American Eagle Outfitters : Q3 2020 American Eagle Outfitters Inc Earnings Conference Call - Presentation

THIRD QUARTER 2020 FINANCIAL RESULTS

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including fourth quarter 2020 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company's control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," "potential," and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of the company's Annual Report on Form 10-K for the fiscal year ended February 1, 2020 and in any subsequently-filed Quarterly Reports on Form 10- Q filed with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results for the fourth quarter 2020 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the impact that the COVID-19 pandemic, the 2020 U.S. Presidential election and disruption related to social unrest will have on our operations and financial results, which is difficult to accurately predict; the risk that the company's operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni- channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity.

2

Non-GAAP Measures

This press release includes information on non-GAAP financial measures including earnings per share, excluding non-GAAP items, which is a non-GAAP or "adjusted" financial measure. These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles ("GAAP") and are not necessarily comparable to similar measures presented by other companies. Management believes that this non-GAAP information more clearly reflects our financial results and is useful for an alternate presentation of the company's performance, when reviewed in conjunction with the company's GAAP financial statements. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company's business and operations.

3

STATEMENTS OF OPERATIONS SUMMARY-GAAP BASIS

(unaudited)

			Third Quarter Ended
(In thousands, except per share amounts)	October 31,		% of		November 2,		% of
	2020		Revenue		2019		Revenue

Total net revenue	$
Cost of sales, including certain buying,
occupancy and warehousing expenses
Gross profit
Selling, general and administrative expenses
Impairment, restructuring, and COVID-19 related charges
Depreciation and amortization
Operating income
Interest expense (income), net
Other income, net
Income before taxes
Provision for income taxes
Net income	$
Net income per basic share	$
Net income per diluted share	$
Weighted average common shares
outstanding - basic
Weighted average common shares
outstanding - diluted

1,031,617	100.0%	$	1,066,412	100.0%
616,840	59.8%		659,350	61.8%
414,777	40.2%		407,062	38.2%
273,297	26.5%		258,973	24.3%
6,955	0.6%		-	0.0%
38,974	3.8%		44,987	4.2%
95,551	9.3%		103,102	9.7%
7,924	0.8%		(1,238)	-0.1%
(2,223)	-0.2%		(1,339)	-0.1%
89,850	8.7%		105,679	9.9%
31,742	3.1%		24,918	2.3%
58,108	5.6%	$	80,761	7.6%
0.35		$	0.48
0.32		$	0.48
166,185			167,912
184,397			168,693

4

STATEMENTS OF OPERATIONS SUMMARY-GAAP BASIS

(unaudited)

(In thousands, except per share amounts)			YTD Third Quarter Ended
October 31,		% of		November 2,		% of
	2020		Revenue		2019		Revenue

Total net revenue	$
Cost of sales, including certain buying,
occupancy and warehousing expenses
Gross profit
Selling, general and administrative expenses
Impairment, restructuring, and COVID-19 related charges
Depreciation and amortization
Operating (loss) income
Interest expense (income), net
Other income, net
(Loss) income before taxes
(Benefit) provision for income taxes
Net (loss) income	$
Net income per basic share	$
Net income per diluted share	$
Weighted average common shares
outstanding - basic
Weighted average common shares
outstanding - diluted

2,466,819	100.0%	$	2,993,581	100.0%
1,758,537	71.3%		1,879,027	62.8%
708,282	28.7%		1,114,554	37.2%
685,206	27.8%		742,764	24.8%
177,186	7.1%		4,272	0.1%
120,818	4.9%		134,648	4.5%
(274,928)	-11.1%		232,870	7.8%
16,617	0.7%		(4,797)	-0.2%
(793)	0.0%		(5,952)	-0.1%
(290,752)	-11.8%		243,619	8.1%
(77,943)	-3.2%		57,125	1.9%
(212,809)	-8.6%	$	186,494	6.2%
(1.28)		$	1.09
(1.28)		$	1.09
166,385			170,463
166,385			171,697

