Real Power. Real Growth. · 2021. 1. 28. · Driving Strong Financial Results 2023 Targets REVENUE...

Real Power. Real Growth.2021 Investor Meeting

Welcome Jay SchottensteinExecutive Chairman & Chief Executive Officer

Brand GrowthJen FoyleChief Creative Officer & Aerie Global Brand President

Customer Focus & Operational ExcellenceMichael RempellChief Operations Officer Financial OutlookMike MathiasChief Financial Officer

ESG & Closing RemarksJay Schottenstein

Today’s Agenda

2

Safe Harbor Statement Under The Private SecuritiesLitigation 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 our long-term financial

outlook. 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 newinformation, 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 our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 and in our Quarterly Reports on Form 10-Q for the fiscal quarters ended May 2, 2020, August 1, 2020, and October 31, 2020, and in any other filings that we may make 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 thisrelease or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; 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 financialperformance; 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 global economic, public health, social, political and financial conditions, and theresulting 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.

Historical consolidated operating income and EBIDTA reflect adjusted results, which are reconciled in the Form 8-K filed with theSecurities and Exchange Commission (SEC) on January 21, 2021.

3

Real Power. Real Growth.

4

Double Aerie to $2 Billion

Reignite American Eaglefor Profit Growth

12

5

2020 Demonstrated2020 Demonstratedthe Power of AEOthe Power of AEO

6

Protect Our People

2020 AEO Priorities

Preserve Financial Health

Prepare For a New Future

123

7

Photos by Andrew Spear for The Washington Post10

AEO’s Strong HeritageAEO’s Strong HeritageSince 1977Since 1977

Optimistic Innovative

True

Resilient AuthenticIndependent

InclusiveRealOpen-Minded

11

FundamentalsTo Drive Success

Great ProductCompelling MarketingStrong Customer ConnectionsUnique Brands

12

Prioritize ProductQuality & Innovation

FabricFitWashConstructionTechnologySustainability

13

REAL GOOD products are made with the planet in mind. Durable eco-friendly,

and made to last.

Everyday more and more of our products are getting the REAL GOOD treatment.

14

Product Superpower:Category Focus Drives Loyalty &Creates Brand Opportunities

Jeans#1 Position Drives AE’s Success

IntimatesLaunched Aerie’s Incredible Growth

Leggings / Sports BrasPlatform for Aerie’s Activewear Opportunity

15

The Most ExcitingConcept in Retail

• Accelerating Growth to $2 Billion

• Unique Brand Platform

• Massive $65B Market Opportunity

• Double-Digit Customer Acquisition

• Scale Fueling Profitability

16

A DominantAmerican Brand

• Leading Apparel Brand

• #1 Jeans Brand1

• Strong Profit & Cash Flow

• Product Leadership

• Optimize Profitability

1 NPD – U.S. Market, Ages 15-25

17

Value Creation Plan

18

• Double Aerie to $2 Billion

• Reignite American Eagle for Profit Growth

• Leverage Customer-Focused Capabilities

• Strengthen ROI Discipline

• Power of People, Culture and Purpose

Driving Strong Financial Results 2023 Targets

REVENUE 2019 2023E CAGR

AE AERIETOTAL AEO

$3.5B $0.8B$4.3B

$3.5B$2.0B$5.5B

0%26%6%

2019 2023E

TOTAL AEO 7.3% 10.0%

OPERATING MARGIN

2019 results presented on an adjusted basis; 2023 targets exclude potential asset impairment and restructuring charges

