AMERICAN EAGLE OUTFITTERS INC

Macroeconomic Conditions and Inflation

During Fiscal 2023 and Fiscal 2024, our results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior, which constrained revenue and increased margin pressure to clear through excess inventory. Given ongoing external uncertainties, we have taken additional actions to improve financial performance, including more operating efficiency initiatives, as described below under "Profit Improvement Program." For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see “Risk Factors” in Part I, Item 1A of this Annual Report.

Omni-Channel and Digital Capabilities

We sell merchandise through our digital channels, www.ae.com, www.aerie.com, and our AEO apps, both domestically and internationally in approximately 90 countries. We also sell AE and Aerie brand merchandise on various international online marketplaces. We offer Todd Snyder and Unsubscribed brand products online at www.toddsnyder.com and www.unsubscribed.com, respectively. The digital channels reinforce each particular brand and are designed to complement the in-store experience.

Over the past several years, we have invested in building our technologies and digital capabilities. We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience.

Profit Improvement Program

We launched our profit improvement program during Fiscal 2023, which focused on a comprehensive review of our cost structure. Early actions focused on the components of gross margin and contributed to margin expansion in Fiscal 2023. Other significant work streams were identified, actioned and incorporated into our Fiscal 2024 plans. The results of these initiatives, combined with merchandising initiatives embedded in our "Powering Profitable Growth" strategy, yielded gross margin expansion, as well as SG&A and depreciation leverage, resulting in an improved operating profit rate for Fiscal 2024.