UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-33338

American Eagle Outfitters, Inc.

(Exact name of registrant as specified in its charter)

Delaware	No. 13-2721761
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
77 Hot Metal Street, Pittsburgh, PA	15203-2329
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (412) 432-3300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AEO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 187,406,236 shares of common stock were outstanding at November 21, 2022.

AMERICAN EAGLE OUTFITTERS, INC.

TABLE OF CONTENTS

		Page Number
	PART I - FINANCIAL INFORMATION
	Forward Looking Statements	3
Item 1.	Financial Statements	6
	Consolidated Balance Sheets: October 29, 2022, January 29, 2022 and October 30, 2021	6
	Consolidated Statements of Operations: 13 and 39 weeks ended October 29, 2022 and October 30, 2021	7
	Consolidated Statements of Comprehensive Income: 13 and 39 weeks ended October 29, 2022 and October 30, 2021	8
	Consolidated Statements of Stockholders' Equity: 13 and 39 weeks ended October 29, 2022 and October 30, 2021	9
	Consolidated Statements of Cash Flows: 39 weeks ended October 29, 2022 and October 30, 2021	11
	Notes to Consolidated Financial Statements	12
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	35
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	N/A
Item 4.	Mine Safety Disclosures	N/A
Item 5.	Other Information	N/A
Item 6.	Exhibits	37

2

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Quarterly Report") contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on the views and beliefs of management, as well as assumptions and estimates made by management. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not intend to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “potential,” and similar expressions may identify forward-looking statements. Our forward-looking statements include, but are not limited to, statements about:

•the planned opening of approximately 10 to 20 American Eagle stores and approximately 40 Aerie locations and over 40 OFFLINETM stores, which will be a mix of stand-alone and Aerie side-by-side locations, during Fiscal 2022;

•the anticipated selection of approximately 15 to 30 American Eagle and Aerie stores in the U.S. and Canada for remodeling during Fiscal 2022;

•the potential closure of approximately 30 to 50 American Eagle stores at the expiration of their lease terms, primarily in North America, during Fiscal 2022;

•the success of our core American Eagle and Aerie brands through our omni-channel and licensed outlets within North America and internationally;

•our plans for our supply chain platform;

•our acquisitions' ability to achieve expected results;

•the success of our business priorities and strategies;

•the continued validity of our trademarks;

•our performance during the back-to-school and holiday selling seasons;

•the reduction of operating expenses and capital expenditures;

•the accuracy of the estimates and assumptions we make pursuant to our critical accounting policies and estimates;

•the payment of a dividend in future periods;

•our ability to fund our current and long-term cash requirements through current cash holdings and available liquidity, including under our revolving credit facility;

•the possibility that product costs are adversely affected by foreign trade issues (including import tariffs and other trade restrictions with China and other countries), currency exchange rate fluctuations, increasing prices for raw materials, supply chain issues, political instability or for other reasons;

•the possibility of changes in global economic and financial conditions, and resulting impacts on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; and

•the possibility that we may be required to take additional impairment or other restructuring charges.

Our forward-looking statements surrounding the novel strain of coronavirus ("COVID-19") include, but are not limited to, statements about:

•the ongoing impact of the COVID-19 pandemic on global economic conditions;

•the currently unknown duration and trajectory of the COVID-19 pandemic;

•the impact of governmental regulations that have been, and may in the future be, imposed in response to the COVID-19 pandemic, including regulations that could adversely affect our business or cause us to cease our digital business if we are required to close our distribution and fulfillment centers or are otherwise unable to acquire or deliver merchandise, or to close our retail stores;

•the impact of the COVID-19 pandemic on the operations of our partners, suppliers and vendors;

•the potential for the impacts of the COVID-19 pandemic to cause or exacerbate supply chain disruptions, shipping delays, and freight costs;

3

•the ability of our distribution centers and stores to maintain adequate staffing to meet increased customer demand;

•the possibility of temporary furloughs of store, field, and corporate associates surrounded by store closures; and