OPERATING INCOME 2019 CAGR2023E

AE AERIECORPORATE UNALLOCATEDTOTAL AEO

$526M $68M$280)M$314M

2%46%3%15%

$560M$310M$320)M$550M

( (

19

AEO is Well-Positioned to Thrive

UNIQUE ADVANTAGES

+FAVORABLE MACRO

Strong Brands

Leading Customer CentricOmni-Experience

Agile Suppy Chain

Financial Strength

Disrupted Competitive Landscape

Shifting Consumer Behavior to Digital

Growing Casual, Cozy & Activewear

Real Estate Opportunity

20

Fueling Aerie’sMomentum...Doubling to $2 Billion

[Placeholder] Aerie Sizzle Reel

#AerieREAL is...• No Retouching

• Positivity

• Empowerment

• Confident on the Inside & Out

• Inclusivity

Let The Real You Shine.TM

Aerie is More Than a Brand, It’s a Movement

23

Aerie’s Growth hasBeen Strong & Consistent24 Consecutive Quarters of Double-Digit Growth

2015 2016 2017 2018 2019 2020E

$0.3B

$0.4B$0.5B

$0.6B

$0.8B

$1B+25% CAGR

AERIE REVENUE

24

Aerie's Roadmap to $2 Billion

Market Expansion

Activewear Product Extension

1234

Winning in Intimates & Lounge

New Customer Acquisition

25

Aerie’s Massive Runway in anAttractive Addressable MarketTOTAL WOMEN’S APPAREL

INTIMATES, SOFT APPAREL, SWIM, ACTIVEWEAR

INTIMATES,SOFT APPAREL, SWIM

AERIE TODAY

$123B

$65B

$44B

$1B

U.S. Market Only; Source: NPD; Category Data T12M Through Dec 2019 (Pre-COVID)

26

INTIMATES

SOFT APPAREL

ACTIVEWEAR/OFFLINE

SWIM

BEAUTY & ACCESSORIES

2015 2020E

60%31%

33%

21%5%

10%

20%

13%

4%

2%

$0.3B

$1B

Expanding All Major Categoriesto Complete the Aerie Lifestyle

27

Aerie Undies Build Loyalty

FeaturingThe Original Boy BriefThat Started It All...

Over 130M Sold!

28

Bras &Bralettes Build

Loyalty

29

REAL Sunnie Bralette

30

31

REAL Sunnie Bralette

Soft ApparelDrives Repeat

Purchase

32

SwimBrings New Customers

33

Swimwear

34

Swimwear

35

This Spring, Aeriewill Introduce Intimates,

Apparel & Activewear to the Sustainable

REAL GOOD Collection 36

is a celebration of the hell yeahs andthe aww mans, the oms and the ughs,

the trips and the triumphs.

No matter where you are on yourjourney, keep moving forward with love.

And remember sweat looks good on YOU. OFFLINE™ by Aerie.

Activewear made for REAL life.

37

Clear Opportunity forAerie in Activewear

$21B Market1

...and growing

~$200MOFFLINE by Aerie2

1Market Size from NPD2OFFLINE by Aerie Revenue Reflects FY 2020E

38

15%

8.5 Million +1400 BPS

10% =+ 25%Annual

Spend 5-YearCAGR

5-Year SalesCAGR

Customer Count 5-Year

CAGR

Identified Customers 5-Year CustomerRetention Increase

Aerie’s Strength is itsREAL & EmotionalConnection to Customers

41

Customers Love How Aerie Makes Them FEEL

Most people have suffered from body image issues, includingmyself. But through #AerieReal,I’m able to help other women learn how to love themselves."

“ “ The first time I walked into Aerie in 6th grade, I remember never having seen someone who looked like me model clothes before and have it be seen as completely normal not like a special exception... Aerie has really had a real positive impact on my confidence."

“ The first time I saw a model online with beautiful stretch marks I cried, that is not something I grew upseeing as a good thing in themedia, so thinking about future generations getting to see thatportrayed in a positive way makes me so happy."As someone who has struggled with

body dysmorphia, it's nice to see models with cellulite who look like me and are not airbrushed and fake.It’s empowering to see others with the same body types and all size ranges represented."

“

#AerieReal has made me feel more accepted and included with the representation of different races and body types."

“

Aerie has made me feel inspired and more confident in myself."

