Greetings, and welcome to the American Eagle Outfitters third quarter 2023 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 the call over to your host, Judy Meehan. Thank you. You may begin. Good morning, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer, Jen Foyle, President, Executive Creative Director for AE and Aerie, 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. 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. Additionally, you can find our third quarter investor presentation posted on our corporate website at www.aeo-inc.com in the investor relations section. Now, I will turn the call over to Jay. Good morning. Overall, I'm pleased with our third quarter performance. Although the macro environment remains highly dynamic, we are seeing encouraging trends. Our brands remain stronger than ever, and our strategic priorities are propelling us forward. AEO's customers are at the center of our strategy, driving constant innovation that enables us time and time again to deliver exciting collections, and this fall was no exception. Additionally, we provide an industry-leading customer experience, reflecting our investments in data-driven insights and operational excellence. With the launch of our profit improvement program, structural initiatives to drive growth and higher margins are taking hold. Now, a few financial and strategic highlights from the quarter. Third quarter revenue hit a record of $1.3 billion, driven by 5% comp growth, reflecting growing brand momentum and terrific fall merchandise collection. Our market-leading brands are true lifestyle destinations for our customers, and that was evident this quarter. Aerie returned to double-digit revenue and comp growth, and AE generated positive revenues and comps. We also saw significant strength across digital and stores, with new merchandise and strong execution, driving improved traffic across AE and Aerie. The digital channel was a star performer, accelerating to 10% growth. We are seeing great momentum here. Under the leadership of our new Head of Digital, David Zhang, we have introduced innovative customer engagement tactics, enhanced our use of data and analytics to drive stronger KPIs. This work has yielded a remarkable improvement in our e-commerce business, where we see plenty of runway ahead. Stores were also positive in the quarter. We are pleased with early results from new store designs, including our gateway store in SoHo. The store encompasses all of our collections across AE, Aerie, OFFLINE, AE 77, AE 24/7, and our Unsubscribed seamlessly under one roof. New Aerie and OFFLINE stores are also coming out of the gate positive to expectations. Turning to profit, we achieved our second highest third quarter gross margin and operating income in over a decade. This was only second only to 2021, when stimulus fueled exceptional results across the industry. Margin expansion to last year was driven by improved markup as well as numerous structural changes aligned with our ongoing focus on profit improvement. A few highlights of this work include: maintaining tight inventory and promotional discipline, changing our clearance strategy to yield higher profits, scaling Aerie and shifting the product mix into higher margin categories, modernizing our delivery network to reduce costs, and optimizing AE's real estate footprint. As we continue to drive strong demand and build momentum on this work, we are raising our full-year operating income guidance to the high end of our prior range. We now expect to be in the range of $340 million-$350 million, from $325 million-$350 million prior. Lastly, our capital allocation priorities remain unchanged. We are committed to investing in our brands to continue growth while returning capital to shareholders. Our balance sheet is resilient, and we maintain a healthy liquidity position. We ended the quarter with $241 million in cash and nearly $900 million in total liquidity, with no debt. Looking ahead, we remain intently focused on advancing our long-term strategic priorities to, one, drive consistent growth across our portfolio of brands, and two, generate efficiencies and cost savings for improved profit flow-through. We continue to advance towards our priorities and investing in talent, which further positions us for future success. During the quarter, as part of our COO, Michael Rempell's succession plan, we made two key leadership appointments. We're excited to welcome Sarah Clarke, our new Chief Supply Chain Officer, who is responsible for ensuring operational excellence across our global supply chain, from sourcing through distribution. A welcome to Valerie van Ogtrop, our new Head of Brand Operations, a role we created to drive greater collaboration and synergies across AE and Aerie's growth and profit plan. Sarah and Valerie nicely complement our teams of experienced executives and excellent bench of division leaders and associates. There's a high level of focus and energy across the organization around our profit improvement project. We've had strong engagement from our leadership teams, with great support from our board of directors. We're harnessing our innovative spirit to rethink how we operate every day, and work streams focused on unlocking both revenue growth and efficiencies moving forward. We intend to host an investors meeting in spring of 2024, where we will unveil specifics on our go-forward strategy and provide long-term financial targets. And in near term, with incentives fully embedded in our 2023 expense base and early benefits from our profit improvement initiatives, I'm confident of our ability to leverage expenses even on modest sales growth in 2024. AEO has enduring brands, robust operations, and strong talent. I am confident that with our strong foundation and new strategic direction, we have the right recipe in place to build revenue and profit from here and deliver shareholder returns. With that, I'll turn the call over to Jen. Thanks, Jay, and good morning, everyone. As Jay noted, we had a strong quarter with sequential improvement across brands and channels. Fall collections were well received, and I am proud of how the teams executed on our brand strategies. It was incredibly exciting to see American Eagle return to growth with revenue and comps of 2%. We delivered a winning assortment that showcased our incredible brand heritage and an exciting