Greetings, and welcome to the American Eagle Outfitters Q4 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Judy Meehan. Thank you, ma'am. You may begin your presentation. Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer. Jennifer Foyle, President, Executive Creative Director for AE and Aerie. Michael Rempell, Chief Operating Officer, and Mike Mathias, Chief Financial Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the Company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. 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. Also, please note that during this call and in the accompanying press release, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliation 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 the Q4 investor presentation. Now I'll turn the call over to Jay. Good afternoon, and thanks for joining us today. 2021 was a remarkable year, well exceeding our expectations. I'm incredibly grateful to our associates who worked tirelessly through the year's macro challenges to deliver outstanding results. In 2021, we hit a number of significant milestones, including crossing $5 billion in revenue for the first time ever. Annual record revenue has increased $1.3 billion or 33% from 2020. Additionally, compared to pre-pandemic 2019, revenue grew 16%, and we achieved significant margin expansion and profit flow-through. We saw greater consistency across the business and growth across brands, channels, and geographic regions. This was a terrific result and reflects a financially strong, agile, customer-focused, and efficient organization. Fueled by strong demand for our brands, improved product margin and cost efficiencies, we achieved adjusted operating income of $603 million. This included additional freight costs related to factory closures due to COVID, which hit largely in the Q4. Despite these pressures, 2021 was our best profit results since 2007. Without additional freight costs, profits would have hit an all-time high. Momentum and strong demand continued in the Q4, driving record revenue of $1.5 billion. As I mentioned, profit flow-through was constrained by elevated freight costs. I'm proud of these results, particularly in light of the supply chain challenges that hit the retail industry. With momentum across our business and key strategies working, we exceeded our 2023 financial targets, which were communicated back in January of last year. We now have our eyes set on a new target of $800 million in operating profit, including $5.8 billion in revenue and a 13.5% operating margin. Our Real Power. Real Growth. plan is delivering structural improvements to our business that is enabling us to fuel growth with greater agility and focus. Starting with Aerie, once again, we posted a record year, including the Q4, marking the 29th consecutive quarter of double-digit growth. Operating profits more than tripled from pre-pandemic 2019 levels as Aerie reached a turning point in its growth path. Our active wear expansion OFFLINE is hitting it out of the park. Excitement for the Aerie Real movement is unmatched, and we seek significant opportunity to continue to grow Aerie as we penetrate key markets. At American Eagle, the transformation has been nothing short of incredible. Under Jen's leadership, we're running a stronger, more focused, and more profitable brand. The numbers speak for themselves, with operating profits up over 50% from 2019 and revenue up 2% exceeding our plan. Our product assortments have been strengthened, and inventory optimization is enabling us to prioritize our best-selling products. We've also made early progress in our real estate optimization strategy, closing unproductive stores and energizing the business around high-quality stores and digital. Supply chain innovation has been a key enabler of our strong performance across brands. The acquisition of Airterra and Quiet Logistics are part of the transformation and will solidify many of the benefits, cost savings, and efficiencies we have seen in our P&L to date while providing a new growth platform for the company. Michael will speak about this more, but we are very excited about this opportunity and the interest we are seeing from other retailers. Lastly, social responsibility has always been woven through the fabric of AEO as we work to build a better world. This is evident through our purpose-led values, charitable giving, and a commitment to fostering a workplace culture where everyone is respected and empowered. In 2021, AEO led charitable donations of over $16 million, our highest ever. Over the last several years, we pledged to accelerate sustainability efforts across our operation, and we are making great progress. We look forward to greater disclosure and transparency of our ESG practices in 2022 to highlight our work and measurable impact in these important areas. I'd like to thank our teams for their excellent execution and unwavering focus on driving our business forward. Thanks to their efforts, we have entered 2022 a stronger company. The macro environment remains challenging, which we are taking into account in our plans for the year. Yet we expect our results to reflect meaningful progress over prior years, setting a new baseline for profitability. With that, I'll turn it over to Jen. Thanks, Jay, and good afternoon, everyone. It's been a truly sensational year for AEO. Our leading brands, Aerie and AE, continue to be a favorite with our consumers. This year, we saw a significant gain in active customers, reaching our highest level ever, and we are winning more wallet share. For the year, Aerie reached $1.4 billion in revenue, up 39% to 2020, adding over $500 million since 2019. We saw strong profit flow through with annual operating profit over $200 million and margins in the mid-teens. Aerie's Q4 revenue marked another new record. Growth was spectacular, rising 27% on top of a 25% increase in Q4 2020. This was Aerie's 29th consecutive quarter of double-digit growth, marking new highs. Sales metrics were healthy across the board. The AUR was up in the low 20s%, and this was driven by higher full price selling, more strategic promotional activity, and mix shift into higher ticket items. Demand was strong across core Aerie apparel and intimates, as well as OFFLINE activewear, which is showing great momentum just a year and a half into the launch. I'm very encouraged by the customer response, and I look forward to expanding Aerie in OFFLINE store footprint and reaching new markets. As we previously discussed, Aerie's Q4 profit margins were constrained by industry-wide supply chain disruptions in South Vietnam, where Aerie had a greater presence. We took on higher air freight costs to get our product here on time, and we also experienced uneven inventory flows in our high demand leggings business, which of course is one of our higher margin categories. Additionally, delayed