American Eagle Outfitters, Inc.

Good afternoon, everyone. Welcome to the AEO, Inc. fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead.

Good afternoon, everyone. Today we issued our fourth quarter and fiscal year 2025 press release. Note that included in the release and during this call 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 our fourth quarter investor presentation. During today's call, we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. 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. Today we have a change to our conference call format due to the passing of Jay's mother, He is unable to join the question and answer section of the call. We extend our deepest condolences to Jay and the Schottenstein family. Today's call will include Jay's overview and highlights, which were prerecorded. Joining me for the call are Jen Foyle, President, Executive Creative Director for American Eagle & Airy, and Mike Mathias, Chief Financial Officer. And now we will begin the call.

Thanks to the hard work of the team, We made meaningful progress this year and delivered a strong fourth quarter. Following a tough start to the year, I am extremely proud of how the team course corrected with a deliberate action plan that ignited growth, improved profitability, and cash flow, fueling a strong finish to 2025. Initiatives across merchandising, operations, and marketing continue to strengthen our company and position our brands for long-term success. We remain committed to driving enduring profitable growth and strong cash flow for our shareholders. Let me walk you through the highlights of the quarter, and Mike will go through the numbers in detail. We delivered double-digit sales growth in the fourth quarter ahead of plan. This represented an acceleration from the third quarter to produce our best quarter of the year. We also achieved record-breaking results during the Thanksgiving and holiday season, building on the approved trends that began last summer. Margin performance was solid and drove enhanced operating efficiencies. We were thrilled to see the remarkable momentum at Aerie and offline, which delivered 23% comp growth. Robust demand was broad-based across categories and channels. By leveraging our stronger market position and heightened demand, we exited the quarter with record brand awareness, and customer acquisition was up in the double digits. With successful expansion underway across a number of categories, we see significant runway to continue to build area and offline and capture new audiences, and the years ahead. I'm also pleased by the consistent and steady progress we've seen at American Eagle. Comps grew 2%, accelerating from the third quarter with growth across genders. Product initiatives are delivering more newness and fresh trends, right collections. Following impactful partnerships with Cindy Sweeney and Travis Kelsey, Martha Stewart's holiday campaign reinforce AE's cross-generational appeal as the ultimate gift-giving destination. Customer counts and retention rates are proof points of success. This year, we look forward to creating more culture-defining moments with newly announced partnerships with Lumenia Mill, Ella Langley, and Bailey Zimmerman, and more to come. In terms of the numbers, total revenue hit an all-time high for the fourth quarter increasing 10% to $1.8 billion. Overall comp sales grew 8%. Adjusted operating income of $180 million was up 27% from the $142 million last year. Notably, we achieved these results despite significant tariff pressure. Successful tariff mitigation efforts centered on cost savings, greater efficiencies, and strategic management across our sourcing operations. Four year 2025 annual revenue reached a record $5.5 billion of 3% to last year. And adjusted operating income was $328 million. We ended 2025 in a strong financial position with nearly $240 million in cash and no debt. Our capital allocation strategy remained focused on investing in the business while returning cash to shareholders. We completed $256 million in share buybacks while paying 85 million in dividends last year. Now looking ahead, we remain confident in our strategy and our ability to build on our second half. As part of the continued effort to drive efficiencies and prioritize initiatives with the highest impact and strongest returns, We made the decision to exit quiet logistics during the quarter. This move keeps our focus and investment dollars on our core brands. As we exit the third-party business, we are left with a significantly enhanced logistics function, including much improved warehousing systems and technology, regionalized distribution capabilities, excellent speed to customer, and a network that will support growth for several years. We entered 2026 from a position of strength and positive sales trends continuing. We have significant opportunities ahead and our teams are energized and committed to executing on our plans. I am fully confident in our path forward and our strategy to drive long-term profitable growth and free cash generation, which in turn will create value for shareholders.