customer experience. Women's was particularly strong, where we wrote positive comps across tops and bottoms. We are seeing strong demand for fleece, tees, skirts, and newer bottoms, such as twills, cargos, and wider legs. Men saw strength in tees, sweaters, twill bottoms, and shorts. AE also delivered strong operating profit growth, up 6% to last year, aligned with the strategic plan we laid out in 2021. We have made significant progress in improving the health of the AE brand over the last few years. We stepped away from low-margin sales, rationalized SKUs to eliminate unprofitable offerings, and optimized our brand's real estate footprint. As a proof point, third quarter brand profit is up 20% relative to third quarter 2019 levels, with revenue modestly down 2%. With profit restored to a healthy level, as discussed in prior quarters, we are strategically focused on growth. Early initiatives have been highly impactful, and I'm pleased to note that AE returned to growing its customer file this quarter. Casual wear is a lifestyle that continues to evolve, providing exciting new trends for us to drive and play into. We are focused on expanding our dominance in denim, leveraging our industry-leading fits and fabrics to deliver newness. At the same time, we are also making investments to better penetrate categories and occasions that are important to our customers, with collections like AE 24/7 in men's activewear and AE 77, our premium capsule. We are also continuing to invest in our source fleet to improve productivity and ensure we put our best foot forward. We have seen a positive response to AE's new store design, with remodeled stores delivering significantly improved comps. Based on the success of these initial tests, we are expanding our remodel program next year to include additional stores, while continuing to close and reposition low-productivity locations. We are also focused on improving inventory allocation and replenishment to better serve our customers. Lastly, we continue to leverage and innovate marketing campaigns and amplify excitement around the AE brand. This fall, we collaborated with the Ziegler Sisters on a limited edition capsule to showcase key fashion items for back-to-school season. This included our OMG J eans event, a powerful takeover on the High Line in New York City, an immersive installation that stopped many New Yorkers in their tracks. We showcased the quality and versatility of our iconic denim assortment, underscoring our strong heritage and dominance in the category. The campaign outperformed our expectations, driving strong sales both online and in stores. Now, turning to Aerie. We had an exceptional quarter, with revenue and comps up 12% and profits expanding 34%. Newness and assortment changes in our core intimates business drove a nice sequential recovery. We grew market share and had our best-ever third quarter performance in core bras. We also continued to see rapid growth in our core apparel business, with particular strength in fleece and sweaters, where new collections are resonating very well.... Our activewear collection, OFFLINE, also had a great quarter, achieving double-digit growth. Aerie has seen incredible expansion over the last few years, growing into a beloved destination for exciting fashion and comfy, cozy fits in intimates, apparel, swimwear, and activewear. Since 2019, we have doubled our sales and quadrupled our profits. We are gaining new customers every season, with our total customer file now over 10 million. Yet, with just a low single-digit share of close to $80 billion total addressable market, we are just scratching the surface. Activewear, in particular, provides an attractive opportunity, fueled by strong demand for athleisure. We see a unique opportunity to build share here with OFFLINE. Aerie's vibrant and playful take on activewear as we continue to develop the assortment. We are focused on continuing to build brand awareness as we leverage investments in our store fleet and innovative marketing strategies to grow our customer base and share of wallet. New store performance remains strong, providing a positive lift to comps as they come into the comp base. Additionally, OFFLINE openings are exceeding plans. On the marketing side, Aerie's fall campaigns were focused on elevating the brand as the go-to for high quality, fashionable, and comfortable intimates and apparel. We showed up across the season with an array of notable influencer talent and programs. This included a first-to-market partnership with the popular dating app, Bumble, encouraging users to find their comfy match with Aerie. We also hosted the Hidden Gems Marketplace, a fun, interactive customer event in New York City that generated strong marketing KPIs. We have two of the best brands in retail. For over a decade, we have consistently ranked in the top three brands in the Piper Sandler Taking Stock of Teens survey. AE is the market leader in denim in the age 15-25 cohort, the Number 2 brand across all ages, and the Number 1 brand for women in particular. Aerie is one of the most exciting brand platforms in fashion, celebrating body positivity and empowering women to feel their best selves every day. It's a strategic priority to profitably grow our portfolio of brands, and I see meaningful opportunity ahead. Before I turn this call over to Mike, a big thank you to the AE and Aerie teams for their hard work in delivering a strong quarter. Our brand, category, and channel strategies are gaining momentum, which is a true testament to this talented team. With that, I will turn the call over to Mike. Thanks, Jen. Good morning, everyone. As Jay mentioned, third quarter results mark continued progress on our strategic priorities to grow our brands and set us up for improved profit flow-through. Strong brand momentum, combined with actions taken on our profit improvement initiatives, resulted in improved gross margins and operating income year-over-year. We entered the quarter with momentum that continued into the early holiday season, fueling a strong top-line result. Consolidated revenue of $1.3 billion was up 5% to last year, and comparable sales also rose 5%. Operating income of $125 million reflected a 9.6% operating margin. Gross profit of $544 million increased $64 million, representing a gross margin of 41.8%, up 310 basis points to last year. As Jay