new store openings due to labor and building material shortages also had an impact. These factors present opportunities for us in the coming quarters. Aerie and Offline are supported by rich brand platform which changed the industry forever. We focus on individualized, innovative marketing campaigns that speak to real women. Authenticity and positivity are at the very heart of everything we do. We have a true 360-degree view of our customers, and now with the addition of Offline, we are offering a more complete lifestyle, meeting their needs across cozy, comfy, and active. Needless to say, I'm very optimistic about our future, and I remain focused on fueling further momentum as we build to our new $2.2 billion revenue target. Turning to American Eagle, what a difference a year makes. New product assortments, stronger advertising, and messaging, together with inventory and real estate optimization, are having a meaningful impact. American Eagle posted a terrific year with record revenue up 30% to 2020 and up 2% to 2019. We are reactivating shoppers, attracting new customers, and seeing significant improvement in retention rates. Demand in the quarter was strong across genders. Our men's business has seen tremendous growth as we've refocused the assortment in our core best-selling items. The women's business also had a great quarter, supported by our signature denim category and focused on outfitting. With our strategic emphasis on reigniting profitability, we saw a significant recovery in margins and profits, posting the highest margin since the mid-2000s. As marketing evolves, AE remains committed to being a leader in testing and learning through new media. In the Q4, this included TikTok challenges, partnering with Snapchat on augmented reality shopping, the launch of our first NFT digital apparel collection, and new partnerships in the gaming world. As I look ahead, I'm excited with emerging fashion trends and the continued appetite for casual and active apparel. This benefits both of our brands. Spring looks strong across brands with seasonal goods checking, and we expect to have a positive spring season. To the AE and Aerie teams, none of this would have been possible without your hard work and dedication. A special thank you to the AE bottoms team for reaching the $2 billion mark. What an incredible effort. I am so grateful for the energy you bring to the organization every day, and I am so excited for another great year in 2022. Thank you. Now I'll turn the call over to Michael. Thanks, Jen, and good afternoon, everyone. First, let me start by saying that 2021 was a remarkable year for AEO. It's clear that the strategies we laid out last January and our learnings over the past two years have truly changed how we are managing the business. I am particularly proud and impressed with how the team delivered through a highly disrupted supply chain environment, especially in the Q4. We successfully met robust holiday demand and achieved record revenue combined with strong AURs. We were pleased with the business across channels. In the Q4, store traffic continued to rebuild, rising in the double digits and driving a 32% increase in store revenue. Mainline and factory outlets both saw healthy growth and profit improvement, reflecting strong demand as customers returned to stores. All regions in the U.S. saw double-digit growth, with our international markets also seeing very positive results. Digital revenue declined 3% from the Q4 2020, yet was up over 30% from Q4 2019. We've added nearly $600 million in annual e-commerce revenue since 2019, with our digital penetration growing from 29% to 36%. We have scaled our business across channels, with both stores and digital seeing revenue and profit growth over this period. We continue to prioritize enhancing the omni-channel experience by testing new tools and technologies. In stores, we successfully piloted a new mobile point-of-sale solution and have seen a significant increase in curbside pickup orders. Online, we introduced a new instant credit feature for returns, which had a tremendous impact on sales recapture. Approximately 75% of qualified customers opted for instant credit, with the bulk of them using it within two weeks. Additionally, we've also expanded our Afterpay capabilities to the app. It's been incredibly exciting to see our mobile app grow into such a strong shopping portal for our customers, driving approximately a third of our e-commerce sales and traffic in the Q4. App-based customers are our most engaged digital shoppers, spending 2.5x more annually than our web customers and transacting with us 3x more throughout the year. They are also more likely to be multi-channel and multi-brand shoppers. Our customer data in the Q4 was also incredibly strong. We achieved our highest ever active customer count and our highest average annual spend. The relaunch of our loyalty program last summer is continuing to pay off. We're attracting new members and driving higher retention. On the operational side, we're transforming the business. In the Q4, we enhanced our return capabilities, doubling our processing rate per hour. This has resulted in better merchandise restock rates, improved product availability for customers, and a higher full price selling. Additionally, as delivery and fulfillment costs rose across the industry, our in-market fulfillment model with Quiet Logistics continued to fuel savings for AEO. Delivery costs leveraged 190 basis points this quarter, driven by a significant reduction in shipments per order. We also shipped orders faster with an approximately 35% reduction in delivery times, bringing benefits to both our customers and our operations. Utilizing Quiet Logistics to place inventory on the edge fueled these efficiencies, and as we continue to expand the node network, we expect to see even greater savings. The combination of Quiet Logistics and Airterra also creates a state-of-the-art supply chain platform that we will look to monetize by growing its third-party customer base. Since announcing the acquisition, we've received tremendous interest from retailers of all sizes. As the business expands, we expect a material revenue and profit stream for AEO, and we're looking forward to sharing more about the long-term value creation opportunity. In closing, I'm incredibly proud of the quality of our execution this quarter, and I'm excited to build on the structural improvements we've made to our business. With that, I'm gonna turn the call over to Mike. Thanks, Michael. Good afternoon, everyone. 