•our potential actions in response to the COVID-19 pandemic.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:

•the risk that our inability to anticipate and respond to changing consumer preferences and fashion trends and fluctuations in consumer demand in a timely manner could adversely impact our business and results of operations;

•the risk that the ongoing COVID-19 pandemic and any other adverse public health development have had, and may continue to have, an adverse effect on our business and results of operations;

•the risk that governmental regulations relating to the ongoing COVID-19 pandemic could have a material adverse impact on our business, financial conditions and results of operations;

•the risk that global economic conditions, such as a slowing economy, inflation, rising interest rates, and the effect of economic pressures and other business factors on discretionary consumer spending and changes in consumer preferences could have a material adverse effect on our business, results of operations and financial condition;

•the risk that our interest expense may be negatively impacted by rising interest rates;

•the risk that recent inflationary pressures could have a material adverse effect on demand based on pricing actions and operating measures taken to mitigate inflation's impact;

•the risk that seasonality may cause sales to fluctuate and negatively impact our results of operations;

•the risks associated with operating in a highly competitive industry, as we face significant pricing pressures from existing and new competitors;

•the risk that our results could be adversely affected by events beyond our control, such as natural disasters, public health crises, political crises, negative global climate patterns, armed conflicts, including the war in Ukraine, or other catastrophic events;

•the risk that impairment to goodwill, intangible assets, and other long-lived assets could adversely impact our profitability;

•the risk that our inability to grow our digital channels and leverage omni-channel capabilities could adversely impact our business;

•the risk that failure to define, launch and communicate a brand relevant customer experience or otherwise achieve the desired results of our advertising initiatives could have a negative impact on our growth and profitability;

•the risk that our efforts to execute on our key business priorities could have a negative impact on our growth and profitability;

•the risks that our efforts to expand operations in new countries inherently expose us to;

•the risk that failure to protect our reputation could have a material adverse effect on the value of our brands;

•the risk that failure to manage growth in our omni-channel operations and the resulting impact on our distribution and fulfillment networks may have an adverse effect on our results of operations;

•the risks associated with our inability to implement and sustain adequate information technology;

•the risk that the loss or disruption of information technology services could affect our ability to implement our strategies and have a material adverse effect on our business;

•the risks related to our electronic processing of sensitive and confidential personal and business data. If such data is lost or disclosed in an unauthorized manner, or if we or our third-party vendors are subject to cyberattacks, data breaches, other security incidents, or disruption of information technology systems or software, such events could expose us to liability, damage our reputation, and have a material adverse effect on our business;

•the risks associated with climate change, and related legislative and regulatory responses to climate change, which may adversely impact our business;

4

•the risk that telework measures intended to prevent the spread of COVID-19 may negatively impact our operations or increase our risk exposures;

•the risks that our international merchandise sourcing strategy subject us to, which could adversely impact our business and results of operations;

•the risk that our product costs may be adversely affected by foreign trade issues (including import tariffs and other trade restrictions with China), currency exchange rate fluctuations, increasing prices for raw materials due to inflationary pressures or otherwise, political instability, or for other reasons, which could impact our profitability;

•the risk that our suppliers may be impacted by economic conditions and cycles and changing laws and regulatory requirements which could impact their ability to do business with us or cause us to terminate our relationship with them and require us to find replacements, which we may have difficulty doing;

•the risks relating to foreign laws and regulations, among others, that our international operations subject us to;

•the risks associated with changes in tax policy, including as a result of the Inflation Reduction Act, or trade regulations or the imposition of new tariffs on imported products that could have an adverse effect on our business and results of operations;

•the risk that our inability to achieve planned store performance, gain market share in the face of declining shopping center traffic or attract customers to our stores could adversely impact our profitability and our results of operations;

•the possibility that our credit facilities may not be available for future borrowings;

•the risks that our share repurchase program may not be successfully consummated, that it may not enhance shareholder value, or that share repurchases could be negatively perceived by investors;