“

It’s empowering to see others with the same body types and all size ranges represented."

“

42

Has Built OurCommunity Around EmpoweringPeople To LoveTheir REAL Selves

43

The Connection WithOur Customer is REAL

44

Aerie’s Powerful MomentumFueling Strong Growth:2023 Financial Targets

Operating Income Excludes UnallocatedCorporate Expense

REVENUE OPERATING INCOME

2019A 2019A2023E 2023E

$68M

$801M

$310M$2.0B

+26% CAGR +46% CAGR

46


Reignite forProfit Growth

Everyone Is Welcome

48

[Placeholder] AE Sizzle Reel

American Eagle is a Powerful$3 Billion+ Brand

2015

1 CAGR 2015 - 2019

2016 2017 2018 2019 2020

AMERICAN EAGLE REVENUE

+2% CAGR PRE-COVID1

$3.2B $3.2B $2.7B$3.3B $3.4B $3.5B

COVIDIMPACTED

50

Reignite AE for Profit Growth

Optimize Inventory

Refresh Brand DNA

Complete the Outfit

Right-Size Store Footprint

1234

51

A Favorite BrandRANK

#2

#3

RETAILER

WITH FEMALES

WITH MALES

%

1

3

4

5

6

7

8

9

10

27%

5%

4%

4%

3%

3%

3%

2%

2%

2Nike

AdidasPacsunHollisterlululemonH&MUrban OutfittersVansForever 21

8%

Source: Piper Sandler Fall 2020 “Taking Stock With Teens”; Data Reflects % of Surveyed Teens Preferring the Brand

52

A Strong ConnectionTo The Most In-DemandGeneration

Targeted Demo Spends2X the PopulationAverage on Apparel

Source: NPD

53

TRUEWE ARE

Our relatability, integrity,consistency and positivity

are the cornerstones of ourtrusted relationship with

our customer.

54

We AreAn AmericanYouth Culture

Brand.

ICONIC

RELEVANT

CURRENT

YOUTH

CULTURE

MODERN

LIFE

MEETS

TIMELESS

STYLE

55

Marketing Aimed atDeepening EmotionalConnection to Customers

• Storytelling• Influencers + Social• RealRewards

Brand Love

56

We Are AYouth Culture

Brand.AE is passionate about our

customers' passions, and weengage with how and where

they spend theirtime.

57

American Eagle isFamous for Jeans

Jeans Brand

Women’s Jeans Retailer

Men’s Jeans Retailer

U.S. Market Only; Source: NPD, 12 Months Ended November 2020

Ages 15-25

All Ages

Ages 15-25

#1#1#1

58

7.3

6.4

5.2

4.3

4.3

3.4

3.2

2.8

2.8

The Clear Leader in JeansMen’s & Women’s Jeans Brands | Ages 15-25 Women’s Jeans Retailers | All Ages

RANK RANK

2

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10

10.5

7.2

4.9

2.3

1.7

1.4

1.2

1.2

1.1

Hollister Old NavyLevis Walmart

Old Navy Kohl’sForever 21 Ross Dress For LessAeropostale Target CorpWrangler NordstromPacific Sunwear Amazon.comExpress Macy’sFashion Nova Marshalls

BRAND BRANDMARKET SHARE MARKET SHARE

1 118.2 9.9

U.S. Market Only; Source: NPD, 12 Months Ended November 202059

Jeans are Foundationalto Our Customer Bond

• New Customer Acquisitions• Retention• Customer Lifetime Value

61

American Eagle ProductFocus: Complete the Outfit

Design, Buy and Market Big Ideas

Build on Jeans

Quality is Paramount

Emotional Details are Remembered

62

Tees

Fleece Sweaters

Flannels

Prioritize TopsQuality & Innovation

FabricFitWashConstructionTechnologySustainability

63

Love Your Jeans. Love Your Planet.