noted, we achieved some of our highest merchandise margins on record, reflecting strong demand, lower costs, and a number of benefits from our profit improvement initiative. Inventory discipline resulted in lower markdowns as we maintained healthy promotions. With the change in our clearance model announced last quarter, we continue to sell through end-of-season merchandise at better margins. We also saw leverage on rent, reflecting our focus on strengthening fleet productivity at AE and the ramp-up of new Aerie stores, as well as delivery, distribution, and warehousing costs, with efficiencies across several key metrics, including lower shipments per order and lower cost per shipment. SG&A expense of $362 million was up 16% to last year and in line with guidance. Consistent with strong business trends, roughly half of the increase was driven by incentive expense after zero accruals last year. As discussed last quarter, incentives are weighted to the back half of this year. So payroll also increased largely due to higher wages. Depreciation was up year-over-year and in line with guidance provided last quarter, primarily reflecting our investment in new stores. As noted previously, we have reset incentives to reflect improving business performance. With incentives now in our base and an ongoing focus on cost efficiencies, we're well positioned to leverage our expense base on modest top-line growth next year. EPS for the third quarter of $0.49 per share. Turning to our brands, Aerie revenue and comparable sales increased 12% in the third quarter. A positive non-comp lift from new stores was offset by lower third-party sell-offs, reflecting greater inventory control and our shift to a more profitable clearance model. Aerie's operating margin of 19.3% hit an all-time high, expanding over three points to last year as the brand continued to scale, and we saw improved markups, lower markdowns, and early benefits from the clearance shift. American Eagle revenue and comps increased 2%, with the operating margin expanding 70 basis points to 21.5%. As we've discussed on numerous occasions, our focus over the past several years has been strengthening the profitability of the AE brand. I'm extremely pleased with the progress we've made, expanding profit margins by 400 basis points since the third quarter of 2019. We're now turning our attention to growing the top line with a sharp eye on profit flow-through. Consolidated ending inventory at cost was down 4% compared to last year, with units down 3%. Inventory levels remain healthy and controlled as we maintain buying discipline and case demand. We ended the quarter with the balance sheet in a strong position, including $241 million in cash and total liquidity of $875 million, including our revolver. Capital expenditures totaled $43 million, and we continue to expect full year CapEx to be in the range of $150 million-$175 million. Our plan for our consolidated store count in 2023 remains roughly flat to last year, reflecting approximately 25 new Aerie store openings, offset by approximately 25 net closures for the AE brand. Before I move on to our outlook, I'd like to provide more color on our ongoing profit improvement work. Last quarter, we made an important change to our clearance model, which is tracking in line with plan to generate $25 million in savings in 2023 and $50 million in savings on an annualized basis. As we continue to lock down efficiencies that have supported our gross margin expansion, other significant work streams within SG&A have also been identified and are being actioned on. We are instilling an internal culture around continuous improvement and expense management, the results of which are incorporated into our 2024 plans. As a result, next year, we expect to drive continued gross margin expansion, leverage on SG&A and depreciation, operating rate expansion, and healthy earnings growth, structuring the business to deliver this at low single-digit revenue growth. A more positive trend would drive incremental leverage and profit flow through. We'll give further details in future months as we provide our specific expectations for 2024 and beyond in the spring. Quarter to date, we are seeing sustained momentum across our brands, with revenue up in the mid-single digits. Additionally, we continue to make good progress in executing on profit improvement initiatives. With this as background, we're raising our full year outlook for operating income to the high end of prior guidance. We now expect to be in the range of $340 million-$350 million. This reflects revenue up mid-single digits, with comps up low to mid-single digits. For the fourth quarter, this implies operating income in the range of $105 million-$115 million, with revenue up in the high single digits, including a four-point tailwind from the 53rd week. Comp sales are projected to be up in the mid-single digits. SG&A is expected to be up approximately 20%, including a five-point impact from the 53rd week. As previously discussed, it also includes higher incentive accruals, which are skewed to the back half of this year. As Jen mentioned, we look forward to providing more color on our long-term strategic priorities and financial goals at our spring investor meeting. With that, I'll open it up for questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd 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 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow for as many questions as possible, we request that you each keep to one question. Thank you. Our first question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question. Great, thanks. So Jen, could you speak to key areas of acceleration at Aerie in the third quarter and just how you see the brand position for holiday? And on the return to growth at American Eagle this quarter, how do you view sustainability of positive comps of this concept moving forward? And then, Mike, could you just elaborate on the profit improvement project and maybe the modest top line to leverage SG&A next year? Just taking a step back, how that compares to historical flow through in the model? Sure. Happy Thanksgiving to all, by the way. Look, I'm gonna take a small victory lap here. I just loved what we saw in Q3. Let me just say one thing. This team, okay, my team, Jay's team, all of our American Eagle team, they were all in stores last week. We