UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION

Washington,D.C.20549

FORM8-K

CURRENTREPORTPursuanttoSection13or15(d)

ofTheSecuritiesExchangeActof1934DateofReport

(Dateofearliesteventreported)August23,2017

AMERICANEAGLEOUTFITTERS,INC.(Exactnameofregistrantasspecifiedinitscharter)

Delaware 1-33338 13-2721761

(Stateofincorporation)

(CommissionFileNumber)

(IRSEmployerIdentificationNo.)

77HotMetalStreetPittsburgh,Pennsylvania 15203-2329

(Addressofprincipalexecutiveoffices) (ZipCode)

(412)432-3300(Registrant’stelephonenumber,includingareacode)

N/A(Formernameorformeraddress,ifchangedsincelastreport)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the followingprovisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) orRule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM2.02. ResultsofOperationsandFinancialCondition

The information in this Item 2.02 of Form 8-K, including the accompanying exhibits, shall not be deemed to be “filed” for the purposes of Section 18of the Securities and Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information bedeemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation languageof such filing, except as shall be expressly set forth by specific reference in such filing.

On August 23, 2017, American Eagle Outfitters, Inc. (the “Company”) issued a press release announcing, among other things, the Company’sfinancial results for the second quarter ended July 29, 2017. A copy of this press release is attached hereto as Exhibit 99.1. The Company’sManagement team held a conference call on August 23, 2017 at 9:00 a.m. Eastern Time to review the aforementioned financial results. A replay of theconference call will be available beginning August 23, 2017 at 12:00 p.m. Eastern Time through August 30, 2017. To listen to the replay, dial1-844-512-2921, or internationally dial 1-412-317-6671, and reference confirmation code 13652042. An audio replay of the conference call will alsobe available at http://investors.ae.com. A copy of the conference call transcript is attached hereto as Exhibit 99.2.

ITEM9.01. FinancialStatementsandExhibits

(d) Exhibits Exhibit No. Description99.1* Press Release dated August 23, 2017 announcing second quarter 2017 financial results

99.2* Conference Call Transcript dated August 23, 2017 * Such Exhibit is being “furnished” (not filed) pursuant to Item 2.02 of the Current Report on Form 8-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersignedhereunto duly authorized.

AMERICAN EAGLE OUTFITTERS, INC.(Registrant)

Date: August 29, 2017 By: /s/ Scott Hurd Scott Hurd Senior Vice President, Chief Accounting Officer

EXHIBITINDEX Exhibit Number Description99.1* Press Release dated August 23, 2017 announcing second quarter 2017 financial results

99.2* Conference Call Transcript dated August 23, 2017 * Such Exhibit is being “furnished” (not filed) pursuant to Item 2.02 of the Current Report on Form 8-K.

EXHIBIT99.1

AMERICANEAGLEOUTFITTERSREPORTSECONDQUARTERRESULTS,COMPSALESINCREASED2%

SALESANDEPSABOVEEXPECTATIONS

PITTSBURGH–August 23, 2017 - American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.12 for the second quarter ended July 29, 2017.Excluding restructuring and related charges of $0.07 per diluted share, the company’s adjusted EPS was $0.19 for the second quarter.

Jay Schottenstein, Chief Executive Officer commented, “In the second quarter, we achieved sales and earnings above our expectations in a challenging retailenvironment. Sales trends improved and I’m proud of the continued growth in jeans, bottoms, women’s apparel and Aerie, with encouraging signs in men’s topsbeginning to emerge. Our brands are strong and we have significant opportunity for further growth. I’m optimistic as we enter the second half of the year, and weremain focused on delivering product innovation, strengthening customer engagement and improving profit flow-through.”

SecondQuarter2017Results

• Total net revenue increased 3% to $845 million from $823 million last year.

• Consolidated comparable sales were up 2%, following a 3% increase last year.

• Gross profit* of $294 million compared to $307 million last year with a gross margin rate of 34.9% to revenue compared to 37.3% last year, a 240basis point decline. The margin declined primarily due to increased promotional activity. Additionally, shipping costs and rent deleveraged.

• Selling, general and administrative expense rose 2% to $204 million compared to $200 million last year, and leveraged 20 basis points to a rate of24.1% to revenue. Higher advertising expense was offset by lower compensation expense.

• Operating income of $39 million, which includes $11 million of restructuring charges, compared to $69 million last year. Adjusted operating income*of $50 million compared to $69 million last year with a rate of 6.0% to revenue compared to 8.3% last year.

• Other expense of $6.7 million includes $9.3 million of pre-tax charges related to the planned exit of a joint business venture. This was partially offsetby $2.6 million of other income, compared to other expense of $3.1 million last year.

• The effective tax rate decreased to 34.7% compared to 36.5% last year.

• EPS of $0.12 compared to EPS of $0.23 last year. Adjusted EPS* of $0.19 compared to EPS of $0.23 last year. * Adjusted amounts are based on Non-GAAP results, as presented in the accompanying GAAP to Non-GAAP reconciliation.

RestructuringandRelatedCharges

In the second quarter, the company had charges totaling $21 million, approximately $0.07 per share. This consisted of restructuring charges corresponding to thepreviously announced initiative to explore the closure or conversion of company owned and operated stores in the United Kingdom, Hong Kong and China tolicensed partnerships. Additionally, the company incurred charges related to the planned exit of a joint business venture.

ShareholderReturns,Cash

The company ended the quarter with total cash of $193 million compared to $248 million last year. Over the past 12 months, we returned $88 million in sharebuybacks, $90 million in dividends and invested $187 million in capital expenditures, resulting in a lower cash balance.

Inventory

Total ending inventories at cost increased 3% to $433 million. Ending units were flat compared to last year, while the average unit cost was up 2% to last year.

CapitalExpenditures

In the second quarter, capital expenditures totaled $46 million. We continue to expect fiscal year 2017 capital expenditures in the range of $160 million to$170 million, with roughly half of the spend related to store remodeling projects and new openings, and the balance to support the e-commerce business, omni-channel tools and general corporate maintenance.

StoreInformation

Consistent with our strategy, this quarter we opened 9 new Aerie locations, of which 7 were in new markets. Additionally, we opened 6 new AE stores, with 2 inMexico and 4 in the U.S. to better position our brand in select markets. The company also opened 9 international licensed stores and closed 3. For the remainder ofthe year, the company plans to open another 5 AE stores and 5 Aerie stores in the U.S., Canada and Mexico, as well as 32 international licensed stores to supportthe company’s global growth strategy. The company is on track to close a total of 25 to 40 stores this year. For additional store information, see the accompanyingtable.

ThirdQuarterOutlook

Based on anticipated comparable store sales in the range of flat to up low single digit, management expects third quarter 2017 EPS to be approximately $0.36 to$0.38. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.41 last year.

ConferenceCallandSupplementalFinancialInformation

Today, management will host a conference call and real time webcast at 9:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial1-201-689-8562 or go to http://investors.ae.com to access the webcast and audio replay. Also, a financial results presentation is posted on the company’s website.

Non-GAAPMeasures

This press release includes information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including earnings per share information and theconsolidated results of operations excluding non-GAAP items. These financial measures are not based on any standardized methodology prescribed by U.S.generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies. The company believesthat this non-GAAP information is useful as an additional means for investors to evaluate the company’s operating performance, when reviewed in conjunctionwith the company’s GAAP financial statements. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively inevaluating the company’s business and operations.