5

GAAP TO NON-GAAP RECONCILIATION

STATEMENTS OF OPERATIONS

(unaudited)

					13 Weeks Ended
				October 31, 2020
			Operating			Interest		Diluted
					Earnings per
			Income		Expense, net
($ in thousands)				Common Share
GAAP Basis		$	95,551		$	7,924		$	0.32
% of Revenue			9.3%			0.8%
Incremental COVID-19 related expenses and			6,955			-		$	0.02
restructuring(1):
Convertible debt(2):			-			(4,113)		$	0.01
Non-GAAP Basis	$	102,506	$	3,811		$	0.35
% of Revenue			9.9%			0.4%

1. $7.0 million Incremental COVID-19 related expenses and restructuring charges:
2. • $6.0 million of incremental COVID-19 related expenses consisting of personal protective equipment and supplies for our associates and customers
   • $1.0 million of corporate severance charges
3. Amortization of the non-cash discount on the Company's convertible notes

6

GAAP TO NON-GAAP RECONCILIATION

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

(unaudited)

		13 Weeks Ended
		October 31,				November 2,
($ in thousands)		2020				2019
Net Income	$	58,108			$	80,761
Add: Provision for income taxes		31,742				24,918
Add: Depreciation and amortization		38,974				44,987
Add: Interest expense (income), net		7,924				(1,238)
EBITDA	$	136,748			$	149,428
Add: Incremental COVID-19 related expenses and
restructuring (1)		6,955				-
Adjusted EBITDA	$	143,703			$	149,428

1. $7.0 million Incremental COVID-19 related expenses and restructuring charges:
2. • $6.0 million of incremental COVID-19 related expenses consisting of personal protective equipment and supplies for our associates and customers
   • $1.0 million of corporate severance charges

7

KEY HIGHLIGHTS

(unaudited)

Third Quarter		2020			2019
Total Net Revenue Change		(3) %		6 %
Gross Margin		40.2 %		38.2 %
Selling, General and Administrative Expenses		26.5 %		24.3 %
Adjusted Operating Margin (1)		9.9 %		9.7 %
Adjusted EPS (1)	$	0.35		$	0.48

1. Results shown are on a non-GAAP basis and exclude certain charges for all periods presented. See accompanying tables for a reconciliation of GAAP to non-GAAP results.

8

INVENTORY DATA

(unaudited)

	October 31,		November 2,
($ in thousands)	2020		2019

Ending Inventory	$559,961	$647,329
% Change to prior year	-13%	9%
Quarterly Inventory turn (1)	1.26	1.12

1. - Inventory turn is calculated as the total GAAP cost of goods sold for the quarterly periods divided by the straight average of the beginning and ending inventory balances from the consolidated balance sheets.

9

BALANCE SHEET SUMMARY

(unaudited)

($ in thousands)

ASSETS

Cash and cash equivalents	$
Short-term investments
Merchandise inventory
Accounts receivable
Prepaid expenses and other
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets net, including goodwill
Non-current deferred income taxes
Other assets
Total Assets	$

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable	$
Current portion of operating lease credits
Dividends payable
Total other current liabilities
Total current liabilities
Long-term debt, net
Non-current operating lease liabilities
Other non-current liabilities
Total non-current liabilities
Total stockholders' equity
Total Liabilities and Stockholders' Equity	$
Total Cash and Short-Term Investments	$
Total Working Capital	$
Current Ratio

October 31,		February 1,		November 2,
2020		2020		2019
692,356	$	361,930	$	214,514
-		55,000		50,000
559,961		446,278		647,329
124,560		119,064		112,304
130,909		65,658		54,427
1,507,786		1,047,930		1,078,574
650,397		735,120		764,350
1,243,311		1,418,916		1,486,133
50,864		53,004		55,466
12,774		22,724		16,833
33,083		50,985		50,896
3,498,215	$	3,328,679	$	3,452,252
304,552	$	285,746	$	366,676
346,321		299,161		292,312
22,843		-		-
220,620		166,849		151,164
894,336		751,756		810,152
321,081		-		-
1,196,755		1,301,735		1,353,819
17,846		27,335		27,896
1,535,682		1,329,070		1,381,715
1,068,197		1,247,853		1,260,385
3,498,215	$	3,328,679	$	3,452,252
692,356	$	416,930	$	264,514
613,450	$	296,174	$	268,422
1.69		1.39		1.33