saw almost 20 stores in basically two and a half days. This is what my team commits to. We're in this for the long haul. That's all I can tell you. To grow year-over-year, day-over-day, quarter after quarter, you have to have a long-term strategy, and I'd like to say we're delivering on it. Really proud of what we accomplished in Q3. Women's, in particular, in AE, we did double down there. Their comps definitely superseded the men's comps, and we're gonna continue that. I love what I'm seeing for spring. More fashion, more nods to what I think is relevant in today's trends. You know, we went back, and we decided that we needed to get famous for our Aerie categories, and we've been up to that for three years now, and now it's time to jump off in American Eagle, and wow, do I like what I'm seeing in the future for trends. In Aerie, well, I think this is long overdue. You know, keep in mind, Aerie held their market share in bras in a declining business. We held our own in Q3. It's an $80 billion opportunity for us to grow into that category, and the team's up to it. I like what I'm seeing early on. Q4, you know, is still... We have many weeks ahead of us, and as you know, the big week ahead, heading into what we call Green Friday, not Black. I think we're ready to go. Like I said, we were in 18 stores, almost 20, in two and a half days, and, we are ready to compete on our terms. ... And as Mike alluded to, we're gonna talk more in the spring season when we speak to you all about our long-term growth plans. But I can. I see it. I see what's happening here, and we're gonna deliver and build this incredible brand strategy. Yeah, and Jen, you know, like, when you were in the stores, you would agree that our stores were the best, were like the best looking stores out there, too. I think so. I think, you know, the way we operate... You know, it's one thing to grow your business, it's another thing to deliver operational excellence. That's what I have to say. Yeah, and on profit improvement work, Matt, you know, the third quarter was another proof point on where we've had the focus, which has been expenses, and margin improvement, all generating and providing that merch or that gross margin expansion. So now, for three quarters now, we've seen gross margin expansion. We've leveraged the expenses in gross margin. Fourth quarter, we'll do it again. As we talked about, this work is sort of a multi-year journey, and the SG&A pieces of that would take a little longer as we've looked at labor models, services, things tied to contracts, and vendors that we're negotiating either reductions to current rates or looking to consolidate or move vendors. That work, we have line of sight now that will have to into 2024, and we know what the benefits look like. So on top of the gross margin expansion that we believe will continue next year, now we've got the opportunity to leverage SG&A at low single-digit revenue growth next year, if that would be the result. Anything better than that, we'd see even higher leverage against that historical model. Great color. Thanks, and good luck with Green Friday. Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question. Hi, this is Kelly. Also, Paul, thanks for taking your question. Could you just talk about how the clearance strategy change impacted the P&L this quarter? Was it a headwind to sales, and how much of a benefit was what is the gross margin at 3Q? And how do you expect that to impact 4Q next 2024, from both a sales and margin perspective? And then I have a follow-up. Thank you. Yes, I think the headwind to revenue was one or two points in the quarter, just based on the sell-off revenue not being booked, which is unprofitable, and that's the story around this improvement, the $50 million annualized benefit that'll happen over a 12-month basis. Historically, we really took hits in Q2 and Q4, for the most part, selling off clearance versus clearing at our sales now, which is what we're doing. So we'll see this benefit across a 12-month period. Saw some benefit in Q2, there's some benefit in the Q3 results. Again, most of that benefit is markdown management, inventory management in total, and then leverage of our expenses and gross margin in Q3. And then Q4, we'll see another slight benefit, but again, those other pieces are bigger than the clearance benefit. It's a twelve-month model now versus sort of a Q2, Q4 sell-off model. We'll see that $50 million annualized across a twelve-month period go forward. Just on the SG&A guidance for the fourth quarter, I think coming into today, we sort of had guided the SG&A up mid-teens in the fourth quarter. So I'm just trying to understand what's driving you know the greater growth in fourth quarter relative to your previous expectations. Is that all accrual of incentive comp, or... And I guess on that, I mean, you've been talking about sort of finding cost savings for a while now. Just wondering why we would be seeing more offsets. Thank you. Yeah, I think the +20% includes five points from the 53rd week. That gets you back to sort of mid-teen growth, which was similar to Q3. And yes, but half of that is based on changes in changes to the incentive accrual. So half of that mid-teens would be incentive, the other half other expenses. Again, the work we talked about on SG&A, we knew would be a longer path. There are some benefits embedded in there, but not what we're expecting now in 2024, that we've got full line of sight to some of those work streams within the work completing as we speak. The teams are embedding that into 2024. We've always said the SG&A benefits would come more next year and then even into 2025. There's some components that continue past even this coming year. We're not... You know, the gross margin focus is what's coming through the P&L in the back half. Really pleased with the proof point that that's providing, of all the work that the teams are executing. Next year is when SG&A and depreciation leverage kick in. Just to follow up on that, so the mid-teens guidance prior did not include 53rd week? It did include 53rd week, and the new guidance includes some movement in the incentive accrual between quarters. Got it. Thank you. Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Good morning, everyone. As you think about the store remodels, and I was in the one on, downtown on, on Broadway on Sunday, and it was busy, and it looked good with all the concepts together. How do you think of the remodels? What type of a lift are you getting? And how much of CapEx would that play into it? And when you think about the digital and store channel performance by brand this quarter, biggest differences that you saw and how you're planning promotions for holiday in each channel. Thank you. I'll start, Mike, and then you can take over. ... You know, The Gateway, we're calling it The Gateway. As a reminder, it's the first facade that you see as you enter SoHo. And this incredibly talented team came up with, and they did some research, and thus the name, The Gateway. And, you know, what a place to highlight our all of our brands and all the work we're up to. So I could not be more proud on that delivery. And there's more to come there, and there's learnings that I think we're gonna leverage for the future. That said, as we think about the new store design, there's more out there. American Eagle has this incredible new lived-in store design, and I mentioned it in my comments. Those comps are exceeding, when I say exceeding, the average sales comp in the brand. So, so many learnings there, and we're gonna, you know, we're gonna test and scale, but we love this new design! It's so fun, and, you know, it's been a long time coming for the American Eagle brand to show up the way we deserve. So I love what I'm seeing there. As we fast forward, there's so much good in play here. The learnings that we've had over the past three years in American Eagle, particular, we have, you know, we've definitely rationalized this brand. We've closed stores, we've done everything, and now it's time to forge forward and get what we deserve back. And I love what I'm seeing from the teams. I just looked at spring concept, and our windows and the product that's coming in, and, like a good bottle of wine, it gets better with age. You know, there's a lot to hurdle out there, but I feel really proud of what this team's doing. Aerie, that's a whole other story. It's about time we have that halo effect on the comps with the new stores, and we did say that in prior calls. We acknowledge that it takes time to halo a new store opening and learning from that. And, well, here we are. So we love what happened in Q3. And then on direct... Well, well, so everyone talks omni, but I think the best retailers look at each channel and drive what they are best at, and this is what the direct team's up to. You heard the comps, they're up at 10%. But, you know, I wanna say that this company is very modest in its ad spend, and so we do it with a lot of return. And I love what this team's up to. David and team have tested, and we have so many new ideas that we can launch, and we're gonna do this over time so that we see steady growth. And that's what we're up to. Thank you. Just, just to add a little bit of color on remodels. We, as Jen said, we've got, we've got the SoHo location, love what we're seeing out of that store, but we also have four mall-based locations that we remodeled. We're reading early indications that we are seeing significant and positive sales lift from these locations as well. We're gonna be coming out and talking about sort of the detailed plans around the AE brand growth strategy in the spring, but part of that will be remodel, supporting a lot of other things Jen and team are doing to grow the brand. Preliminary number now, which we'll refine as we get closer, around 50 more remodels is what we're looking at in the next year to help fuel that growth strategy. Thank you. Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Great, thanks so much. Jen, you mentioned you're excited about the spring product assortment. Just talk about swim a little bit, what you're seeing in that category, how you think it's expected to perform versus last year. And then maybe just Mike, I believe the company has a business in the Middle East through some of its franchise partners. Can you just talk about how that business has trended since October, and if that has an impact on the quarter or your guidance for fourth quarter? Thank you. Sorry, I got disconnected. Swim, interesting category for sure. Lots of learnings here. It's still a great business for us, high margin business. I would like to say that the teams have taken away how to think about the business on a more profitable growth trajectory for the future. My teams were just in Brazil, actually, coming back with what I think are the best trends out there, and we're certainly putting them into play, and nearing in. We're definitely doing a little bit more test and scale there. For sure, we're looking at... You know what's interesting, we have American Eagle and Aerie, and we have American Eagle Women's and Aerie, which is a women's brand. So as I think about, you know, our opportunities as a company, we take that into play, right? We're better together, and that's what I was. You know, as we talk about The Gateway stores, you see all of our brands housed together. And guess what? We're seeing growth in both women's business, Aerie, OFFLINE, well, both Aerie, OFFLINE, and then AE. So it's amazing what we can do if you just think about the business that way. So as I think about swim or as I think about trends, not only do I think about Aerie or OFFLINE, I think about American Eagle, too, and what are the women wanting and how do we position our company for growth in all of the categories? And that's, I think, a competitive edge. So going back to swim, as I think about that, that's the way we're thinking about the business. And certainly, we're making sure that we don't over pitch the plan. Again, high-margin business and testing and scaling there. I think we have other businesses that we can leverage in all brands. So, more to come there. Spring looks great, and I hope we can continue to deliver. ... Okay, I'll take the question, like, about the Middle East. You know, like, we have a strong, like, international business there. There, you know, like, the first couple of weeks, you know, it did get a little wack, but the last couple of weeks, it is coming back pretty strong. So we're very optimistic there, and we're praying for peace, you know, like, as far as, like, down the road, you know, in that area, in that region. Okay. Thank you so much. Thank you. Our next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question. Thanks. Morning, everyone. I