* * * *

AboutAmericanEagleOutfitters,Inc.

American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care productsat affordable prices under its American Eagle Outfitters ® and Aerie ® brands. The company operates more than 1,000 stores in the United States, Canada, Mexico,China and Hong Kong, and ships to 82 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at more than190 international locations operated by licensees. For more information, please visit www.ae.com .

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent ourexpectations or beliefs concerning future events, including third quarter 2017 results. All forward-looking statements made by the company involve material risksand uncertainties and are subject to change based on factors beyond the company’s control. Such factors include, but are not limited to the risk that the company’soperating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company’s Form 10-K and Form 10-Q filed withthe Securities and Exchange Commission. Accordingly, the company’s future performance and financial results may differ materially from those expressed orimplied in any such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if future changesmake it clear that projected results expressed or implied will not be realized.

CONTACT: American Eagle Outfitters, Inc.Olivia Messina, 412-432-3300

AMERICANEAGLEOUTFITTERS,INC.CONSOLIDATEDBALANCESHEETS

(Dollars in thousands)

July29,2017

January28,2017

July30,2016

(unaudited) (unaudited) ASSETS

Cash and cash equivalents $ 192,558 $ 378,613 $ 247,934 Merchandise inventory 433,458 358,446 422,151 Accounts receivable 80,673 86,634 65,282 Prepaid expenses and other 110,496 77,536 90,852

Total current assets 817,185 901,229 826,219

Property and equipment, net 719,127 707,797 700,270 Intangible assets, net 47,520 49,373 50,761 Goodwill 15,069 14,887 17,399 Non-current deferred income taxes 28,761 49,250 44,370 Other assets 58,661 60,124 54,169

Total Assets $ 1,686,323 $ 1,782,660 $ 1,693,188

LIABILITIESANDSTOCKHOLDERS’EQUITY Accounts payable $ 275,479 $ 246,204 $ 286,691 Accrued compensation and payroll taxes 22,708 54,184 35,908 Accrued rent 78,697 78,619 78,621 Accrued income and other taxes 13,289 12,220 10,250 Unredeemed gift cards and gift certificates 32,573 52,966 31,532 Current portion of deferred lease credits 12,838 12,780 12,810 Other current liabilities and accrued expenses 36,398 36,810 42,719

Total current liabilities 471,982 493,783 498,531

Deferred lease credits 53,620 45,114 51,100 Non-current accrued income taxes 4,786 4,537 4,795 Other non-current liabilities 31,636 34,657 38,365

Total non-current liabilities 90,042 84,308 94,260

Commitments and contingencies — — — Preferred stock — — — Common stock 2,496 2,496 2,496 Contributed capital 586,844 603,890 591,532 Accumulated other comprehensive income (30,121) (36,462) (29,356) Retained earnings 1,772,233 1,775,775 1,693,371 Treasury stock (1,207,153) (1,141,130) (1,157,646)

Total stockholders’ equity 1,124,299 1,204,569 1,100,397

Total Liabilities and Stockholders’ Equity $ 1,686,323 $ 1,782,660 $ 1,693,188

Current Ratio 1.73 1.83 1.66

AMERICANEAGLEOUTFITTERS,INC.CONSOLIDATEDSTATEMENTSOFOPERATIONS(Dollars and shares in thousands, except per share amounts)

(unaudited)

GAAPBasis13WeeksEnded

July29,2017

%ofRevenue

July30,2016

%ofRevenue

Total net revenue $844,557 100.0% $822,594 100.0% Cost of sales, including certain buying, occupancy and warehousing expenses 551,908 65.3% 515,499 62.7%

Gross profit 292,649 34.7% 307,095 37.3% Selling, general and administrative expenses 203,717 24.1% 199,536 24.3% Restructuring charges 9,746 1.2% — 0.0% Depreciation and amortization 40,283 4.8% 38,900 4.7%

Operating income 38,903 4.6% 68,659 8.3% Other expense, net (6,734) -0.8% (3,134) -0.3%

Income before income taxes 32,169 3.8% 65,525 8.0% Provision for income taxes 10,933 1.3% 23,933 2.9%

Net income $ 21,236 2.5% $ 41,592 5.1%

Net income per basic share $ 0.12 $ 0.23 Net income per diluted share $ 0.12 $ 0.23 Weighted average common shares outstanding—basic 177,228 181,048 Weighted average common shares outstanding—diluted 178,788 183,413 26WeeksEnded

July29,2017

%ofRevenue

July30,2016

%ofRevenue

Total net revenue $1,606,393 100.0% $1,572,010 100.0% Cost of sales, including certain buying, occupancy and warehousing expenses 1,035,922 64.5% 971,463 61.8%

Gross profit 570,471 35.5% 600,547 38.2% Selling, general and administrative expenses 398,696 24.8% 395,529 25.2% Restructuring charges 15,193 1.0% Depreciation and amortization 80,730 5.0% 77,683 4.9%

Operating income 75,852 4.7% 127,335 8.1% Other (expense) income, net (6,330) -0.4% 1,801 0.1%

Income before income taxes 69,522 4.3% 129,136 8.2% Provision for income taxes 23,050 1.4% 47,068 3.0%

Net income $ 46,472 2.9% $ 82,068 5.2%

Net income per basic share $ 0.26 $ 0.45 Net income per diluted share $ 0.26 $ 0.45 Weighted average common shares outstanding—basic 178,475 180,872 Weighted average common shares outstanding—diluted 180,473 182,922

AMERICANEAGLEOUTFITTERS,INC.GAAPTONON-GAAPRECONCILIATION(Dollars in thousands, except per share amounts)

(unaudited)

13WeeksEndedJuly29,2017

Grossprofit Operatingincome

Other(expense)income Netincome

Dilutedincomepercommon

share GAAPBasis $ 292,649 $ 38,903 $ (6,734) $ 21,236 $ 0.12% of Revenue   34.7%    4.6%    -0.8%    2.5%  Add: Restructuring Related Charges (1): 1,669 11,415 — 7,340 0.04 Add: Joint Business Venture Charges (2): — — 9,311 5,988 0.03

1,669 11,415 9,311 13,328 Non-GAAPBasis $ 294,318 $ 50,318 $ 2,577 $ 34,564 $ 0.19% of Revenue   34.9%    6.0%    0.3%    4.1% 

(1) - $11.4 million pre-tax restructuring related charges, consisting of:

• Inventory charges related to the restructuring of the United Kingdom, Hong Kong, and China ($1.7M), recorded as a reduction of Gross Profit

• Lease buyouts, store closure charges and severance and related charges ($9.7M), which includes charges for the United Kingdom, Hong Kong, andChina and corporate overhead reductions, recorded within Restructuring Charges.

(2) - $9.3 million pre-tax charges for the charges related to the planned exit of a joint business venture, recorded within Other (expense) income, net.