10

CASH RETURNED TO SHAREHOLDERS

(unaudited)

	Third Quarter Ended		YTD Third Quarter Ended
	October 31,		November 2,		October 31,		November 2,
(In millions, except per share amounts)	2020	2019		2020	2019
Cash used for share repurchases	$0.0	$32.4	$20.0	$112.4
Number of shares repurchased	0.0	2.0	1.7	6.3
Cash used for regular quarterly dividends	$0.0	$23.0	$0.0	$69.8
Total dividends per share	$0.000	$0.138	$0.000	$0.413
Total cash returned to shareholders	$0.0		$55.4		$20.0		$182.2

11

REAL ESTATE SUMMARY

(unaudited)

				Third Quarter		YTD Third Quarter
Consolidated stores at beginning of period	2020	2020
1,098		1,095
Consolidated stores opened during the period	3	6
AE Brand
Aerie stand-alone(3)	7	22
Todd Snyder	0	1
Consolidated stores closed during the period
AE Brand	(3)	(15)
Aerie stand-alone	0	(3)
Tailgate Clothing Co.	0	(1)
Total consolidated stores at end of period			1,105	1,105
AE Brand		931
Aerie stand-alone	167
Aerie stand-alone(3)	177
Tailgate Clothing Co.	4
Todd Snyder	3
Stores remodeled and refurbished during the period	8	12
Total gross square footage at end of period (in '000)	6,858	6,858
International license locations at end of period (1)	225	225
Aerie openings
Aerie stand-alone(3)	7	22
Total Aerie side-by-side stores (2)	2	5
Total Aerie openings		9	27

1. International license locations are not included in the consolidated store data or the total gross square footage calculation.
2. Aerie side-by-side stores are included in the AE Brand store count as they are considered part of the AE Brand store to which they are attached.
3. Aerie stand alone stores include an Offline store opening in Q3 and an Unsubscribed store opening in Q2.

12

INTERNATIONAL LICENSED STORE LOCATIONS

(unaudited)

Q3 2020 Ending Licensed Stores:			Q3 2020 Openings
	225				Spain (4)
					Paraguay (2)
		Q3 2020	Q3 2019		Colombia (1)
Israel	48	48		Kuwait (1)
Saudi Arabia/KSA	26	27		Qatar (1)
UAE	22	17		UAE (1)
Colombia	18	16
India	17	11		Q3 2020 Closings
Philippines	11	10		Lebanon (4)
Chile	10	16		Saudi Arabia (1)
Greece	9	10
Thailand	9	6
Kuwait	8	6
Egypt	7	5
South Korea	7	13
Qatar	6	4
Oman	4	3
Spain	4	0
Bahrain	3	2
Costa Rica	3	2
Panama	3	2
Guatemala	2	2
Paraguay	2	0
Andorra	1	0
Curacao	1	1
Dominican Republic	1	1
El Salvador	1	0
Hungary	1	0
Jordan	1	1
Japan	0	33
Lebanon	0	4
Peru	0	1
Total		225	241

13

APPENDIX

14

HISTORICAL QUARTERLY STORE DATA BY BRAND

(unaudited)