2021 was a pivotal year for AEO as we embraced our Real Power, Real Growth strategy. I'm very proud of the results we achieved. In an operating environment that presented many challenges throughout the year, we delivered record revenue of over $5 billion and exceeded $600 million in adjusted operating income, outperforming our 2023 profit target two years ahead of schedule. As I reflect on the past 12 months, I can confidently say that we're a stronger company, and we've reset the bar on long-term profitability, guided by our continued commitment to product innovation and quality, an emphasis on inventory discipline, a clear real estate strategy focused on supporting Aerie's significant expansion and optimizing AE footprint for profitable growth, and strong operations fueled by investments to improve the customer experience and build an industry-leading supply chain. Our Q4 performance is a testament to these initiatives. We posted record revenue of $1.5 billion, adjusted operating income of $92 million, and adjusted EPS of $0.35. This was a strong result in the face of industry-wide supply chain disruptions, which led to roughly $80 million in elevated freight costs in the quarter. Approximately $60 million of this was air freight specific to Vietnam factory closings. Without this, the Q4 would have marked our highest operating income since 2007, underscoring the significant underlying profit improvement in our performance. Consolidated Q4 net revenue increased $216 million or 17% versus Q4 2020, and was up $193 million or 15% from 2019. Sales metrics were very favorable across brands. Strong demand, higher full price sales, and fewer promotions drove the average unit retail up 17% and fueled a double-digit increase in our average transaction value. This marked our seventh consecutive quarter of AUR growth and rounds out two years of consistent growth in our average transaction value, fueled by our focus on product innovation across brands and inventory optimization at AE in particular. From a brand standpoint, Aerie continued its industry-leading multi-year growth. Revenue rose 27% from Q4 2020 and almost 60% from Q4 2019. Aerie's adjusted operating profit was $23 million, and the brand operating margin was 5.3%. As Jen discussed, elevated air freight cost of approximately $31 million in the Q4 translated to an over 7-point headwind to Aerie's operating margin. Although we anticipate markup pressure into the new year, we expect margins to improve meaningfully from the Q4. Moving to American Eagle's brand performance. In the Q4, revenue grew 11% compared to 2020, and operating profit jumped 25% with the brand adjusted operating margin coming in at 17.5%. This included a roughly $29 million headwind to operating profit or almost 3-point headwind to the operating margin from elevated air freight costs. As I've said in past quarters, there's been a clear shift in priorities within AE. A renewed emphasis on inventory discipline and real estate optimization is yielding material profit unlock. Our strategy of doing more with less is working, and this is evident in our results. Fiscal 2021 brand revenue is up 2% from pre-pandemic fiscal 2019 levels, and adjusted operating income is up 51%, all with 40% lower SKU and choice counts and 69 fewer store locations. We still have plenty of optimization opportunity across the brand. Total company consolidated gross profit dollars rose 11% compared to the Q4 of 2020, reflecting a 32.4% gross margin rate. Strong product demand and efficiencies in our distribution network fueled leverage and delivery. The margin rate also benefited from inventory optimization, promotional discipline, and higher full price selling. As discussed, this was offset by close to four points of elevated air freight costs. SG&A deleveraged 60 basis points. The $58 million increase was due primarily to higher wages for store associates and hours to support the recovery in store operating capacity compared to last year. This was partially offset by leverage on advertising expense. Looking into 2022, we are prioritizing SG&A efficiencies. Over the past few years, we've been driving improvements to our gross margin. As we continue to focus on those areas, we're also turning our attention to optimizing our expense structure. We will update you as we see progress. Our target is a 23% annual rate of SG&A to revenue in 2023. Adjusted operating income of $92 million reflected a 6.1% operating margin, including an approximately 4-point headwind from gross margin pressure related to air freight, as discussed. Adjusted EPS was $0.35 per share. Our diluted share count was 203 million, and included 32 million shares of unrealized dilution associated with our convertible notes. As a reminder, we will move to recognize full dilution from the convert in our share count beginning next quarter. This is in line with the required adoption of a new accounting standard impacting all convertible issuers. As a result, for 2022, we anticipate a fully diluted share count of 227 million shares, with the impact to earnings partially offset by approximately $17 million in lower interest expense. Ending inventory cost was up 37% compared to a 9% decrease last year. High product costs drove over half the increase due to product mix and higher transportation costs. Total inventory units were up 14%. The increase also reflected earlier deliveries of spring shipments as we managed through longer and more unpredictable transit times. Our balance sheet remains healthy, and we ended with $435 million in cash. Cash generation was strong throughout the year, providing sufficient liquidity for us to raise our dividend, fund our acquisition of Quiet Logistics, and maintain a healthy cash balance. As Michael and Jay both discussed, we are very excited about the Quiet acquisition, including the benefits it brings to our brands and the long-term growth potential of the third-party business. Capital expenditures totaled $90 million in the quarter and $234 million in fiscal 2021. With regards to our real estate strategy, we are investing in Aerie's market expansion, prioritizing areas where we see the greatest opportunity. In the Q4, we opened 45 new Aerie doors, including a mix of new standalone and side-by-side formats, with roughly half being offline doors. For AE, we have made steady progress towards our long-term target of rightsizing the brand's store footprint. In North America, we've closed over 70 AE doors since 2019, reflecting a high single-digit reduction in gross square footage for the brand. Store productivity is up significantly versus 2019 despite lower traffic, supported by AUR gains and ADS gains. We maintain significant flexibility to adjust our footprint further, with 40%-50% of our fleet coming up for renegotiations every year, and we'll continue to leverage a data-centric approach as we look to maximize brand profitability. Moving to our outlook for 2022, we are encouraged by the continued underlying strength of our brands and the pace of business so far this spring. Our strategies are delivering, and we're a stronger company following the structural changes we've made over the past two