AMERICANEAGLEOUTFITTERS,INC.GAAPTONON-GAAPRECONCILIATION(Dollars in thousands, except per share amounts)

(unaudited)

26WeeksEndedJuly29,2017

Grossprofit Operatingincome

Other(expense)income Netincome

Dilutedincomepercommon

share GAAPBasis $ 570,471 $ 75,852 $ (6,330) $ 46,472 $ 0.26% of Revenue   35.5%    4.7%    -0.4%    2.9%  Add: Restructuring Related Charges (1): 1,669 16,862 — 10,801 0.06 Add: Joint Business Venture Charges (2): — — 9,311 5,964 0.03

1,669 16,862 9,311 16,765 Non-GAAPBasis $ 572,140 $ 92,714 $ 2,981 $ 63,237 $ 0.35% of Revenue   35.6%    5.8%    0.2%    3.9% 

(1) - $16.9 million pre-tax restructuring related charges, consisting of:

• Inventory charges related to the restructuring of the United Kingdom, Hong Kong, and China ($1.7M), recorded as a reduction of Gross Profit

• Lease buyouts, store closure charges and severance and related charges ($15.2M), which includes charges for the United Kingdom, Hong Kong, andChina and corporate overhead reductions, recorded within Restructuring Charges.

(2) - $9.3 million pre-tax charges for the charges related to the planned exit of a joint business venture, recorded within Other (expense) income, net.

AMERICANEAGLEOUTFITTERS,INC.COMPARABLESALESRESULTSBYBRAND

(unaudited)

SecondQuarterComparableSales

2017 2016 American Eagle Outfitters, Inc. (1) 2% 3% AE Total Brand (1) 0% 1% aerie Total Brand (1) 26% 24%

YTDSecondQuarterComparableSales

2017 2016 American Eagle Outfitters, Inc. (1) 2% 5% AE Total Brand (1) -1% 3% aerie Total Brand (1) 26% 28%

(1) AEO Direct is included in consolidated and total brand comparable sales.

AMERICANEAGLEOUTFITTERS,INC.STOREINFORMATION

(unaudited)

SecondQuarter

2017 YTDSecondQuarter

2017 Fiscal2017Guidance

Consolidated stores at beginning of period 1,053 1,050 1,050 Consolidated stores opened during the period

AE Brand 6 9 15-20 aerie 9 11 15 Tailgate Clothing Co. 0 0 1 Todd Snyder 0 1 1

Consolidated stores closed during the period AE Brand (8) (10) (20) - (30) aerie (3) (4) (5) - (10)

Totalconsolidatedstoresatendofperiod 1,057 1,057 1,042-1,062Stores remodeled and refurbished during the period 15 29 50 Total gross square footage at end of period 6,642,276 6,642,276 Not Provided International license locations at end of period (1) 195 195 227

(1) International license locations are not included in the consolidated store data or the total gross square footage calculation.

Exhibit99.2

AmericanEagleOutfitters,Inc.

SecondQuarter2017Earnings

ConferenceCallTranscriptAugust23,2017

Operator:Greetings, and welcome to the American Eagle Outfitters Second Quarter 2017 earnings call. At this time, all participants are in a listen-only mode. Aquestion-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Judy Meehan, Vice President of Investor Relations for American Eagle Outfitters. Thank you. Youmay begin.

JudyMeehan–AmericanEagleOutfittersInc.–VP,IR:Good morning, everyone. Joining me today for our prepared remarks are Jay Schottenstein, ChiefExecutive Officer; Chad Kessler, Global Brand President of the AE Brand; Jen Foyle, Global Brand President of Aerie; and Bob Madore, 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 thatrepresents the company’s current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. Thecompany undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwiseexcept 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.Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on the company’s website atwww.ae.com in the Investor Relations section. Here, you can also find the second quarter Investor Presentation.

And now, I’d like to turn the call over to Jay.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:Good morning, and thank you for joining us today. I’m pleased with our progress this quarter andthat we delivered sales and earnings above our guidance. This marked our 10th consecutive quarter of positive comparable sales growth. In the currentenvironment, this is an accomplishment our team can be very proud of. The quarter was highlighted by the top line growth, although margins were pressured byincremental promotions.

As we move forward, we’re highly focused on opportunities to engage our customers, drive stronger demand, and improve profit flow through. Our e-commercebusiness was a positive standout once again, as we registered our 10th quarter in a row of double-digit sales growth. We saw strong online traffic at both brands.Consistent with our vision of delivering the best online shopping experience, our Web business now represents 23% of total revenue.

On the brand advertising front, we have prioritized digital marketing, which has been highly effective at attracting new customers. In a few weeks, we will launch anew rewards program. In a minute, Bob will review some of the work on our real estate portfolio, but let me reiterate that our store base is strong and highlyprofitable. Our stores represent a critical brand and customer touch point, and yet we are continually reviewing our portfolio, looking to optimize the fleet. Thefocus is on finding the right balance between stores and digital on a market-by-market basis.

Although we are operating in an environment of intense competition, I can say with confidence that we have two of the best specialty apparel brands in America.Our brands are uniquely positioned with broad consumer appeal, supported by omnichannel capabilities and infrastructure that leads the market. Our merchandiseand design teams continually challenge themselves on product and fabric innovation to ensure that we are raising the bar to offer our customer the best fashion,quality and value.

In the American Eagle brand, by leveraging our strength such as our signature jeans, we see on top opportunity not only in North America but globally. The Aeriebrand is emerging as one of the most exciting new concepts with the customers incredibly passionate about what Aerie stands for. We will continue to feel themomentum and look forward to realizing Aerie as a billion-dollar brand over the next few years.

In closing, I’d like to thank the amazing team of associates across AEO. Our focus is operating for position of strength and the team is highly capable and focused.I view the current environment as an opportunity where we will continue to capture market share and execute our growth strategy.

Thank you. Now I’d like to turn it over to Chad.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Thanks, Jay. Good morning, everyone. In the second quarter, we madeprogress in a number of areas as we continued to evolve the AE Brand. We saw a strong demand across all of our bottoms categories. AE Jeans performedextremely well where we saw record sales and margins again this quarter. Overall, American Eagle Brand comps were flat, which is an improvement from the firstquarter trend.

Following a slower start to the quarter, we saw demand strengthen during June and July with more seasonal weather and a positive response to updated collectionsand promotional events. As expected, the digital business had very strong growth fueled by higher traffic and strong conversion.

Women’s apparel posted a positive mid-single digit comp with strength across most categories. Our team has done a remarkable job getting inspiration from ourcustomers, ensuring we have the right fashion, updated fits, washes and novelty retails within a well-curated collection. Following several quarters of weakperformance, men’s apparel showed improvement. We saw record performance in men’s bottoms and a good turnaround in tops. The work the team has done toevolve this business is beginning to pay off and we feel good about our prospects for continued progress.

Now, as we look ahead, we are excited about our market position and further opportunities for growth. American Eagle is clearly the go-to destination for jeans. Infact, across all demographics, we are the number two denim retailer in America. And across jeans brands, we are in second place and growing. Our strength in jeanshas been a major factor in our success to-date, and we will continue to fuel our success going forward.

To be successful in this transforming environment, I believe brands must be famous for something. Our goal is for the AE Brand to be synonymous with jeans andto be the number one jeans brand. Period. We offer the best innovation, the broadest assortment, the best fits, quality and value. Although we are well-positionedtoday, we see significant opportunity for additional growth. For example, fewer than 40% of our transactions during the back-to-school time period currentlyincluded jeans. We see this as meaningful upside.

In a few weeks, we will be launching our revamped loyalty program immediately converting over 15 million current members and ramping up our efforts to attractnew customers with a significantly upgraded overall experience. The program will be fully digital with complete integration across shopping channels and willbuild more levels of rewards including around AE Jeans.