REAL GOOD products are made with the planet in mind. Durable eco-friendly,

and made to last.

Everyday more and more of our products are getting the REAL GOOD treatment.

64

Operating Income Excludes UnallocatedCorporate Expense

Reignite Profit GrowthThrough Margin Expansion

REVENUE OPERATING INCOME

2019A 2019A2023E 2023E

$526M

$3.5B $3.5B $560M

+0% CAGR +2% CAGR

65


OperationalExcellence &Customer FocusEmerging From 2020 Strong,Positioned for Growth

67

Leverage Insights to DriveCustomer Value

• 19 Million Customers• 85-90% Identified Sales Rate • Multi-Channel Engagement

• 3X Average Spend• Higher Retention• Superior Margins

RELAUNCHED July 2020Loyalty Program –

Brought Loyalty Program In-House From Third Party

• Greater Speed & Flexibility • Direct Control Over Customer Data

New Program Delivers More Frequent Rewards

• Increased Redemption Rate • Higher Sales Lift • Margin Improvement

68

Leading withCustomer CentricOmni-Experience

Buy Online,Ship From

Store Buy Online, Pick-Up From

Store

Store ToDoor

SocialCommerce

CurbsidePick-Up

PopularMobile

App

Customer Self-Checkout

(Pilot)

AlternativePaymentOptions

Same DayDelivery

(Pilot)

Digital + Stores =Frictionless, Convenient

Shopping

69

Transforming Supply Chainfor Accelerating Demand, Speed and Efficiency

• Regional Distribution Nodes

• Organizational Changes, System Upgrades and Enhanced Analytics • Strengthened Factory and Logistics Network Linkage for Speed & Efficiency

• Inventory: Right Place, Right Time

• Improved Inventory Turns

EFFICIENCY SPEED

• Product Closer to Customers

• Faster Store Replenishment

AGILITY

• Capital Light Model

• Better In-Stocks & Less Trapped Inventory

• Delivery Carrier Diversification

70

$0.7B

$0.6B

$0.8B

$1B$1.1B

$1.3B

$1.7B

$0.1B

$0.1B

$0.5B

$0.2B$0.3B

$0.4B

$0.6B

$0.8B $0.8B $0.9B $1.1B

2015 2016 2017 2018 2019 2020E

Strong and ConsistentDigital Growth

+22% 5-Year CAGR

AE AERIE

71

$0.1B$0.3B

$0.4B $0.6B$0.8B

$1.1B

$0.5B $0.5B $0.6B $0.5B $0.5B $0.6B

2015 2016 2017 2018 2019 2020E

Strong and ConsistentDigital Growth

+22% 5-Year CAGR

DESKTOP APP & MOBILE

$0.6B

$0.8B

$1B$1.1B

$1.3B

$1.7B

73

Store Fleet is a Positionof Strength

• 95%+ of stores were 4-Wall positive in 2019

Store counts for U.S. and Canada only; updated 3Q20

• Average lease term of 2.8 years, with significant near-term maturities

880 Stores

U.S. B Mall

U.S. C Mall

Canada

Factory

U.S. A Mall

Flagship/Street

188 83

161

6

302140

74

64

Store Closures to MaximizeProfit Transfer

LEASE TENURE

4-WALLPROFITABILITY

MALL PROSPECTS

DEMOGRAPHICTRENDS

PROXIMITY TONEARBY STORES

Financial

Customer

Market

CUSTOMER PROFILE & CROSS-CHANNEL

ENGAGEMENT

IMPORTANCE FORACQUISITION

75

Evolving AE’s Store Footprint

• 52 Closures in 2020

• Negotiated Rent Reductions &

• Testing Smaller Formats

• Variable Cost Structure & Capital Efficient

Short-Term Renewals

TARGETING 600-700 U.S. AND CANADA AE STORES

76

Huge Aerie CustomerOpportunity

Customer Penetration5 - 8% 3 - 5% < 3%8%+

Customer penetration = Aerie customers as a % of female populationCurrent customer and digital penetration reflects FY 2019 data