years. We're also cognizant of the environment we're operating in, including rising inflation, which has implications for our business and our customers, lapping the strength from last spring as we cycle stimulus, continued disruption in the global supply chain environment, and the war in Ukraine. Against this backdrop, we are taking a cautious view. For 2022, we expect operating income in the range of $550 million-$600 million on revenue growth in the mid-teens. This reflects the structural improvements to our business and significant growth from pre-pandemic 2019, which posted adjusted operating profit of $314 million. The new logistics business is expected to contribute roughly 5-6 points of the mid-teen revenue growth and break even on profitability. In terms of quarterly cadence, we expect the year to be a tale of two halves, with operating profit down materially in the first half, followed by a recovery in the second half. This implies the operating margin building from mid- to high-single digits in the first half to low double digits in the second half. Our outlook primarily reflects three things. The timing of stimulus lapping in the spring, our logistics business shifting from being dilutive in the first half to accretive in the second half as we fully integrate and ramp up the business, and easing cost pressure through the year as product and freight inflation is partially offset by the absence of elevated air freight due to factory closures in the second half. In closing, I'm really pleased with our performance in 2021. We're a stronger company today than prior to the pandemic. We've made material structural improvements in the way we run our business and have established a new baseline of profitability. Our Real Power. Real Growth. strategy has positioned us well for long-term revenue and profit growth. I remain confident we can achieve our new 2023 targets of $5.8 billion in revenue, $800 million operating income, and 13.5% operating margin. With that, I'll open it up for questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. Please limit yourself to one question. One moment while we poll for questions. Our first question comes to the line of Adrienne Yih with Barclays. You may proceed with your question. Yes, thank you very much, and well executed throughout a very challenging year. Kudos to the team. Mike, I appreciate the guidance on an annual basis. I was wondering, you gave some first half, second half, some color there, but can you shape the quarters for us? Most importantly, the nearing quarter sounds like February is off to a nice start, as is the sector. How are you thinking about sort of the comp guidance for Q1? Then if you can give us some color on gross margin shaping throughout the quarters as well as the SG&A, that would be wonderful. Thank you very much. Thanks, Adrienne. Appreciate the comment on the Q4. Yeah, it's a very good question. There's a lot going on this year, which is tough to put in prepared remarks. It's definitely gonna be a tale of two halves. We've got some P&L nuances, and especially as we include the logistics business this year. I mean, first I'll start by reiterating that. I think we all said it, but it's worth saying again that I think the benefits we've seen to our gross margin from the end market nodes are locked in with the purchase of Quiet Logistics, and we're gonna continue to work on efficiencies from here, as Michael said. I'm really happy about that. I think we're all also excited about the opportunity we have to create incremental value from this new business, and we're ramping up to be profitable next year. Again, very exciting things for us. Let me get to, you know, like your specifics there on the first half and second half. In the first half, we're forecasting a 37% gross margin rate on a low double-digit% revenue increase. We continue to have pressure from product and freight costs, and that's worth about 200 basis points to that rate. There's another 200 basis points from the logistics business, and that's just building revenue with a projected loss in the spring. Mostly a mixed impact from the increase in revenue. Additionally, we're expecting higher markdowns in the spring season against a historically low rate last year, driven by the stimulus demand that started in mid-March and continued into early Q2. That's gross margin for the first half. In the second half, we see gross margin flat to last year, flat to 2021. That's on a mid- to high-teens% revenue growth. It's a little bit different between quarters. There's a gross margin decline in the third quarter and an increase in the Q4. The mix of that is, it's improved IMU as we lap the Q4 air freight, but then offset by the impact of the logistics business again as we grow revenue further, but achieve a profit in the fall. For SG&A then in the first half, we'll be up in the mid-teens%. That's driven by a continuation of what I just said on the Q4. Stores are at full capacity. We're up against constraints last year still. Not anniversarying increase in average wage yet. Advertising is also incremental to last year in the spring. That'll impact SG&A in the first half. I said in the remarks as well that SG&A is an opportunity for us this year. We expect that growth and expense to lessen each quarter with the back half only up in the high single digits%. We're still set on targeting 23% for next year. If you put all that detail together, that brings us to the $550 million-$600 million operating guidance for the year. That's reflecting around a 10% rate. We're very happy about that. Still in the double digits on this guidance. The difference to the 12% that we just achieved in 2021 is a pretty easy walk. It's about 100 basis points of product cost pressure, incremental to 2021. A 100 basis points of impact from the logistics business, and that's just the mix impact of revenue with no income. From there, as I'd say. I think we think the opportunities in our guidance from there are better than expected product costs as we get to the back half of the year. Additional timing benefit from the SG&A expense reductions that we're targeting. It's a lot there. Hopefully that the layout of that detail helps answer the question. That was super helpful. Thank you very much and best of luck for spring. Thank you. Appreciate it. Our next question comes to the line of Paul Lejuez with Citi. You may proceed with your question. Hi, this is Paul Lejuez. I'm for Paul. Thanks for taking our question. Just to follow up, did you provide for us what the Q1-to-date comps are looking like? If you haven't yet, could you give us a little bit more color by brand? Yeah. We're up mid-teens% for February. I guess I'll quote you that. It's a great start to the quarter, great start to the season. I think basically what I just laid out, stimulus benefits really started mid-March and continued through