As we enter the fall season, I’m very optimistic. Although it’s still early, we have seen improving trends so far this back-to-school season. And I believe we arewell-positioned this year for a better second half. We have improved product and strong marketing support with exciting events, plans to engage our customersthroughout the fall and holiday season. Additionally, we will continue to enhance the customer experience both online as well as in stores, where we are testingnew store prototypes this fall. Thanks to my teams for their hard work.

Now I’ll turn the call over to Jen.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:Thanks, Chad. Good morning, everyone. I’m very proud to report that Aeriehad achieved double-digit sales growth for 14 consecutive quarters.

This quarter, we achieved a 26 comparable sales increase building on a 24% increase last year. I’m absolutely thrilled with the team’s execution andaccomplishments. Our customers’ passion and support for Aerie and Aerie REAL validates our strong belief that we are uniquely positioned in the market andwell-positioned for a sustained growth.

In the second quarter, we saw strength across most product categories. It was especially gratifying that the new areas of expansion such as Slim apparel includingChill. Play. Move. exceeded our expectations. We’re pleased to see so much enthusiasm around our emerging new categories. The teams did a great job identifyingnew trends and differentiating our collections with updated styles, silhouettes and fabric innovation.

Our categories extensions, our natural product adjacencies that complete the Aerie lifestyle. For example, our soft net tops, leggings and fleece fit perfectly withinthe brands, and yet we continue to focus on intimates at the core of our business. In fact, next week, we’re excited to launch a new collection, REAL Me designedwith absolute comfort and movement in mind.

We saw impressive growth continue online, where we offer our customers a unique engaging and convenient shopping experience. Combined with our sister brand,AE, our customers have complete outfitting’s right at their fingertips. Currently, nearly 40% of our sales are being realized through our digital channel. As weexpand our footprint in markets with new brick-and-mortar stores, we’re gaining new customers and have seen the online penetration rise dramatically in thosemarkets.

Customer acquisition is strong, and we saw double-digit increase in our customer database. Our marketing team continues to do a great job creating a unique brandexperience and inspiring our customers every day. Our Aerie customers are truly impassioned by Aerie REAL and the strong message of body positivity, which isat the center of everything we do. As we continue to grow, we are building and elevating our best talent and fueling our overall capabilities. We are bringing moreand more agility and speed to our process.

Looking forward, I’m excited about how we position for the remainder of this year and we are very excited about the long-term growth and the future of Aerie.Thanks to my team, again, for their many contributions to their success.

And now I’m going to turn the call over to Bob.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Thanks, Jen; and good morning, everyone. The team managed the business wellthrough a difficult spring season, although we’re not satisfied to report earnings below last year. Promotions were up, which increased – put increased pressure onmargins as we faced a slower start and less favorable weather conditions early in the season, yet sales trends improved from the first quarter with healthier salesmetrics, including positive traffic, transactions, and a higher average unit retail price. We ended the second quarter in a better inventory position with clearanceunits down to last year and we ended the period in a strong financial condition.

Now looking more closely at the details of the quarter. Total revenue increased 3% to $845 million from $823 million last year. Comparable sales were up 2% forthe period, following a 3% increase last year. Additional sales information can be found on page 9 of the Investor Presentation.

This quarter by brand, American Eagle comps were flat and Aerie comps increased 26%. We saw a mid-single-digit increase in the average unit retail price due toproduct mix. The average dollar sale was down in the low-single-digits due to lower units per transaction. Online traffic was very strong. And while store trafficwas negative, we saw improving trends throughout the spring season in addition to outpacing mall traffic in the second quarter. On a consolidated basis, traffic andtransactions increased driving the 2% comp growth.

Adjusted gross profit decreased 4% to $294 million from $307 million last year. Gross margin rate declined 240 basis points to 34.9% of revenue. The reduction inmargin was primarily due to increased promotional activity.

Buying, occupancy and warehousing costs de-leveraged 30 basis points. SG&A dollars rose 2% to $204 million compared to $200 million last year. Driven bystrong sales, we leveraged SG&A expense by 20 basis points to a rate of 24.1% of revenue.

We invested in advertising, primarily digital, which was partially offset by a lower compensation expense. Depreciation and amortization increased $1 million to$40 million and deleveraged 10 basis points to 4.8% as a rate of revenue. Adjusted operating income of $50 million compared to $69 million last year, and theoperating margin declined 230 basis points, 6% as a rate of revenue.

The effective tax rate decreased to 34.7% compared to 36.5% last year due to overall mix of earnings in jurisdictions with various tax rates. Adjusted EPS of $0.19decreased 17% from $0.23 last year.

In the second quarter, we incurred restructuring-related charges totaling $21 million or approximately $0.07 per share. This consisted of restructuring chargescorresponding to our initiative to close or convert company-owned and operating stores in the United Kingdom, Hong Kong and China to licensed partnerships.Additionally, the company incurred charges related to the planned exit of a joint business venture.

Now regarding inventory, which can be found on page 10 of the Investor Presentation. We ended the quarter with inventory at cost of $433 million, up 3% fromlast year, which was better than we expected. Ending inventory units were flat to last year, while the average unit cost was up 2%, reflecting continued investmentsin bottoms and Aerie Apparel. Currently, we expect third quarter ending inventory to be up in the mid-single-digits.

Capital expenditures totaled $46 million in the second quarter, and we continue to expect CapEx to be in the range of $160 million to $170 million for the year.Roughly half of the spend relates to store projects and the balance to support the digital business, omnichannel tools and general corporate maintenance.

We ended the quarter with total cash of $193 million, compared to $248 million last year. The lower cash balance is a result of share buybacks in the first quarter,which totaled $88 million. Additionally, over the past 12 months, we returned $90 million in dividends and invested $187 million in capital expenditures. Thedetail of our store openings and closings are on page 13 through 15 of the Investor Presentation. We are continually working to maximize our omnichannelbusiness.

As I emphasized last quarter, we’re evaluating the fleet for closures and market consolidation on an ongoing basis. Additionally, we’re making good progress onlease negotiations, maintaining lease flexibility and successfully securing lower rents. Over the past two years, we have renegotiated or negotiated over 350 leaserenewals and secured an average of 8% reduction in cash rents. Currently, nearly half or approximately 530 leases are set to expire over the course of the next threeyears, with 215 expiring or coming up for decision this year.

As we continue to build flexibility into our portfolio, it’s notable that our stores are highly profitable and powerful vehicles for customer acquisition andengagement. Our very best customers are multichannel customers engaging with our brands online and in stores. As an example, roughly 80% of the online returnscome back to stores, where we successfully convert over 40%. In addition, 20% of those transactions are up sales. We see opportunity to move these metrics evenhigher.

Now looking ahead to the third quarter. We expect third quarter earnings per share of $0.36 to $0.38, which is based on comparable sales of flat to low-single-digitincrease. This guidance assumes a lower merchandise margin due to increased promotions and a low-single-digit increase in SG&A dollars compared to last year.This compares to earnings per share of $0.41 last year and excludes potential impairment or restructuring charges.

We remain focused on driving quality sales, improving our profit flow-through as well as driving our strategic initiatives forward. We believe the current retaillandscape offers opportunity to gain market share and leverage the strength of our brands and product offerings.

Thank you. And now we will take questions.

Operator:Thank you. [Operator Instructions] Our first question comes from line of Randy Konik with Jefferies. Please proceed with your question.