Aerie store count includes standalones, side-by-sides and OFFLINE; updated 3Q20

342

550 >50%

43%+

+

Aerie Stores

Aerie Stores

Digital Penetration

Digital Penetration

CURRENT

2023 PROJECTED

77

AEO Revenue is Concentrated inU.S. & Canada (94%)

Disciplined Approach to International Expansion

International: Long-Term OpportunityAEO’S REVENUE MIX

• Focused on Mexico and Hong Kong • Capital Light and Digital-Led Approach • Tailored Commercial Model for Each Market

Franchise Strategic Wholesale Concession Selective DTC

UNITED STATES

CANADA

MEXICOHONG KONG

LICENSE

78

AEO 2020 PriorityPreserved Financial Health and Emerged with Strength

Fourth Quarter Outlook Fueledby Aerie, Digital & Strong Margins

Operating Income of$95M+ vs. $77M LY

Aerie Revenue: Up High 20%'sAE Revenue: Down Low Double DigitsAEO Revenue: Down Low Single Digits

80

4Q19 results presented on an adjusted basis; 4Q20 outlook excludes potential assetimpairment and restructuring charges

• Double Aerie to $2 Billion

• Reignite American Eagle for Profit Growth

• Leverage Customer-Focused Capabilities

• Strengthen ROI Discipline

• Power of People, Culture and Purpose

Value Creation Plan

81

2017 2020E

StoreComps

UnderlyingDigital Growth

NewStores

DigitalHalo

2023E2023E2020E

Aerie’s Momentum to Continue– Roadmap to $2 Billion

+27%CAGR

+26%CAGR

STORES

DIGITAL

$0.5B

$2B $2B

$1B $1B

82

Aerie’s New Stores Generate Strong Returns

Less than 3 Years

At least 15%

Payback period on new stores

Return hurdle on new Aerie openings

83

Aerie’s Financial PlanOperating Income Excludes Unallocated Corporate Expense

2019A 2019A2023E 2023E

$68M

8.5%

$310M 15.5%

+46% CAGR +700 BPS

REVENUE

2019A 2023E

+26% CAGR

$801M

$2.0B

84

Aerie’s Financial Plan

OPERATING INCOME OPERATING MARGIN


AE’s Financial Plan

$526M

$3.5B $3.5B $560M15.1% 16.0%

+0% CAGR +2% CAGR +90 BPS

85

Operating Income Excludes Unallocated Corporate Expense

REVENUE

2019A 2019A2023E 2023E2019A 2023E

OPERATING INCOME OPERATING MARGIN


Opportunity to Rebuild AE’s Merchandise Margins

2016 2017 2018 2019

AS CC COUNTS HAVE INCREASED,MERCHANDISE MARGINS HAVE DECREASED

CHART DATA SCALE IS APPROXIMATE

AE MERCHANDISE MARGINS

Inventory Discipline

Controlled Promotions

Improving Competitive Landscape

New Leaders in Place

AE CC COUNT

86

Inventory Optimization

Reduce Assortment Breadth

Deeper Product Buys

Flexible Systems andOperations

CHART DATA SCALE IS APPROXIMATE

REVENUE CONCENTRATEDIN 40% MOST

PRODUCTIVE CCS

OPPORTUNITY FORREDUCTION IN LEAST

PRODUCTIVE CCS

87

Driving Strong Financial Results 2023 Targets

88

REVENUE 2019 2023E CAGR

AE AERIETOTAL AEO

$3.5B $0.8B$4.3B

$3.5B$2.0B$5.5B

0%26%6%

2019 2023E

TOTAL AEO 7.3% 10.0%

OPERATING MARGIN


OPERATING INCOME 2019 CAGR2023E

AE AERIECORPORATE UNALLOCATEDTOTAL AEO

$526M $68M$280)M$314M

2%46%3%15%

$560M$310M$320)M$550M

( (

Path to 10% Operating Margin

+270 BPSIMPROVEMENT

+Aerie Growth Leverage

Inventory Optimization

Right-Sized Store Fleet

Product Mix

Delivery & Distribution

Labor Inflation

89

Financial targets exclude potential asset impairment and restructuring charges

Long History of Financial Strength andReturns to Shareholders

$1.6B

$0.8B

$1.1B

$1.9BReturns toShareholders

DIVIDENDS