												Consolidated from Continuing												Consolidated from Continuing
			AE Brand		aerie	Operations					AE Brand				aerie		Operations *
																		End Store		End Gross		End Store	End Gross		End Store		End Gross
			End Store	End Gross		End Store		End Gross		End Store		End Gross
			Count	Square Feet		Count	Square Feet	Count		Square Feet				Count		Square Feet		Count	Square Feet		Count		Square Feet
2004	1st Qtr.	809		4,285,182	-		-		809	4,285,182	2013	1st Qtr.	896	5,632,943	141		558,695	1,037	6,191,638
	2nd Qtr.	825		4,390,790	-		-		825	4,390,790		2nd Qtr.	921	5,840,401	135		532,832	1,056	6,373,233
	3rd Qtr.	839		4,489,606	-		-		839	4,489,606		3rd Qtr.	932	5,935,360	132		520,137	1,064	6,455,497
	4th Qtr.	846		4,540,095	-		-		846	4,540,095		4th Qtr.	944	6,024,950	122		478,536	1,066	6,503,486
																								478,536		1,066		6,503,486
	Total		846		4,540,095		-			-		846		4,540,095		Total		944		6,024,950	122
2005	1st Qtr.	845		4,549,729	-		-		845	4,549,729	2014	1st Qtr.	949	6,069,574	108		425,786	1,057	6,495,360
	2nd Qtr.	854		4,631,461	-		-		854	4,631,461		2nd Qtr.	966	6,214,646	106		417,410	1,072	6,632,056
	3rd Qtr.	866		4,729,612	-		-		866	4,729,612		3rd Qtr.	988	6,387,514	104		408,559	1,092	6,796,073
	4th Qtr.	869		4,772,487	-		-		869	4,772,487		4th Qtr.	955	6,216,819	101		396,291	1,056	6,613,110
																								396,291		1,056		6,613,110
	Total		869		4,772,487		-			-		869		4,772,487		Total		955		6,216,819	101
2006	1st Qtr.	876		4,847,077	-		-		876	4,847,077	2015	1st Qtr.	956	6,233,394	98		383,638	1,054	6,617,032
	2nd Qtr.	883		4,911,192	-		-		883	4,911,192		2nd Qtr.	960	6,264,006	97		379,351	1,057	6,643,357
	3rd Qtr.	900		5,031,014	2		5,054		902	5,036,068		3rd Qtr.	970	6,343,955	98		377,357	1,068	6,721,312
	4th Qtr.	903		5,129,625	3		7,337		906	5,136,962		4th Qtr.	949	6,228,755	97		372,357	1,047	6,601,112
																								372,357		1,047		6,601,112
	Total		903		5,129,625		3			7,337		906		5,136,962		Total		949		6,228,755	97
2007	1st Qtr.	909		5,188,241	3		7,337		912	5,195,578	2016	1st Qtr.	950	6,237,871	95		363,909	1,046	6,601,780
	2nd Qtr.	914		5,278,756	5		10,566		919	5,289,322		2nd Qtr.	951	6,245,820	91		346,771	1,044	6,598,956
	3rd Qtr.	928		5,421,689	32		104,810		960	5,526,499		3rd Qtr.	952	6,265,099	97		363,424	1,052	6,638,008
	4th Qtr.	929		5,444,174	39		137,595		968	5,581,769		4th Qtr.	943	6,222,548	102		380,554	1,050	6,619,267
																								380,554		1,050		6,619,267
	Total		929		5,444,174		39			137,595		968		5,581,769		Total		943		6,222,548	102
2008	1st Qtr.	942		5,545,675	55		199,113		997	5,744,788	2017	1st Qtr.	944	6,237,016	103		382,854	1,053	6,637,435
	2nd Qtr.	951		5,645,346	81		297,160		1,032	5,942,506		2nd Qtr.	942	6,224,214	109		400,448	1,057	6,642,227
	3rd Qtr.	958		5,708,713	111		419,935		1,069	6,128,648		3rd Qtr.	943	6,222,195	110		403,048	1,058	6,641,401