RandalJ.Konik–JefferiesAnalyst:Yeah. Thanks a lot. I just want to further expand upon, I guess, Aerie and then I will have a question about gross margin.Just on Aerie, obviously, great numbers, they’re accelerating, give us some perspective on how big you think those additional new younger categories in swim andapparel can be additive to the business. Give us some update on store growth goals and how you’re thinking about positioning those stores relative to the AmericanEagle parent.

And then, just on database management around Aerie, can you give us some perspective on how you’re trying to look at females you have in the American Eagledatabase and how you can try to convert them to an additional Aerie consumer?

And then lastly, just on gross margin, what’s the opportunity for merchandise margin improvement in the back half? Thanks.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:Okay. There’s a lot of questions, but I’m going to do my best, Randy. Okay.First and foremost, these new categories are only just emerging for us. The center of our business is still in intimates and represents over 50% of our business at thisstage. But knowing that we have these other adjacency businesses, we’re pretty excited about them. And what we love about them is that there’s trends that arehappening out there, i.e., fleece, and we really were able to get on that trend early and accelerate that trend. And it really offsets a little bit of softness in bras. Butwe’re still loving what we’re seeing in bras. And we have innovation there that we’re going to continue to use that to drive the bra business and get more customersin our product.

Going to that, I think you asked about the database. There’s still a huge runway of getting the AE girls into our brand. Very similar to the stats that Chad mentionedin getting more customers in denim, it’s a similar story just with getting that – the women’s customer in AE into our box. So huge runway there. Margins, we’veonly just begun. We’re not even fully a $500 million business. So we’re going to continue to leverage our units and get better costing as we expand into newmarkets. And lastly, I think I’m doing a pretty good job, by the way.

RandalJ.Konik–JefferiesAnalyst:Very good.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:And lastly, we have – we’re only really concentrated on the East Coast. Sothere’s a definite correlation on when we open up a four-wall store, on what happens to the direct business. It literally ignites and opens up that market for us. Sowe continue to look at market opportunities that we’re not currently in, picking the right locations so that we can drive the direct business and really looking at itfrom a market perspective. So that’s how we’re approaching growth. The number that we’re getting to – we want to get towards is about 300 stores in total, and thatincludes side-by-side. And we prefer the side-by-side opportunity.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficerJust to elaborate a little bit on the gross margin question, Randy, as it relates to totalcompany, we see opportunity for merch margin to continue to improve. The trend we’ve seen from Q1 into Q2 is that the decrease to the prior year is actuallydecreasing or improving. We’re seeing improved IMUs as we move through Q3 and Q4. And we’re actually up against last year, an extremely promotional highmarkdown period. If you remember, in Q3 through Q4, you had Aero going through store liquidations and closures in addition to just huge promotionalenvironment. We see that trend improving versus last year, too.

And just on Jen’s point as far as store and market focus, Jen and the team are very focused on expanding within markets, really leveraging the existing presence wehave with one-off, two-off stores and digital there. I think I’d pointed out the statistic last quarter, where 70% of Aerie’s digital revenues came from the marketswhere they had a brick-and-mortar presence. So just to exemplify Jen’s point where we have a brick-and-mortar presence, digital pops and shows up in a big way.

Operator:Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.

MatthewBoss–JPMorganAnalyst:Thanks. So as we break down performance by category, women’s apparel was up mid-singles, but overall, women’s postedits first flattish comp in several quarters. What do you see as the biggest areas of opportunity by category in the back half? And then, just on cadence, if you couldspeak to trends you saw as the quarter progressed and maybe any comments on back-to-school so far.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah, so our women’s businesses is really healthy. In total women’s,we were up mid-single-digits. And we had record-breaking bottoms business and the tops business continued to perform really well. And I think that’s importantbecause I think we can show, we’re showing clearly in women’s over the last few quarters that we can continue to grow the bottoms business at record rates andsell tops at the same time.

We had some softness in women’s accessories. Some, I think, we did to ourselves, and some I think there was just some softness in trend in women’s accessoriesand similarly dresses were softer than they had been the year prior. But the total women’s apparel business both tops and bottoms is very healthy. So feeling goodabout that.

As back-to-school kicks in, as I said in my comments, it’s very early days. We’re a few weeks into the quarter, but it feels like the trends are improving.Back-to-school is clearly a big bottoms time period. And we’re seeing a lot of positive response to our jeans and pants assortments broadly across men’s andwomen’s. I think we really – the team did a great job nailing what the customer’s going to be looking for. And that just helps to fuel the total business. So I’moptimistic. And I think that those trends are going to carry through fall.

Bob mentioned it, but you’ve got to remember last fall, we were up against Aeropostale closing, which really impacted Q3. And the men’s business – the slowdownin men’s really started last fall. So we ended up being more promotional than we wanted to be. And I think with the trends we’re seeing coming out of June andJuly and into the early days of August, I’m definitely optimistic that we can roll over some of those promotions and further close the gap to gross margin.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:And, Matt, I’d just add one last thing to Chad’s point. Our comp guidance that wegave for the quarter is in line with the performance we’ve seen quarter-to-date. Just to give you a little more specifics on that.

Operator:Operator: Thank you. Our next question comes from the line of Brian Tunick with RBC Capital Markets. Please proceed with your question.

BrianTunick–RBCCapitalMarketsLLCAnalyst:Thanks, and good morning. Was curious about the inventory growth. I think you’re guiding tomid-single-digits at the end of the third quarter, guys. Is that timing or is that your viewpoint of Q4 opportunities? And then, if you could talk maybe about themen’s tops business, sounds like some encouraging things are happening there. When should we expect to see the brunt of the new product flows and the timing ofthe deliveries on the business? Is it now? Or is it more opportunity as we head into the fourth quarter? Thanks very much.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Yes. I will answer the inventory question. So inventory was better than we expectedin the quarter, flat units, up 3%. We’re guiding to be up about 4% in Q4, driven by continued investment in bottoms, as Jen’s business, Aerie, continues to takeadvantage of additional lifestyle categories that are definitely in line with their target customer and resonate with that consumer.

If you break down Q3 ending inventory, just to give you some insights, AE Brand inventory is actually down 2% versus last year, and on a unit basis down 8%.Most of the increase, almost all the increase in inventory is all in Aerie. Aerie had a 26% comp in the quarter. And as Jen continues to expand in new markets withbrick-and-mortar, as I mentioned, we’re anticipating digital sales to come along with that. So Aerie’s inventory growth is very much in line with their sales growth.And as a matter fact, I would argue that AE’s inventory may be a little light relative to their overall business and how we’re planning it.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:In terms of men’s, we are starting to see some of the total apparelimprovements taking place in the business right now. I think it’s important to remember that we kept the men’s customer. We didn’t lose the men’s customer. Ourbottoms business continued to grow throughout some of the challenging periods we were having in tops. And we have new leadership in both design andmerchandising that started at the beginning of this year. And they’re going to – some of their efforts have already started to pay off in terms of really being focusedon the customer and meeting the customers’ needs.

I think you’ll see really the impact of their efforts as we get into the holiday season and through on into spring. But we’re already seeing improvement with some ofthe work in the product architecture they’ve done. We’re seeing some pretty broad improvement across particularly the knits categories, where we can react morequickly to their new strategies. And for me, I think you can see that, just look at that picture in the window of Joey that red hoodie. He looks great. And I think aswe go into September, we go up against the softer men’s business, I think we’re going to see some pretty nice results.

Operator:Thank you. Our next question comes from line of Tiffany Kanaga with Deutsche Bank. Please proceed with your question.