the rest of the quarter. We're up mid-teens% right now, but we're giving guidance that our brand revenue basically would be up in the mid- to high single digits%. Then we have like four points or so from the logistics business on top of that. Based on that, you can tell we're expecting a bit of a decline in the trend against last year as we get up against that stimulus impact in the back half of the quarter. Got it. Just moving over to Aerie margins. I think you called out the $31 million of air freight impacting Aerie in the Q4. Could you give us a little bit more color about what the underlying margin rate looked like excluding freight? How did the promotional cadence look at Aerie in the Q4? How should we be thinking about that in 2022? Thank you. Yeah. Look, our markdown rates remain healthy, so I think this margin pressure that was really all IMU driven and all, you know, freight cost driven. Our week-in, week-out promotional level throughout the season was actually down. We pulled back on promotions early in the season as we all talked about demand getting pulled up before Thanksgiving because of all the media coverage of supply chain issues out there. So we were able to kind of, you know, reduce level of promotion and not only just the promotional rate, but the number of days that we were promoting. And that was pretty healthy through the quarter. So this pressure is all really IMU and product related, product cost related within our product cost, you know, the freight cost within our product cost, I'll call it that. Got it. Thanks so much. Our next question comes from the line of Matthew Boss with JPMorgan. You may proceed with your question. Great. Thanks. Maybe one for Jen. At Aerie and American Eagle, is there a way to maybe parse out what you're seeing in demand, if we think about it by category in February, driving that mid-teens, maybe just early reception to spring at either concept? Are you seeing any pushback at all to any of your early pricing tests? That's a great question, Matt. Look, I'm really excited with the continued momentum. I mean, as you can see, we had a great Q4. I'd like to say our comps too are. We are up against higher comps in both brands than most competitors. So I think we really pulled out a nice quarter in Q4. Moving on to February, the lowest markdown rate I think I've seen in history in February, which bodes to the fact that we did not carry over a lot of excess inventory. We were cleaner in our clearance levels in both brands. When I went to the mall, that's what I saw. I saw incredible assortments, and they just got better today. We just launched our biggest both. You know, for both brands, we just launched our spring two deliveries, and they're amazing. Please go online and check it out. AE just launched their incredible marketing campaign that is so much fun. We just launched it today, and I can talk about that later. Look, the product categories are still checking. Jeans are still on fire. I have a little bit of a note to everyone on denim. What I like about what I'm seeing in denim is some of our tried and true fits are still working. As we see all this incredible momentum in new fits, we're maintaining our old business, i.e. jeggings, are still checking for us, and that's such a nice maintained margin business for us. You saw that we got to $2 billion in denim in Q4, and I'm excited to build onto that and, you know, as we approach 2022 and beyond. Really excited about denim. Early seasonal products are checking. Shorts are doing great across both brands. Swim incredible. Early start. In fact, we were lighter in some cases on our assortments in February in swim, and they're just building throughout each week. I mean, the numbers are incredible. Again, we just released our biggest assortments today, so I think there's more to come there. Excited about obviously OFFLINE. I mean, near and dear to my heart, this business is on fire. We left money on the table in Q3 and Q4 that I hope, as Mike said, you know, we faced some headwinds earlier, but, you know, we really hit it out of the ballpark in Q1 and Q2 on both brands last year. I look forward to some of those tailwinds in Aerie as we head into Q3 and Q4. Great. Mike, maybe just as a follow-up. At Aerie, I think what would be really helpful is a brand's level bridge If that was possible, meaning you outlined low-20s% EBIT margin in 2023. It embedded a roughly 30% EBIT flow-through rate. How do we bridge the mid-teens% EBIT margin this year to the low-20s% in 2023 at Aerie? Sounds like nothing's changed, but just maybe the best way to bridge would be really helpful. I think there's a quick answer on especially the elevated air freight in Q4. We're definitely gonna see cost pressures as I just described in the spring. If you reconcile some of what just happened, especially, you know, that Vietnam shutdown related kind of, I'll call it not self-inflicted, but we made the choices, that choice to execute on significant air freight, Aerie's really closer to the high teens as a rate in 2021. We're planning it to be a high teen, close to 20%, result in fiscal 2022. With that flow through rate you just quoted, it's 25%-30%. You've got another 25%-30% on the growth that we're expecting in 2023, you're in that low 20% range. Great. Best of luck. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Jay Sole with UBS. You may proceed with your question. Great. Thank you so much. I have another question on Aerie. Just, can you just talk about some of the stores, the new stores that were added, this past year. You know, how are those stores performing and what are some of the signs that you're seeing that those stores are gonna meet your targets? I can start, Jen. Yeah, we're really pleased with how they look out of the gate. You know, we didn't open that many in the back half of the year. A bunch of them did slide from intending to be open in the third quarter into the Q4, some of the new Aerie and OFFLINE, especially the OFFLINE doors that we were adding. We don't have a great run rate on OFFLINE yet, but the ones we've seen are out of the gate at pro forma or better. We're seeing incrementality in the mall, especially in the places where we're adding OFFLINE to the mall where Aerie already existed. We're getting more out of that center between brands from an incrementality perspective. It's encouraging us that we're on the right path of what we're gonna add in fiscal year 2022 here, and we're not seeing any signs of any reason why we should be concerned about the, you know, the four wall, you know, result from those locations and the return on the capital we're spending in that, you know, 2-3, maybe call it 2-4-year payback period. Yeah. I just wanna add on one fun little tidbit. We just opened up Easton, our, like, mega store. It's an AE OFFLINE and Aerie side by side, completely renovated and