just want to say a quick thank you for your show of support at your Times Square store. Meant a lot. Can you... So any color you can add on to speak to the gross margin drivers into next year would be helpful. And then congrats on the nice growth in the brand level, EBIT dollars. Any color on how you just to think about that growth in general corporate expense dollars, what we should think about going forward? Thank you. On gross margin expansion, we've got line of sight into our first half buys. We see tailwind still in our initial markups, so benefiting margin on that front. There's still annualization of a lot of the benefits that we were seeing through expenses and gross margin. So our shipments per order, cost per shipment, we've got line of sight into the first half, but still as well see some of those benefits continuing through the expense buckets. We are, you know, so rent, delivery, distribution, warehousing, we still see benefits that we're capturing that will have an annualized effect into next year on top of the expansion of markup that we have at least half, you know, half the year, with embedded in our plans at this point. Yeah, and Mike, like, we also see, like, an opportunity in, like, the international part of the business too, growing. We see that as a great growth vehicle, too. The international part, too. Great, thanks. And then just the corporate expense dollars? Yeah, it's again, just ties to everything else we've talked about from a profit improvement perspective. There's pieces being embedded into our plans as we speak for next year, really across all areas of the P&L. You know, just expanded on the gross margin opportunities that still exist, and then corporate expenses that really straddle both gross margin and SG&A. Making changes to labor models into next year, services line items, maintenance line items, those things are being embedded. All the benefits we're seeing from the work happening as we speak are embedded, being embedded into next year's plan. Yeah, yeah. Also, Mike, I think- Sorry. I also think Mike is also saying that he doesn't see really the SG&A increasing for next year. Yes, yeah. Great, thank you. And then just a quick one. How should we think about the right total sales to comp spread for Aerie at this point? It's only a few points now. I think as we anniversary all that store growth in 2021 and 2022, that comp spread definitely lessens. Digital with comp, we're only opening 25 stores this year, so really, as we get past this year, you only have those 25 in a non-comp base, so it's maybe a point or two. It's probably low single digit spread from here. Great. Thanks a lot, guys. Best of luck for holiday. Happy Thanksgiving. Thank you. Thank you. you. Thank you. Our next question comes from the line of Chris Nardone with Bank of America. Please proceed with your question. Thank you. Two questions. First, could you clarify how comps are trending quarter to date for each brand specifically? And then as we think about next year, how much do you think operating margins can expand? And is this low single digit sales growth you mentioned, is that your base case for next year, or is it more of a point that you can still leverage costs on that level of sales growth? Thanks. The second part first. Yeah, it's more of a point. We're not providing specific revenue guidance in that color. It's just to make the point that we, we can expand operating rate, leverage expenses on just that level of modest sales growth next year based on how plans are coming together. And then quarter to date, it's comps are similar. So we're providing guidance that's similar on top of the 5% we just achieved in Q3. Right now, we're only a few weeks into the quarter. We've got only about 20% of our revenue in. The big weeks really start now, but we're within the guidance, expecting similar type results for the brands. I think on operating leverage, you know, I think with this year, this year on this low to mid-single digit comp that we're guiding to the year, we're gonna expand operating rate by 100-150 basis points. You know, as we get to early next year, provide color and guidance specifically for 2024 in March, we'll provide some level of expected leverage on varying revenue results. Again, the initial color is just to make the point that we see opportunity to leverage and expand, well, expand gross margin, expand operating rate by leveraging expenses across the P&L, not just in gross margin, like we've been able to do this in the back half of this year. And that's, you know, that's again just an early indication, some early color on what we have, our line of sight into 2024. We'll provide more specifics in March. Okay, thank you. Thank you. Our next question comes from the line of Jonna Kim with TD Cowen. Please proceed with your question. Hi there, this is Katie on for Jonna. I just wanted to dig in a little bit to the intimates category and how you're thinking about Aerie's brand positioning there, as well as the performance within intimates. I know you mentioned market share was pretty consistent across bras, I believe. And then just briefly, I'm sorry if I missed this, but can you talk a little bit about traffic trends through the quarter? Thank you. Great question. You know, I mentioned we're holding our own in the intimates category as far as market share, with, you know, it's, it's an $80 billion opportunity, and we're only just, you know, scratching the surface here. I will say that when we launch new ideas- ... so Smoothez is now a cornerstone of our business, and we added on to that category in Q3. We win, right? So the customer trusts us in this category. They love the way it feels on their body. It totally represents our brand platform, so more to come there. I think we have now a jumping off point to really sort of compete on our terms, and it just, again, it totally fits the bill as far as what Aerie's up to on a day in and day out. You know, this is what we do, right? We make women feel great about themselves, and Smoothez does that. So more to come there. Look, the bra business has changed. It's not what it used to be. The one thing I can promise you is the design team and the merchant teams are constantly thinking of new ways to entertain this customer. We have so much in store for the future that I really believe that