TiffanyKanaga–DeutscheBankSecuritiesAnalyst:Hi. Thanks for taking my questions. We’ve noticed that the price points at the high-end of your women’sdenim have gone significantly higher lately with $90 and $80 pairs online. Would you talk about how much of the mid-single-digit increase in AUR was driven bydenim in the quarter? What kind of reception you’re seeing, the higher price points in the category, and where you see the average and max price points headed inthe upcoming periods?

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah. I think it’s great that you’ve seen our new – that’s called theDream Jean. It is the most spectacular jean we’ve ever produced. So thank you for letting me talk about it. The fabric is amazing in this jean. And we call it theDream Jean because you have to pinch yourself – or you don’t have to pinch yourself because it’s real. And you’ve never looked better in a pair of jeans. Sohopefully, everyone will go and buy a pair. We continue to look for opportunities to satisfy the customer with our jeans.

Our price points – in doing so, we’re committed – the brand has always been about offering value. And most of our jeans are between $39 and $59. We have a fewthat are higher than that. The Dream Jean is a new program that we’re trying out to see if we can reach even higher. But it’s important to realize that to thecustomer, we’re offering the same value in that Dream Jean that we offer in our $39 and $49 jeans. So really offer a premium product at our core price points, andthis will continue to – this is an unbelievable product for that price.

In terms of the AUR improvement, or AUR growth, a lot of that is driven out of the mix into bottoms. But we aren’t seeing – we’re seeing AUR growth in jeans,but that’s more probably sort of mid-single-digit growth in the AUR in jeans. But as we mix the business more into bottoms, that does impact the total AUR.

Operator:Thank you. Our next question comes from the line of Oliver Chen with Cowen and Company. Please proceed with your question.

OliverChen-Cowen&CompanyAnalyst:Hi. On the denim frontier, how are you feeling about the breadth versus depth of your assortment? And what do youthink is next in terms of keeping you separate from the pack? You’ve done a really good job with the stretch technology and the finishes and the distressed. Justcurious about how you broadly see the market moving.

And the other broad question is on the digital business, over time, like on a long-time horizon, what would you speak to as the major margin drivers and the marginopportunities in terms of different investments that may need to take place and also opportunities to leverage as the business gains more scale? Thank you.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Sure. Thanks, Oliver. I love talking about jeans. So we feel reallygood about our current assortment. As we’ve said, we continue to have record quarter after record quarter across the denim business. And as I said in the remarks,we’re number two as a denim brand and we’re number two as a denim retailer. And that just means we’re going to try harder. Our goal is clearly to be the numberone denim destination. And we do that really through offering a very broad democratic assortment, offering the best quality, the best fit and the best value. I feelgood about our range of fits and washes.

We could fill the whole store with what we offer in jeans. So we have the most important fits and washes in stores, and then we have a much broader assortmentavailable to the customer online. And as part of the new store experiences, we’re even looking at how can we bring a stronger denim presence and denimexperience into the stores. But we’re seeing a lot of excitement around new rises and new fits in women’s. That’s fueling a lot of growth.

And then in men’s, we’re seeing a lot of excitement around the slimmer legs. So that’s been really well received. That was a key strategy going intoback-to-school. And so far, that’s been quite successful. And then I think the other big thing that is fueling the growth right now is our wash innovation. So we’vegot a great team. We’ve got a great process of testing and learning. We have by far the best fit in the business, not just an individual fit, but the best fit across all ofour different silhouettes in the business. And we’ll continue to innovate fabric and offer the best quality and value. And I think that that’s going to be the wayforward.

And then, on top of all that, we’re really focusing the marketing and the brand positioning around jeans. As I said, there’s so much noise out there these days withomnichannel shopping and social media and just everything going on out there. And I think for a brand to win, you have to be really synonymous with something.And the goal is for American Eagle to be synonymous with jeans and jeans to be synonymous with American Eagle. And I don’t believe we’ve reached that yeteven though we have – even though we’re number two in the market, I see nothing but opportunity to continue to get more customers into our jeans and to grow thebusiness.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:Chad, the big opportunity is that only 50% of our customers buy our jeans.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Right.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:So we have another 50% to play with.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:And that was a huge growth contributor to the digital business this quarter in additionto new categories that really resonate like swim within Aerie. There was a significant amount of swim product sold online. Another contributor specifically todigital business margin opportunity are things such as digital exclusive product, where it’s the only place you can get, where you don’t have to be as promotional,which is a specific strategy of ours, too. So kind of drafting growth opportunities across the entire business within digital specifically like denim and denim growth,new category growth, but then also strategies that are specific to digital we feel will help improve the digital margin.

Operator:Thank you. Our next question comes from line of Simeon Siegel with Nomura Instinet. Please proceed with your question.

GeneVladimirov-NomuraSecuritiesInternationalAnalyst:Good morning, guys. This is Gene Vladimirov on for Simeon. Can you give a little bit of color onthe performance you’re seeing in the franchise stores? It looks like the store guide for franchise implies acceleration from last year. So just wondering what sort oftrends you’re seeing there? And then, maybe can you speak to the higher advertising expense in the quarter and how we should be thinking about for the back halfof the year?

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Sure. So, within the franchise businesses, we’re going to open approximately 50 newfranchise locations throughout the course of the year. I think year-to-date we’ve opened 22 new locations. Where we’re seeing significant growth within licensing,some store growth within existing markets of Israel, South Korea, Japan, et cetera, but really the Middle East is where we’re

seeing a major increase. Performance-wise, we’re seeing a slight improvement in our Japanese-managed business. The Middle East is really fueling the growth inthat business, and Israel continues to grow also. So the major markets or countries where we have a presence are contributing relatively well within the franchisebusiness.

And as we’ve pointed out, and relative to some of the restructuring activities that we’ve undertaken and recorded charges on, we closed all of our owned locationsin the UK this quarter. And we are actively looking to license the other markets where we have owned stores such as Hong Kong and China. And those areproceeding according to expectations.

So that’s really kind of an overview of the franchise business growth, where we’re seeing it, and the fact that we’re continuing to pursue, I’ll call it, the operatingmodel changes that we’ve talked about. We’re also pursuing new markets aggressively. I’ll give you a little more insight into those as we get further into thenegotiations, but we see further major market opportunities to grow the franchise business.

Operator:Thank you. Our next question comes from the line of John Morris with BMO Capital Markets. Please proceed with your question.

JohnDygertMorris–BMOCapitalMarketsAnalyst:Thanks. Congratulations on the improvement, guys, and the good start to back-to-school so far.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:Thank you.

JohnDygertMorris–BMOCapitalMarketsAnalyst:I think this – well, I guess, this would be for Bob and/or maybe a little bit of commentary from Chad onhis thoughts. We can see on the metrics, look pretty good at the store level. You’ve got improving AUR, comp transactions up, traffic up high single, that’s allconsolidated. So, some of that’s Aerie, but have to say there’s really nice metrics improvements at the Eagle division as well. Wondering if you feel like you couldpull back a little bit more on promos, and then one quick follow-up. What’s your thought about pulling back on promotional activity?

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah. John, we definitely are seeing, as we said, nice trend recently.And coming into the back half, as Bob mentioned earlier, we ended up being more promotional than we wanted to be last fall. I tend to believe a lot of times thatour competitors’ promotions don’t have that much of an impact on us, but the Aero closures definitely impacted us in Q3 as well as the general slowdown in men’sand having to take the full box more promotional to try to make up for that. So if we see the trends continuing that we’re seeing now, we should definitely be ableto get promotions more in line or hopefully even less than last year, which would help flow through to the gross margin.