gorgeous. The initial reads are incredible. I think there's opportunity thinking about our businesses this way in the future, really maximizing square footage and showing up with all of our categories. It's like a mini department store. I love this format and the teams are thrilled with it. The visuals look strong. Dollars per square foot are incredible, so really proud of what we did there as a team. Yeah. Maybe if I can just add on, just related to the last question about just ramping and the flow through. I mean, how do you see the productivity of those stores increasing over time, I mean, relative to a mature store? We definitely, from a historical perspective, there's a maturity curve that we've seen, and we plan them that way. We, you know, project them over the course of their lease term with that ramp. We usually see a kinda high teen to even 20% kinda first year comp, then something more in the low to mid-teens or even your double digit. Maybe mid-single to high single in the third year, and then they kind of settle in at whatever the trend is. As we're adding new stores, it's contributing to the, kind of, from a mix perspective to the comp from stores. There's always that digital halo effect that we see six to 12 months later, and that is the strategy. We're adding Aerie and OFFLINE stores to where we're under-penetrated in markets to really generate that full omni growth in the market. Got it. Okay. Thank you so much. Our next question comes from the line of Marni Shapiro with Retail Tracker. You may proceed with your question. Hey, guys. Congrats. Jen, the stores look absolutely beautiful. It's such a significant change. If we can actually touch on that, you know, your business pre-COVID, you were still generating a lot of volume. I know there was a lot of pressure on margin. If you could just walk us through, I don't want category by category, but sort of where the biggest chunks of opportunity margin-wise and improvement are sales-wise. Is it on the men's side? Is it denim? Is it tops? Is it fashion? Is it Aerie? Just so we have a good sense because, again, even prior, you were doing a lot of volume, but now it looks like you're doing a lot of volume at a much more profitable and structurally sounder way of doing business. Am I seeing that right? Yeah, that's a great question, Marni. Look, I love how we delivered the year, right? Really strategically, you know, generating incredible bottom line results in both brands. AE just. I've never seen margins like this. Just incredible year, and just really proud of how that team leveraged the business. As I think ahead, when I think of the category breakdowns, look, we blew it out of the water in men's. They had a great year. There was a lot of low-hanging fruit there, and we went after that. Mm-hmm. That was an easy get. Aerie, well, we're gonna continue to build that brand. You know, I believe if the teams can deliver 29 quarters of double-digit growth, we can continue to grow and operate this brand. That's what I think we're doing well, right? Mm-hmm You know, bringing in that omni-channel customer in Aerie has been a win for us, and the teams are delivering incredible results there. Thinking about that business, tucked inside of it, we still have a lot of intimates growth, Marni. There's still a lot of intimates growth in Aerie, and now we have this incredible opportunity in OFFLINE rooted in leggings, which we're gonna continue to build on and grow. The opportunities are still there. Considering, Marni, we're still not in all markets. I love- Mm-hmm that we still have opportunity, and we're testing new things in those markets, Marnie. We're doing side-by-side locations, Aerie and side by side. We've done an OFFLINE side-by-side to American Eagle. Mm-hmm. All the results have been better than expected, and our performance actually in Offline, my apologies, is beating expectations by, I believe, 26%. So those stores are doing great. Mm-hmm. Now let's move on to where I think we still have some low-hanging fruit. Denim, obviously. I mentioned we can build on our core, and we are building on how we assort the business in both brands, and I love this. We're really trying to deliver more gross margins, stabilizing products so that, you know, we can manage some of these headwinds that we're facing, and we're mixing that way, and we're thinking really strategically. Just thinking about women's. Look, we have a new designer in town. We're really just getting the momentum going. We are highly focused on delivering incredible fashion in women's. Trust me, I've been rolling up my sleeves with the teams personally. I really have been. I've been in the trenches with them, and I can't wait for Spring 2023. It is incredible. Yeah, I think we have more opportunity in women's than, you know... What we're gonna put on the table, we're gonna manage that business and chase it profitably. But I just, I love what I'm seeing. The team really put together a good show and concept. For 2023. I also saw Aerie needless to say, and that's another spectacular concept that I just can't wait to attack for next year. This is some great insights. And, and- Could I do one follow-up, if you wouldn't mind? Hey, Jen. Sure. Jen, you did explain one other thing. Mm-hmm. We were counting on opening 35 more stores, 35 more Aerie stores in the Q4, and because of material shortages and COVID. Mm-hmm We weren't able to open those stores. Yes. True, Jay. Mm-hmm. Great point. They're just opening up, and we're seeing nice results, so we're happy with that. Could I just Marni? Just follow up one more on the gross margin question, because I think this is really good color. If I think back to 2019 and that holiday season in 2018, and maybe the pendulum was swung all the way to one side on promotions. I think at that point, all your sweaters were $25 in the box, things like that. If COVID and this last year, where inventories were very lean and promotions were at all-time low levels, you know, your go-forward promotional activity should fit somewhere in between there. Is it 25% more than what we're seeing today? Not all the way swung back. I mean, how do you think about that? Because you're coming from a very high promotional level, not like an average promotional level, to a very clean promotional level. In 2019, we had a lot of inventory. We weren't happy with some of the inventory, and it was more promotional. We learned a lot that year, and the lessons that we learned these last two years, we put in. We're learning how to do more with less and to maximize and give the customer more depth and less choices, but more depth and more key items. Yeah. I think, Marni, I'll just add, like, I've been describing in all of our other investor calls and meetings that our markdown rate as a company is still in the mid-30s%. I mean, that's still not anywhere near being historical