SHAREREPURCHASE

2011 - 2019 CAPITAL ALLOCATION

2015 2016 2017 2018 2019

$342M$366M

$415M$394M

$457M$472M

$514M $512M$485M

$499M

CAPEX

OPERATING CASH FLOW EBITDA

90

Capital Allocation Priorities

Investments to Fuel Aerie’sGrowth & Build Capabilities

Preserving Balance Sheet Strength

Direct Shareholder Returns

123

91

AEO’s Value Creation Model

Mid-Single DigitRevenue Growth

Dividends & Share Buybacks

Healthy Free Cash Flow

Compelling Shareholder Returns

10% OperatingMargin

92Financial targets exclude potential asset impairment and restructuring charges

ESG & Closing RemarksJay Schottenstein, Executive Chairman and CEO

EnvironmentAEO’s Sustainability Goals Include a Comprehensive Plan to be Carbon Neutralin AEO-Owned Facilities by 2030 with a Commitment to:

Reduce water use per jean by 30% by 2023

Recycle 50% of our total water used in denim laundries by 2023

Apply AEO Wastewater Management Standard to 100% of water-intensive factories, mills and

laundries by 2023

Reduce carbon emissions 40%by 2030 and 60% by 2040 in

manufacturing from a 2018 base year

Achieve carbon neutrality in all owned and operated facilities

(offices, stores, distribution centers) and employee business travel

by 2030

Reduce carbon emissions inmanufacturing 40% by 2030 and

60% by 2040 from a 2018 base year

100% sustainably sourced cotton by 2023

50% sustainably sourced polyester

50% sustainably sourcedman-made cellulosics

Divert apparel waste from landfill

Reduce plastic packaging

Reduce labeling and convert all

labels to sustainably sourced materials by 2021

Water Reduction Energy Reduction Sustainable Materials Reduce & Reuse

94

79

At AEO, we have aresponsibility to do better, to be better, to build abetter world.

Through theAEO Foundation we give back to our communities and support numerouslocal and national causes.

95

Our Brands Sponsor a Number of Causes thatare Important to Our Customers

97

Social & GovernanceAEO is Committed to Strong Social Programs, Effective Corporate Governanceand the Highest Ethical Standards

Robust policies and programs tosupport well being of our people

Prioritize empowerment,career development and rewards

Committed to responsible sourcing, vendor compliance code with regular

factory inspections

Effective HumanCapital Management Highly engaged, talented Board of

Directors with breadth of experience and expertise

4 of 9 Directors are diverse ingender and/or ethnicity

Except for Executive Chairman,all directors and committees are

100% independent

Strong oversight across allfunctions, including ESG

Strong Governance

Optimism and being Real are thefoundation of our culture with a strong

set of values at the core

Inclusion and Diversity is at the centerof our culture

Named Chief I&D Officer in 2020

Launching $5M commitment to REAL Change Scholarship for Social Justice

Company Culture isa Differentiator

98

Double Aerie to $2 Billion

Reignite American Eaglefor Profit Growth

12

99

Our PEOPLECome First

Thanks TEAM!

100

Q&A Session

Real Power. Real Growth. · 2021. 1. 28. · Driving Strong Financial Results 2023 Targets REVENUE...

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Transcript of Real Power. Real Growth. · 2021. 1. 28. · Driving Strong Financial Results 2023 Targets REVENUE...