JohnDygertMorris–BMOCapitalMarketsAnalyst:That’s super helpful. And then, comp traffic, this is sort of an extension here, I mean, comp traffic on aconsolidated basis high-single-digits, I think you mentioned store traffic was down.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah.

JohnDygertMorris–BMOCapitalMarketsAnalyst:So I’m inferring that e-comm was very, very strong. Is that a good harbinger here for fall? How much doyou want us to read into that?

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:I think we’re going to see that continue, that e-commerce really – a lotof the traffic growth coming there, but what’s important is mall traffic has definitely been a headwind over the past – over many quarters, but what’s changed in Q2that Bob mentioned is that we’re still seeing traffic down, but our traffic is better than mall traffic. And we’ve been sort of pacing with mall traffic. And it seemslike we’re starting to see a little separation between the AE Brand and overall mall traffic, which I think bodes well for the second half.

Operator:Thank you. Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

PaulLejuez–CitigroupAnalyst:Hey. Thanks, guys. Can you talk about the relationship between third quarter and fourth quarter net income? Historically, fourthquarter is a larger net income quarter for you guys. Last year that wasn’t the case. How do you look at that? Did something change last year that should change theway we think about 4Q versus 3Q? So I’m just wondering, not asking for guidance for fourth quarter, but just how to think about that from a big pictureperspective, and obviously, excluding the extra week this year. Thanks.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Yeah. With the extra week factored in this year in Q4, you should be thinking of Q3net income and Q4 net income performing at somewhat comparable levels on a dollar basis. If you look at the extra week in Q4, it’s worth about $45 million insales and $0.03 of EPS impact. But roughly, they track somewhat comparably from a net income perspective, Q3 and Q4.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:Well, and last year, you also had a fourth quarter that was very promotional.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Very promotional. Right.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:The competition was going crazy.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Yep.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:All the store closings, everybody was giving everything away.

Operator:Thank you. Our next question comes from line of Janet Kloppenburg with JJK Research. Please proceed with your question

JanetKloppenburg-JJKResearchAnalyst:Good morning, everyone. Congrats on the progress. I was wondering, Chad, if you could talk about the likelihoodthat the American Eagle Brand’s comps could turn positive in the back half driven by the higher AUR denim, or perhaps, continuing progress in the men’sbusiness. And I also wanted Jen to touch a little bit on the softness in bras you saw in the second quarter and maybe what that was related to. And I think you’relooking for improvement here in the third quarter.

And just lastly for Bob, I think you said that the third quarter guidance included in outlook for merch margins should be down in the third quarter. And I’m justwondering given the trends and the clearance levels being where they were, why we should expect that. I think Chad just said he wanted to be less promotional inthe quarter. Thanks.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah, Janet, I’m really optimistic about the back half. For the first twoquarters combined, AE was basically flat, and we had super cold temperatures for most of that entire time period that I think was definitely a headwind in thebusiness. As we come into June and July and early days of Q3, we are running ahead of last year and I think that we should be able to see that continue. We comeup against starting Q3 of this – as I said, the men’s business getting really soft, the Aero closures from last year.

If we continue to see the sort of separation between us and mall traffic and as the men’s business continues to improve, I’m definitely optimistic for our opportunityto post positive comps in the AE Brand. Now, of course, there’s things that could happen in terms of the environment and weather and whatnot. But I definitelythink we have an opportunity for positive comp in Q4.

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:Yeah. If I can add to what Chad is saying, Chad, it only takes one program, extra program to kickin that makes all the difference. And last year, we ran short on certain goods. And so our objective this year to make sure on the right program – programs that arestrong that we don’t run out early like we did last year.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:And, Janet, on your point about expectations of Q3 margin being down versus LY,that’s true. That is what I said. But what we’re seeing is that being down on a basis point percentage continually decreasing from Q1 where we were 270 basispoints down to Q2 where we were 240 basis points down to last year. And we expect Q3 and Q4 to continue an improved trend, but to be down versus last year,still. Why it’s down less is really driven by higher IMUs in addition to slightly lower markdowns based on some of the things that Chad referred to also.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:And, Janet, regarding bras, we did see a little softness in bras for sure, reallyfrom the push-up category. Our lightly lined category still has been working for us. And we continue to innovate around that category, Janet. Bralettes, we’redefinitely saturated out there in the marketplace. But the good thing there – and I’ve said this before – is bralettes continue to be in our top three departments andthere’ll still be demand for them, Janet.

I just think that there was a lot out there for the customer to choose from. So what we’re going to continue to do is innovate in that category. So she’s excited aboutwhat she sees quarter-over-quarter and innovate in our core category. So we’re pretty excited about this launch coming up. You’ll see it in stores next week. So Ithink the customer’s going to love it.

Operator:Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

DanaTelsey–TelseyAdvisoryGroupLLCAnalyst:Good morning, everyone. Can you talk a little bit about the financial impact of the loyalty program andhow you see that developing? And also any more clarification on the joint venture that’s being exited? Thank you.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:We see the loyalty program being hopefully a positive financialimpact through the quarter or through the season. We’ve got our existing loyalty program coming to an end, which has some – we’ll have some coupons out there.But then, as the new program starts, that’s just rolling rewards. So customers will start earning into rewards right off the bat as opposed to getting them quarterly.So we see that as possibly some upside in the back half, but it’s not something – we want to see how it plays out. So it’s not really contemplated in our forecast.

But the loyalty program, really, we have so many customers in the program and the current one is really outdated. This new one’s going to offer much betterrewards for our best customers. It’s flexible for us to update and change as we go. It’s going to be integrated with our credit program. And it really reinforces ourleadership in jeans and has special rewards around jeans. So as that kicks in, we do think it should pay off with some additional sales, but that’s not contemplated inwhat we said today.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Hi, Dana. To answer your question on the joint venture that we’re in the middle ofexiting, we tested a new retail concept that revolved around a nautical retail store and product line assortment. We tested it in approximately three stores, and theresults were not in line with our expectations. So what, I think, is one of the things, many things that we’re great at as an organization is we’re constantlyinnovating and trying new things. But when they don’t work, we have them fail fast, and not in a material way. So this kind of falls into that category. We testedsomething, didn’t live up to the expectations, and we’re moving on to bigger things.

Operator:Thank you. Our next question comes from the line of Pam Quintiliano with SunTrust. Please proceed with your question.

PamQuintiliano–SuntrustHumphreyInc.Analyst:Hey, congratulations on the quarter and thanks for taking my question. Just had for Jen, regarding theSoHo pop-up location. Can you talk about any learnings that you may be able to apply across the broader base? And then, just when we’re thinking about yourstore growth, obviously, it’s tough out there for a lot of other retailers. So given you’re one of the few that’s doing well, expanding your store base, are you gettingbetter real estate opportunities in the marketplace in terms of locations and/or terms? Thanks.

JenFoyle–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–Aerie:The SoHo pop-up is amazing, Pam. We are so excited about it and we lovehaving standalone shop that’s right next door to the headquarters. So we’re always in there, learning from the customers and listening to what they want, and whatthey’re responding to.

