, rationalize unproductive SKUs, and close those margin stores. As a proof point, fourth quarter adjusted operating profit for AE was up 36% to 2019. Jen has made great strides to refresh the brand, re-energizing assortments to capitalize on trends while delivering better profitability. AE is a strong and healthy brand. I'm encouraged by how customers are embracing new styles and I look forward to our continued progress. Aerie has demonstrated exciting, multi-year growth with fourth quarter revenue and adjusted operating income up over 70% in 2019. The rapid success of offline, our extension into activewear underscores the strength of Aerie's powerful brand platform. We have significant potential as we reach more and more customers, and I cannot be more excited about the future. Our international business performed well in 2022. We will continue to fuel sales and profits, pursuing a multi-year strategy to optimize key company-owned markets and expand our licensed business. In 2022, I was pleased to publish our first ESG report, highlighting over two decades of actions we have undertaken to build a better world. As noted in the report, we have made tremendous progress across our water goals and continue to reduce emissions. ESG responsibility is embedded in our brand and company culture and deeply intertwined with our corporate strategy. As we grow our brands and markets, we will stay disciplined and focus on profitability. Inventory management remains a key focus, and we will use the strength and agility of our supply chain to chase demand. Additionally, we have launched a formal program to further reduce expenses, gain efficiencies, and prioritize high ROI in projects. Given the highly volatile environment we've been operating in over the past several years, now is the time to reset our business. Last year, we made good progress, yet opportunities remain as we strive to break out of the mid-single-digit operating margin range. On Quiet's platform, we continue to see interest from prospective customers and remain optimistic about the long-term opportunity, yet the demand has been pressured this past year. As Michael will review, we are adjusting our go-forward plans to strengthen profitability. Although the macro environment remains uncertain, we entered 2023 better positioned. I see no shortage of opportunities for this company. We will harness the power of our brand and industry-leading operating models to drive growth and find efficiencies in processes and capabilities. I'm confident with focus and discipline We can strengthen our bottom line. We're committed to returning cash to our shareholders and are very pleased to reinstate our quarterly dividend. With that, I'll turn the call over to Jay.