we're gonna really compete, again, on our terms. That's what counts. How it fits into the bill of our brand platform and how we show up with product categories and more to come. I can't share all my secrets. I guess that's what I'm saying. I think there's lots of opportunity as far as the market space. It's been underserved, and we're gonna serve up to our customers what she's demanding. Traffic was healthy throughout the quarter. We saw positive traffic across brands and channels, so both in stores and digital. And this is sort of kudos to the team. Within our profit improvement work, we're not looking at reducing marketing expense, but we've done a ton of work to optimize how we're spending media to drive healthier and more qualified traffic. And then we're actually seeing significant benefits to digital conversion, especially really conversion in both channels, but the work that you know, David and team are doing on the digital side to convert that traffic and making you know, A/B testing, making continual changes to our customer journey and you know, how we're messaging the customers, we're seeing the digital benefits. We've got a lot of work happening on driving healthy traffic and then a lot of work happening on converting that traffic, and we're seeing those benefits through the back half and believe that's gonna continue in the next year as well. Thank you so much. Happy holidays. Same to you. Thanks. Thank you. Our next question comes from the line of Corey Tarlow with Jefferies. Please proceed with your question. Great. Thanks. Jen, you talked about your growing customer fleet, or file, excuse me, I believe it's now over 10 million. Could you maybe provide a little bit more color as to what you think the major drivers of that are? Perhaps contextualize the growth that you've seen in this customer file, and how that's benefiting the overall enterprise? Sure. Sorry, let me just reiterate that both brands, their customer file grew. So really exciting to see AE take, you know, a position on growth as far as not even just their comps, but their file, and Aerie grew nicely. Both brands are just really dominating on a 360 approach to marketing. So not only are we spending on performance, and in fact, when we spend on performance marketing, we ensure that it delivers a return on investment. Because, you know, it's an easy game to go out there and overspend on performance and dominate. It's not that easy to have a 360 approach to marketing, right? So that means when we think about what we did, actually, coincidentally, but not so, when we had installations in the Meatpacking District in Aerie and in AE, we took over that district in New York City. Wow! How many eyeballs are on our brands, right? Between that, between our influencers, between our store influencers, don't forget about that. Our stores represent our customer, right? So when we go to a store, we see our customers, they're our employees, and by the way, they spread the good news of our brands, and they see all the work that we're up to, right? Delivering better products, delivering innovation, delivering new store concepts. You know, we haven't stopped. As a reminder, The Gateway, I find this just as a testament to the team. In July, we came up with this idea to put all of our brands near in together in SoHo and see what it means to our company, AEO Inc. Wow, in July, we came up with the concept, and lo and behold, we have a whole new store design, brand new ideas, innovative, innovation at its max. So again, it's not just one thing when it comes to delivering sustainable long-term growth and brand power. You know, this is what we're up to. We believe... Well, we're next in show to the number one brand out there. I'm not gonna say, but trust me, it's a big brand and top of mind is AEO Inc. When we think about our brands that way, we think about the long-term growth, long-term strategies, and how we're gonna be one of the most powerful brands in retail. Again, it's not about just one tactic in marketing, it's about thinking about the future and how we're gonna be the best in show. Jen, just putting on, Jen, with the 25 or so we're opening this year, since 2021, we would have opened a hundred and—very specifically, 150 locations. And And that's obviously part of the strategy, too. Customer file growth, customer acquisition, those stores are still early in their maturity curve. We'll be adding more stores again next year. So everything you're talking about from a marketing perspective, combined with that brick-and-mortar expansion for the brand, we still have opportunity to expand the store base, and it's just adding to the customer file within a—again, brands that play within a pretty sizable, addressable market that we only have a small percentage of still. Got it. And then just to follow up on that, Mike, on the topic of store openings, could you provide any color as to how to think about the AE store fleet as we look ahead? And then just, could you also talk about how AUR trended in the quarter? I know you talked about traffic, but it'd be good to get color on AUR trends and then how you think about that throughout the remainder of the year. Hit AUR first. AUR was up in the quarter. We talked about kind of holding on to that AUR position that we've been able to, you know, grow to over the course of the pandemic. You know, the brand equity we've built, we're not giving back up. It's part of the gross margin expansion story, for sure. Your question on AE store count, we're still talking about a net 25 closures this year, but we're coming to the point where that net number will be similar to maybe down. We're actually continuing to explore repositions in market versus net closures, and we're seeing healthy results from some of those strategic moves. So again, as part of an AE brand growth strategy, we'll articulate where we think the fleet's going, when we provide more color in spring. Square footage reduction won't be as significant as it's been in the last several years as we've reset the profitability of the brand. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Perfect. Thanks a lot for taking the question. Maybe taking a step back, what part of the profit improvement plan has been the most impactful in your eyes so far? And then how should we think about the next leg? And then secondly, I feel like we haven't heard your latest thoughts on the Quiet Logistics business in some time. So perhaps if you could provide an update there, that would be great. Thanks a lot. Yeah, I think to date, I mean, we've been talking about this for about 9 months. We talked about the focus being within the gross margin area, so mainly on product margin and markdown inventory management, but the expenses in gross margin. There were 60 basis points of leverage in the from those expenses in the third quarter. We've leveraged the expenses in gross margin every quarter now this year. We expect to do that keep going forward. So that, you know, to this year's results, that's that leverage is a proof point to the work we're doing, and the fact that's where the focus has been, we're driving results there, gives me high level of confidence in what we're now landing in our 2024 plans around SG&A and depreciation to drive the same thing. Yeah, yeah. And Mike, you know, you know, on the Quiet part of the question, Quiet has provided us, like, enormous benefits to our brands, and we're starting to see it flow through, like, on gross margins. We're starting to use it more in our sister company, Todd Snyder, will go onto, will go onto the Quiet platform this year. And we're also seeing an opportunity to still strengthen our, our, third-party business, too. Thanks a lot, good luck. Thank you. Thank you. Melissa, we have time for one more question. Thank you. Our final question today comes from the line of Janet Kloppenburg with JJK Research Associates. Please proceed with your question. Hi, everybody. Hi. Congratulations on the progress. A couple of questions. First, Mike, could you provide the breakdown of the gross margin improvement? I'm just wondering about how much came from freight and how much came from markdown improvement, and what we should look forward to going forward. Also on SG&A, I know you said you'd leverage next year, which is terrific, but when I look at the SG&A increases in the first half of this year, they were, you know, mid-single digit. So should we expect first half next year to have higher bonus accrual? I'm unsure there. And Jen, if you could help on AE Men, was it positive for the quarter, and what's your outlook there? Maybe just talk a little bit about the leggings business, because I know that's a very high margin business for you at Aerie. Thank you. On the gross margin components, we saw real benefits across the board. Product margin benefits, markdown rate management, so some lower markdowns as well, and then leverage of expenses through gross margin. So it was all three components. On SG&A next year, yeah, I think the growth in the first half was mid-single. Our plans, the plans we're embedding into 2024 with, you know, we talked about 80% of our SG&A spending compensation line items, advertising services, some maintenance areas. There's changes coming that would not have been embedded in anything this year. So we're making changes to those, all those components in our 2024 plans. To your point, we may have a little bit of a quarterly flow on incentive comp versus this back half weighting that we're absorbing now, but we can provide more color to the exactly how the quarters will look once we get to, you know, more specific guidance in March. Thank you. Then, for sure, men's was softer than women's, but we saw that coming. You know, as we entered into Q3, we definitely doubled down on the women's side of the business in American Eagle, and certainly we reaped the results of that. The comps are definitely more significant in women's versus men's. Again, that does not mean that we don't have opportunity in men's. In fact, we see that as some low-hanging fruit as we get into the back half of, you know, this year right now, Q4, and as we head into Q1, Q2. So, we've been working hard at it. I definitely see men's as an opportunity to be a little bit more productive. I think in the past, maybe we were a little bit over assorted there, and we definitely can have a little bit more productive SKUs, as we continue to double down on the women's business. Leggings, I don't know if I should call that my middle name. That business is never going to go away. I think we have a cornerstone as far as innovation there. I just... If anyone hasn't tried our leggings, you must try our leggings. The Aerie Real, I mean, they are incredible, the Real Me leggings. They sit at one of the number one SKUs in our entire company, and it's because of the outstanding design and the comfortability. And again, everything has to move back to what your brand stands for, and Real Me is what Aerie stands for. So there's so much more good stuff happening in OFFLINE. In fact, we had a rallying cry this week on really what OFFLINE means to the Aerie brand or on its own. Wow! You should see, in the same mall, we're getting great comps in OFFLINE and in Aerie at the same time. They like what they're seeing. And keep in mind, we still have some crossover categories in both stores in the same mall, so that would tell me that as we continue to test, growth for Aerie, there's some more opportunity for both brands in the future. So again, leggings, they're not stopping. I don't know what anyone's ever gonna see about that business. And what I love about this, I'm gonna finalize with this, is the denim business in women's in particular, we're seeing some really great reads early on. And so what I'm saying is, we can do both. She can wear things inside, she can go to her gym class in leggings, and then she can go out in our denim, and that's what we're up to. Thank you. Thank you. That concludes our question and answer session. I'll turn the floor back to Mr. Schottenstein for any final comments. Okay, thank you, operator, and thank you all for joining the call this morning. You know, I hope this is clear in our third quarter results. We are seeing what we've built across our growth and profit improvement initiatives. This is a strong testament that our strategies are working. Like Jen was saying, we're here to build enduring brands, whether it be AE, Aerie, OFFLINE, and Todd Snyder. We are focused also on driving consistent profit growth and return to our shareholders. Thank you for your interest and investment in the company, and we look forward to updating you in the coming year. Thank you. Okay, thank you. Sorry. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.