best. We look at that as being a healthy level of promotion, week in, week out. What Jay is describing, the benefit to markdowns and gross margin more so. Yeah, we're definitely selling more at full price. We're kinda, you know, pulling the needle out here and there on promotions. It's not a drastic change in terms of week in, week out. The cleanup of inventory, and especially in AE, where we're down 30%-40% in inventory. We're down 30%-40% in SKU counts and choice counts. Jay just said it, we're buying deeper with less breadth. That benefit in markdowns is coming, like, end of season, permanent markdowns, clearance markdowns, write off of inventory. So the week in, week out POS rate, we feel is really healthy, and we don't think there's any reason from a competitive standpoint that this isn't gonna continue. It's really that cleanup of just really unproductive inventory with too much inventory that's the bigger margin benefit. If you look at, you know, the brand detail we provide now, 2019, if you look at the AE brand, for the year 2021, we grew revenue by $75 million from 2019, but we grew profits by $270 million. That is when we talk about the fundamental changes from this acquisition of Quiet, the node network, delivery cost benefits. Actually markdown benefits because we're putting less inventory in stores and trapping it there because we were able to fulfill closer to those stores. Again, just doing more with less inventory. That's the benefit that's come through really in, you know, in a huge way in the AE brand, definitely benefiting Aerie too with what we're doing. We're not planning on giving that back. Our next question comes from the line of Oliver Chen with Cowen. You may proceed with your question. Thank you. This is Jonna Kim for Oliver Chen. Thanks for taking our question. Just curious about your pricing strategy. You obviously saw strong AUR growth over the last two quarters, but as you think about next year, do you have room for increasing pricing to potentially offset any pressure? Any color will be helpful. Thank you very much. Yes. I think Jay and I are gonna tag team on this. Look, you know, we've been testing new pricing in every category, and in particular ones, denim and leggings. We're not seeing a lot of resistance as long as the customer understands the quality and the price value. But, you know, we are gonna protect our opening price points. That's important. The lipstick of any category gets the order going, and that is something we will constantly look at, and we'll keep the sharp prices where we believe we wanna compete. But we definitely have a strategy where we, you know, build our plans and the way we assort, Jay said it, and the way we assort to a good, better, best strategy. I'd like to say we're leaning into better and best, but we certainly aren't gonna isolate, you know, customers, new customers that may wanna get into our brand and understand who we are. Certainly, categories like socks and underwear are a great place to do it. You know, I love our strategies. Look, we've spent a lot of time on looking at our pricing, looking at the costing, for the future, knowing that there could still be some logistics and, you know, supply chain issues, and I feel like the plans are in a great place. Jay, I didn't know if you had anything. You know, to add to what Jen is saying, to me, the sign of a healthy company is ability to have higher price points on new items and be able to do so, able to introduce higher prices, key items, and drive sales. We've been able to do that. You know, our denim, we're able to introduce $89 denim, $99 denim, higher price points in the leggings, and drive very good sales on it. That's the key to company because we're not limited to a certain price point. We have the ability to keep layering on top of that. We're very excited about that we have the ability to drive that. Also we're very proud of is that people want the American Eagle name. We see more demand for our name on products saying American Eagle. We see more demand for our logo. People want it. We're not just selling jeans. We're selling American Eagle jeans, American Eagle product, and we're very proud of that. You'll see in the campaign this year, you'll see American Eagle everywhere. We're very excited. Our next question comes from the line of Corey Tarlowe with Jefferies. You may proceed with your question. Hi, thank you for taking my question. You had mentioned an improvement in retention at core American Eagle. Just curious as to what's driving this. You had also discussed witnessing the highest ever, I believe, active customer count and the highest ever annual spend as well. What, in your view, do you believe is the core to this development, and how sustainable do you believe this trend is? Thank you. That's a great question. The marketing teams, you know, have really dissected our customer base, and one of our strategies was getting our customers back. The reactivated growth, particularly in American Eagle, I mean, the numbers, it's outstanding, up, I believe, 61%. I mean, pretty amazing, reactivated customer rate. Same for Aerie, very healthy, huge numbers there. That was one of our focuses. Let's not forget, I really think that the way we're approaching our product assortments, we're attracting, you know, a wider demographic now. We're not just focused on the teenager necessarily. We certainly need to appeal to them, because they shop, no matter what the conditions are in the environment, they're shoppers. We also are seeing that we're getting some, you know, widening our age demographic to the older side, which I think is phenomenal. It speaks volume. I think it's really, when you think about denim, our denim fits, we have more variety there. We still have our core, as I mentioned, and now we have our fashion. We're seeing incrementality there. I do really believe it's the product assortments. You know, we sort of emulated what we're doing in Aerie. Some of those offerings, think about a legging. You know, an 11-year-old or a 60-year-old wears a legging. There's some ubiquity in those product offerings, and I think we're approaching it the same way in American Eagle. being very disciplined about our inventory, disciplined about our promotional cadence, while we're still competing on a great price value equation, and the quality is just outstanding. Really proud of what the team- Jen, like to add what you're saying, we're very proud of our fits. They're consistent, and they're probably the best fits in the industry. That's for sure. Absolutely. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. You may proceed with your question. Good afternoon, everyone. As you think about the two new businesses that you acquired, Airterra and Quiet Logistics, what do you see them adding in 2022? When do they become a sales and profit driver as you expand those businesses? Is there any model of what we should think of their contributions over the long term? Thank you. Yeah. Hey, Dana, it's Michael Rempell. I'll answer the first part, and then I'll see if Mike wants to provide any more detail. Look, for me, I should say, I'm really extremely proud of the delivery performance for the American Eagle business. That delivery performance, I don't think there's another retailer in the country that's lowering their delivery cost, lowering delivery as a percent of revenue, and delivering to customers faster, and making their inventory more productive at the same time. It's a huge accomplishment. The team's done a phenomenal job, and it's a great win. The reason I mention that when you're asking about Quiet and Airterra is it's a direct result of the work that we've done with Quiet and Airterra. Those businesses are fueling the results that we're seeing in American Eagle. You know, that's why we acquired them. We saw the opportunity in our business, and it's very clear to us that in order to compete going forward, all retailers are gonna want and need these kind of capabilities. They're gonna need the efficiencies of operating at scale, of being close to the customers, of making their inventory more productive, of accessing new kind of delivery, partnerships and capabilities. That's what this enables. Look, we're only two months into the acquisition. It's a little early to give too much color or too much guidance, but we do plan on giving it later this year. What I would tell you is, our initial conversations with other brands and retailers are extremely positive. I'm very encouraged by what I'm hearing. I'm very encouraged that we're gonna get significant brands and retailers to wanna sign up and join us in this, 'cause they see the value and they see the opportunity. You know, Mike gave a little bit of color earlier, but we do expect, you know, that it'll be a few $100 million of revenue this year. Likely a break-even business as we're investing early on. We just hired a new CTO for the business. His name's Charles Griffith. He's really a world-class player. He was in a leadership role at Amazon, where he built a lot of their transportation capabilities. He's bringing on an extremely talented team. Again, we all know how critical technology is in the success of our business and certainly running an efficient supply chain. You know, these businesses are allowing us to attract talent that we likely would not have otherwise been able to attract. That's certainly a huge value to American Eagle, but it's also gonna be a huge value to all the customers that we serve today and that we're gonna serve in the future. I expect that in 2023, this is going to be a profitable business for us. I said in earlier calls that it was gonna be accretive to our business and accretive to our margins, then I certainly know that it's gonna be that way. Jay, do you want add? Would Michael like to add? Yeah. Just to add one thing, Dana. I always tell Michael that this acquisition is gonna be maybe the anti-Amazon. It's gonna give the ability for us and other retailers to be able to compete against the Amazons, the Targets, and the Walmarts of the, you know, in the future. Thanks, Jay. I think, Dana, I'll just add. I'll just provide some specifics because it's really embedded in that kind of tale of two halves story I was trying to tell at the beginning of the Q&A session here. When we gave guidance of 4%-5% of top line from it, that implies, Michael said it, you know, $250 million-$300 million of revenue, not including the revenue from our own brands. It's actually higher if you throw that in. So intercompany elimination. External or third-party revenue would be $250 million-$300 million. That's incremental to our P&L. We're expecting a loss in the first half. As you know, Michael said, we've only owned it for two months. The team's hard at work to ramp up the business. We're making investments in people and other services, et cetera. The loss in the first half, and that's in that spring, is around a $20 million loss for the spring season. We guided break even for the year. $20 million. We'll pick up that $20 million in the back half is the plan, especially in the Q4. That sets the business up to be profitable in 2023, as Michael said. That's an exciting thing that we'll provide more color on that in terms of, you know, 2023 specifics and within the targets that we already provided. Laura, I think we have time for one more question. Our final question comes from the line of Susan Anderson with B. Riley. You may proceed with your question. Hi. Thanks for taking my question, and thanks for all the details. I was curious, it doesn't sound like you've seen any pushback on the higher price points, but just curious if there's any at all from the consumer, particularly on the denim, where, I think some of those, you know, those higher end price points, if you're seeing any pushback there? Yes. I mean, we always invest accordingly, you know. You know, we've tested and scaled some of these price points, and so far, so good. Obviously, they're more of the fashion-oriented fits, where the customer is willing to pay, and that's how we're doing it, right? In every category, right? We're approaching it cautiously. We still want great, genuine pricing. That's so important. We are a mall-based retailer, so we'll be smart there. I do like the quality and the innovation that I'm seeing. The innovation is just incredible with this design team. They're just not stopping. I mean, I could go through every category, but looking at denim, leggings, just new fabrications and qualities. We've already delivered so much in men's. So where we can get paid, we will. Yeah, that's it. That's a wrap, I guess. We're really excited, and I look forward to what we're gonna see with this next delivery. Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Jay Schottenstein for closing remarks. Okay. Thank you. Okay. I'd like to summarize, AEO has undergone a tremendous transformation over the past two years. 2021 was one of our AEO's best years on record. We achieved over $5 billion in revenue, and that was a first for us. By any standard, that we had a spectacular year with operating profits over $600 million, our best results since 2007. If not for the incremental freight costs as a result of factory closures and supply chain disruptions, it would have been our best year ever. Over the past two years, we made many key structural changes to our business that are driving higher profitability. We've set a new baseline of profitability for the company, confident in 2023 targets of $5.8 billion and $800 million of operating profit and 13%-13.5% operating margins. We appreciate everyone's time and investment in our company, and thank you for joining us this afternoon. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.