•the risks associated with our substantial lease obligations, including future increases in occupancy costs and the need to generate significant cash flow to meet our lease obligations;

•the risk that our inability to successfully integrate Quiet Logistics, Inc.'s ("Quiet Logistics") business and operations may adversely affect our results;

•the risk that the integration of Quiet Logistics may result in significant accounting charges that adversely affect our results;

•the risk associated with our reliance on key personnel, the loss of whom could have a material adverse effect on our business;

•the risks associated with stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other legal obligations, could have a material adverse effect on our business;

•the risk that we may be unable to protect our trademarks and other intellectual property rights;

•the risks associated with changes in the regulatory or administrative landscape which could adversely affect our financial condition and results of operations;

•the risk that fluctuations in our tax obligations and effective tax rate could adversely affect us; and

•the risk that the unfavorable outcome of pending or future litigation could have an adverse impact on our business, financial condition, and results of operations.

5

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

	October 29,			January 29,			October 30,
(In thousands, except per share amounts)	2022			2022			2021
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	82,133		$	434,770		$	740,668
Merchandise inventory		797,731			553,458			739,808
Accounts receivable, net		250,879			286,683			228,461
Prepaid expenses and other		146,362			122,013			66,593
Total current assets		1,277,105			1,396,924			1,775,530
Operating lease right-of-use assets		1,148,832			1,193,021			1,148,108
Property and equipment, at cost, net of accumulated depreciation		789,809			728,272			665,408
Goodwill, net		271,209			271,416			16,389
Intangible assets, net		96,530			102,701			52,943
Non-current deferred income taxes		34,135			44,167			57,753
Other assets		54,857			50,142			33,884
Total assets	$	3,672,477		$	3,786,643		$	3,750,015
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	188,448		$	231,782		$	314,561
Current portion of operating lease liabilities		332,160			311,005			299,693
Unredeemed gift cards and gift certificates		47,531			71,365			42,070
Accrued compensation and payroll taxes		36,436			141,817			123,588
Accrued income and other taxes		13,056			16,274			33,570
Other current liabilities and accrued expenses		67,799			70,628			56,090
Total current liabilities		685,430			842,871			869,572
Non-current liabilities:
Non-current operating lease liabilities		1,089,710			1,154,481			1,123,681
Long-term debt, net		411,911			341,002			336,249
Other non-current liabilities		22,894			24,617			23,816
Total non-current liabilities		1,524,515			1,520,100			1,483,746
Commitments and contingencies		—			—			—
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none    issued and outstanding		—			—			—
Common stock, $0.01 par value; 600,000 shares authorized;    249,566 shares issued; 187,388, 168,699, and 168,622 shares    outstanding, respectively		2,496			2,496			2,496
Contributed capital		389,726			636,355			627,264
Accumulated other comprehensive loss		(41,267	)		(40,845	)		(39,049	)
Retained earnings		2,080,852			2,203,772			2,185,393
Treasury stock, at cost, 62,178, 80,867, and 80,944 shares, respectively		(969,275	)		(1,378,106	)		(1,379,407	)
Total stockholders’ equity		1,462,532			1,423,672			1,396,697
Total liabilities and stockholders’ equity	$	3,672,477		$	3,786,643		$	3,750,015