The team there is phenomenal and just that whole environment, it’s exciting. And I think it’s what you read today, right? Everyone wants an experience today,what’s going to get them off the couch to get into a store, and that’s certainly what we’re going for, and it’s working out phenomenally.

What we’re going to do from there is take some of those learnings and imply it into some of our new concept stores that we’re opening up. So we like certainaspects of it. We love some of the live walls, and what have you. And like I said, it’s just – it’s a template for what we’re going to do go forward.

That said, regarding opening stores, Pam, we’re in a really great position. We’re not oversaturated. So we can really pick and choose what markets we want to be inand what locations. Obviously, going into the best centers where there still is traffic. By the way, one point is that our traffic actually – we haven’t had a problemwith traffic in Aerie. They’re actually – we’re able to drive traffic. The marketing team’s doing a great job. But, again, we’re going to be very selective into whatmarkets we go into.

And as I mentioned in my opening comments, there is that correlation, and Bob supported nicely with his figures, that once we open a store in a new market, thedirect business really follows suit. So we’re going to pick and choose where we want to go strategically and that’s our strategy.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:Yeah. And from a total company real estate portfolio management perspective, let’ssay, a couple of things. I gave some stats over the number of leases that we renegotiated that came up for renewal over the course of the last three years, let’s say,all the way through the end of fiscal 2016 where that drove an 8% cash rent reduction, and it drove a 100-basis-point rate reduction on those – that population ofdeals.

What we’re seeing in recent history, and as part of our strategy, is we are able to do package deals with landlords for renegotiations, major developers where inrecent history over the last two real estate committee meetings and two big packages we looked at we were actually able to reduce our rent by 400 basis pointsacross those two deals that we recently did. So there’s clearly ability to renegotiate and drive lower rents...

JaySchottenstein–AmericanEagleOutfitters,Inc.–CEO:And still keep the flexibility in short-term leases.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:That’s exactly right. On top of that, we’ve maintained an average lease term of 3.7years off those deals that we renegotiated over the course of the last three years and most recently. On top of that, yeah, we are getting better locations because weare performing better. We are driving more traffic than other special retailers in the mall. It gives us an opportunity to potentially reposition the portfolio. So wherewe may be sitting on the 20-yard today – 20-yard line today in an AE store, if a 50-yard line location opens up that affords us the opportunity to put in an Aerie sideby side, we’re going to do it.

And we’re looking for opportunities like that. And that’s where you’re going to see a lot of the new store activity in the U.S. for AE. It’s really opportunities toeither reposition on better location or on 50-yard line or better, or open up an Aerie side by side. So listen, we see this market, it’s challenging. Don’t get me wrong.We’re not happy with the results below last year. But trends are improving. And it’s giving us the opportunity to make some changes in our business and our storeportfolio that I’m not sure we would have had an opportunity to before and hopefully continue to strengthen the brand and the business performance.

Operator:Thank you. Our next question comes from the line of Lindsay Drucker Mann with Goldman Sachs. Please proceed with your question.

LindsayDruckerMann–GoldmanSachs&CoAnalyst:Hi. Thanks so much. I just first wanted to clarify on maybe part of Matt Boss’ question, which is,Chad, you talked about AE women’s apparel comps up mid-singles, but I think the reported comp was flat. So is it just accessories that were the negative piece thatbrought the overall women’s comp to flat, or was there something else? And my second question is just on, I think, in your prepared remarks you talked about anew store prototype. Any more details on what you’re testing, how many you’re testing and what that’s about? Thanks so much.

ChadKessler–AmericanEagleOutfitters,Inc.–GlobalBrandPresident–AEBrand:Yeah. As I mentioned before, the drag on the total women’s businesswas accessories and then some of the dress business in there. But accessories offset some of the gains that we had in total women’s apparel. So those are really thetwo pieces. Honestly, the success in women’s is really broad across all the apparel categories, all the tops and bottoms apparel category.

Yeah, we’re working on some new store prototypes that we’re pretty excited about. Jen’s got this great pop-up on Spring Street. We’re working on a similar – notsimilar in execution, but a similar idea of flexible and some new customer experiences here in New York that we’ll talk about as that gets closer. We’re alsoworking on some new merchandising ideas and customer experiences in malls. So we’re testing a bunch of stuff. We hope to get these things open this fall and getsome learnings.

And then next year, 2018, based on how these work, hopefully, start opening some new store designs. So it’s exciting. I think we’ve got so much opportunity injeans. And today, as we said, fewer than half of the transactions included jean. And I don’t believe – beyond that, I don’t believe that our current store environmentreally speaks to our denim authority as much as it could.

And so part of what we want to do in these new store prototypes and new customer experiences is make sure that denim is really front and center and that the denimexperience is as strong as it can be. And as we’ve seen in the women’s tops areas and I think we’ll see this fall on men’s tops, with the leading bottoms business,we can get the customer into jeans and then get them to buy the tops that go along with it. So I’m really optimistic about that. It’s going to be great.

JudyMeehan–AmericanEagleOutfittersInc.–VP,IR:And, Melissa, we have time for one more question.

Operator:Thank you. Our final question today will come from the line of Anna Andreeva from Oppenheimer & Company. Please proceed with your question.

AnnaAndreeva-Oppenheimer&CompanyAnalyst:Great. Thanks. Good morning, and happy to have made it. Two quick questions. Follow-up on AUC,what’s driving the bigger tailwinds into the back half? And should we still expect AUC favorability for spring 2018? And then, secondly, just any initial thoughtson CapEx for next year. Should that number be coming down given potential for door closures? And just given the strong balance sheet, any updated thinking onbigger share buyback? Thanks.

BobMadore–AmericanEagleOutfitters,Inc.–ChiefFinancialOfficer:So, on the average unit cost question that you asked, Anna, really, again, driven byour investment in not only total bottoms business within American Eagle, but the expansion of certain apparel categories within Aerie, which is really what’sdriving that. On a like-by-like basis – like-by-like product basis, we’re actually seeing about a 3% AUC decrease. So it’s really category expansion and investmentin long bottoms and apparel within the Aerie business that’s driving that.

From a CapEx perspective and kind of thoughts around next year, we’re in the process of starting our budget process soon, so I don’t have a specific number foryou. I anticipate, though, that number to be comparable to this year’s number or quite possibly even a little higher.

As we test the new store prototypes within American Eagle, in particular, depending upon the response and our satisfaction with those concepts, we will be lookingto remodel a number of the stores in the store fleet. So I do anticipate an increase in remodel CapEx looking out to next year for sure. And we will continue toinvest in our digital business accordingly.

So the number could be comparable to this year or slightly above. We haven’t really nailed our budgets down at all at this point, but I wanted to give you a little bitof directional guidance. From a share buyback perspective, within this market in this sector is crazy. Every day I look at my computer screen and see what’s goingon not only across our stock in the PE that we’re living it in any given day, the volatility is unbelievable and how other retailers impact our share price is amazingto me.

Having said that, we’re always looking for opportunities to buy shares. We’re constantly – the one constant is we’ll always do stock buybacks to offset sharedilution, increase share count dilution for sure. That’s at a bit minimum. And we kind of – listen, you can’t time the market, you can’t try to play out to the bottom.We are always looking to return to shareholders through both dividends and share buybacks. We always maintain that flexibility, I guess, is what I’d say, but don’thave any specific plans that we can communicate at this point.

JudyMeehan–AmericanEagleOutfittersInc.–VP,IR:Okay. Melissa, that’s it.

Operator:Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.