	4th Qtr.	954		5,700,320	116		439,343		1,070	6,139,663		4th Qtr.	933	6,169,370	109		395,284	1,047	6,580,812
																								395,284		1,047		6,580,812
	Total		954		5,700,320		116			439,343		1,070		6,139,663		Total		933		6,169,370	109
2009	1st Qtr.	953		5,723,465	129		494,734		1,082	6,218,199	2018	1st Qtr.	935	6,183,421	109		398,447	1,048	6,598,026
	2nd Qtr.	954		5,736,761	132		505,695		1,086	6,242,456		2nd Qtr.	939	6,213,412	109		408,389	1,053	6,640,759
	3rd Qtr.	952		5,745,294	137		529,123		1,089	6,274,417		3rd Qtr.	941	6,230,107	110		413,272	1,057	6,662,337
	4th Qtr.	938		5,686,232	137		529,123		1,075	6,215,355		4th Qtr.	934	6,189,989	115		438,355	1,055	6,647,302
																								438,355		1,055		6,647,302
	Total		938		5,686,232		137			529,123		1,075		6,215,355		Total		934		6,189,989	115
2010	1st Qtr.	938		5,703,529	139		538,190		1,077	6,241,719	2019	1st Qtr.	936	6,205,898	119		456,506	1,061	6,662,404
	2nd Qtr.	934		5,691,552	144		560,582		1,078	6,252,134		2nd Qtr.	939	6,228,664	131		505,389	1,075	6,740,653
	3rd Qtr.	935		5,708,403	147		575,096		1,082	6,283,499		3rd Qtr.	945	6,275,892	142		554,419	1,094	6,836,504
	4th Qtr.	929		5,705,645	148		582,780		1,077	6,288,425		4th Qtr.	940	6,254,049	148		576,867	1,095	6,830,916
																								576,867		1,095		6,830,916
	Total		929		5,705,645		148			582,780		1,077		6,288,425		Total		940		6,254,049	148
2011	1st Qtr.	931		5,727,853	150		590,278		1,081	6,318,131	2019 1st Qtr.	936	6,205,898	119		456,506	1,061	6,662,404
	2nd Qtr.	931		5,757,301	151		593,859		1,082	6,351,160		2nd Qtr.	939	6,228,664	131		505,389	1,075	6,740,653
	3rd Qtr.	937		5,805,078	158		623,862		1,095	6,428,940		3rd Qtr.	945	6,275,892	142		554,419	1,094	6,836,504
	4th Qtr.	911		5,666,422	158		623,862		1,069	6,290,284		4th Qtr.	940	6,254,049	148		576,867	1,095	6,830,916
																								576,867		1,095		6,830,916
	Total		911		5,666,422		158			623,862		1,069		6,290,284		Total		940		6,254,049	148
2012	1st Qtr.	911		5,680,673	157		621,170		1,068	6,301,843	2020	1st Qtr.	938	6,246,343	148		575,509	1,093	6,821,852
	2nd Qtr.	908		5,669,359	155		613,669		1,063	6,283,028		2nd Qtr.	931	6,205,098	160		618,083	1,098	6,827,912
	3rd Qtr.	909		5,690,552	154		610,110		1,063	6,300,662		3rd Qtr.	931	6,207,972	167		641,995	1,105	6,858,161
	4th Qtr.	893		5,606,396	151		596,882		1,044	6,203,278										641,995		1,105		6,858,161
					Total		931		6,207,972	167
										596,882		1,044		6,203,278		*- Consolidated total includes Tailgate Clothing Co. and Todd Snyder stores.
	Total		893		5,606,396	151

15

LEGEND OF NUMERICAL GUIDANCE

Description	% Range
Flat	0.0%
Slight	0.1%	- 0.9%
Low Single Digits	1.0%	- 3.3%
Mid Single Digits	3.4%	- 6.6%
High Single Digits	6.7%	- 9.9%
Low Double Digits	10.0%	- 12.9%
Low Teens	13.0%	- 13.3%
Mid Teens	13.4%	- 16.6%
High Teens	16.7%	- 19.9%
Low Twenties	20.0%	- 23.3%
Mid Twenties	23.4%	- 26.6%
High Twenties	26.7%	- 29.9%

16