Refer to Notes to Consolidated Financial Statements

6

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	13 Weeks Ended					39 Weeks Ended
	October 29,		October 30,			October 29,			October 30,
(In thousands, except per share amounts)	2022		2021			2022			2021
Total net revenue	$	1,240,583	$	1,274,078		$	3,493,745		$	3,502,848
Cost of sales, including certain buying, occupancy and    warehousing expenses		760,810		709,554			2,255,929			1,999,743
Gross profit		479,773		564,524			1,237,816			1,503,105
Selling, general and administrative expenses		311,101		313,890			917,687			872,320
Depreciation and amortization expense		51,124		40,947			146,664			119,674
Operating income		117,548		209,687			173,465			511,111
Debt related charges		—		—			60,066			—
Interest expense, net		3,878		8,612			11,887			26,038
Other expense (income), net		782		(3,130	)		(5,501	)		(6,354	)
Income before income taxes		112,888		204,205			107,013			491,427
Provision for income taxes		31,616		51,981			36,466			122,226
Net income		81,272		152,224			70,547			369,201
Net income per basic share	$	0.44	$	0.91		$	0.39		$	2.20
Net income per diluted share	$	0.42	$	0.74		$	0.36		$	1.78
Weighted average common shares outstanding - basic		186,305		167,637			178,637			168,062
Weighted average common shares outstanding - diluted		195,776		205,013			207,499			207,032

Refer to Notes to Consolidated Financial Statements

7

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	13 Weeks Ended						39 Weeks Ended
	October 29,			October 30,			October 29,			October 30,
(In thousands)	2022			2021			2022			2021
Net income	$	81,272		$	152,224		$	70,547		$	369,201
Other comprehensive income (loss):
Foreign currency translation adjustments		(1,250	)		(2,155	)		(422	)		1,699
Other comprehensive income (loss)		(1,250	)		(2,155	)		(422	)		1,699
Comprehensive income	$	80,022		$	150,069		$	70,125		$	370,900

Refer to Notes to Consolidated Financial Statements

8

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

13 Weeks Ended October 29, 2022 and October 30, 2021

(In thousands, except per share amounts)	Shares Outstanding			Common Stock		Contributed Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders' Equity
Balance at July 31, 2021		168,454		$	2,496	$	630,506		$	2,058,448		$	(1,379,025	)	$	(36,894	)	$	1,275,531
Stock awards		—			—		7,791			—			—			—			7,791
Repurchase of common stock from employees		(188	)		—		—			—			(6,452	)		—			(6,452	)
Reissuance of treasury stock		356			—		(11,778	)		5,820			6,070			—			112
Net income		—			—		—			152,224			—			—			152,224
Other comprehensive (loss)		—			—		—			—			—			(2,155	)		(2,155	)
Cash dividends and dividend equivalents ($0.18 per share)		—			—		745			(31,099	)		—			—			(30,354	)
Balance at October 30, 2021		168,622		$	2,496	$	627,264		$	2,185,393		$	(1,379,407	)	$	(39,049	)	$	1,396,697
Balance at July 30, 2022		187,312		$	2,496	$	380,959		$	2,000,021		$	(970,536	)	$	(40,017	)	$	1,372,923
Stock awards		—			—		6,591						—			—			6,591
Repurchase of common stock from employees		(18	)		—		—			—			(193	)		—			(193	)
Reissuance of treasury stock		94			—		(660	)		(441	)		1,454			—			353
Net income		—			—		—			81,272			—			—			81,272
Other comprehensive (loss)		—			—		—			—			—			(1,250	)		(1,250	)
Contributions from noncontrolling interests		—			—		2,836			—			—			—			2,836
Balance at October 29, 2022		187,388		$	2,496	$	389,726		$	2,080,852		$	(969,275	)	$	(41,267	)	$	1,462,532

9

39 Weeks Ended October 29, 2022 and October 30, 2021

(In thousands, except per share amounts)	Shares Outstanding			Common Stock		Contributed Capital			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders' Equity
Balance at January 30, 2021		166,335		$	2,496	$	663,718		$	1,868,613	$	(1,407,414	)	$	(40,748	)	$	1,086,665
Stock awards		—			—		29,245			—		—			—			29,245
Repurchase of common stock from employees		(779	)		—		—			—		(23,963	)		—			(23,963	)
Reissuance of treasury stock		2,719			—		(58,063	)		26,417		46,071			—			14,425
Equity portion of partial extinguishment of Convertible Senior Notes, net of tax		347			—		(9,876	)		6,995		5,899			—			3,018
Net income		—			—		—			369,201		—