April 22, 2020

Dear Fellow Stockholders,

As I write this letter, we are experiencing an unprecedented global health pandemic that has materially impacted our people, our businesses, and our communities. Due to health concerns related to COVID-19, we have temporarily closed our corporate offices and 1,000+ store locations in North America. We have consulted with medical professionals, and implemented new sanitization, cleaning, and health protocols for our distribution centers so that they can safely remain operational. Perhaps most importantly, we are working tirelessly to ensure that when we are able to return to our store and office locations, we will do so by putting PEOPLE first, with the health of our associates and customers as our top priority. I have been inspired by how the AEO community has come together during this difficult time in our history to diligently and passionately protect the welfare of our associates and our customers, while also effectively managing business continuity  to ensure we will have a bright future.

“I have been inspired by how the AEO community has come together…to diligently and passionately protect the welfare of our associates and our customers, while also effectively managing business continuity  to ensure we will have a bright future.”

While we could have never predicted the extreme circumstances we now find ourselves facing, the strategic initiatives that have guided us in recent years will allow us to emerge as a stronger company once this pandemic is behind us. We entered 2020 with a strong cash position and two of the most recognized and beloved brands in specialty retail, American Eagle and Aerie. Our investments in merchandise innovation, omni-channel capabilities, supply chain, and inventory rationalization are allowing us to be agile in a time of disruption, when the ability to quickly reduce or move inventory between locations is of paramount importance. Our culture of caring and optimism is allowing us to pull together, provide support to others, and find new ways to move forward in a time of uncertainty.

Looking back specifically at the past year, some Fiscal 2019 highlights include:

"Our culture of caring and optimism is allowing us to pull together, provide support to others, and find new ways to move forward in a time of uncertainty."

“We gained market share in both American Eagle and Aerie, and we experienced positive traffic to our stores, outperforming mall averages…our current priorities revolve around product improvements, reductions in choice counts, and inventory optimization”

Strong Merchandise Drives Sales Growth and Customer Gains: Our compelling merchandise strategies,  including apparel choices in Aerie and new sizes and fabrications in AE jeans, allowed us to deliver sales improvements in each quarter of the year, reaching a record of $4.3 billion in revenue, an increase of 7% over the prior year. In fact, we marked 20 consecutive quarters of comparable sales growth. We gained market share in both American Eagle and Aerie, and we experienced positive traffic to our stores, outperforming mall averages. While our bottom line results fell short of our expectations, our current priorities revolve around product improvements, reductions in choice counts, and inventory optimization to ensure we drive profits as well as sales going.

Aerie Continues Record Breaking Momentum and Becomes a Market Leader for Intimates and Feel-Good Apparel: Our emerging Aerie brand continued to demonstrate incredible momentum in Fiscal 2019, marking its place as one of the fastest growing and most exciting brands in specialty retail. Comparable sales  increased 20% and the brand has delivered 21 straight quarters of double-digit growth. Aerie also controlled promotions, resulting in improved flow-through of its solid top-line results. We see tremendous runway ahead for this brand,  as it continues to capture the love of customers through comfortable quality merchandise, positive messaging,  and empowering.

AE Jeans Outperform, While AE X Me Becomes a Platform for Individuality and Optimism: Another powerful growth vehicle for our company is our AE jeans business. In Fiscal 2019, we marked our 26th consecutive quarter of record sales for AE The category was strong across genders in each quarter of the year, demonstrating remarkable consistency. American Eagle brand dresses, skirts, fleece, sweatshirts,  and accessories also grew in Fiscal 2019 relative to last year. Even with softness in certain men’s and women’s tops categories, these strengths enabled American Eagle to deliver growth in comparable sales and record annual revenue in Fiscal 2019. The AE X ME marketing campaign has continued to resonate with our customers, allowing them to collaborate with us to showcase their individuality and youthful optimism, which we believe is more important than ever given the current environment.

"Investments we made in Fiscal 2019 to our digital channels and supply chain infrastructure are paying off today, as this channel continues to operate and build momentum..."

Inventory Rationalization Becomes a Priority as our Supply Chain Innovation Work Continues: Through rigorous hindsight immediately following the 2019 holiday season, we identified opportunities to narrow our product choices while improving our inventory processes and supply chain speed. We prioritized an inventory rationalization strategy that will enable us to have the right merchandise in the right locations, when and where  the customer wants it, all at a lower cost to the This bolsters our belief that we will not only navigate this current period of uncertainty, but also see improved performance when conditions normalize.

Focus on Omni-Channel Retail: AEO’s focus on omni-channel retail continued to deliver returns in Fiscal 2019, with positive sales, traffic, and transaction growth across channels. Digital revenue increased at a double-digit rate, led by mobile and app Customer growth was also strong across brands, as our retention and re-engagement rates improved through the year. Investments we made in Fiscal 2019 to our digital channels and supply chain infrastructure are paying off today, as this channel continues to operate and build momentum despite a difficult macro environment.

Strong Company Culture is a Differentiator: At AEO we care about each other, and we take care of our AEO family. This past year, we launched well-being programs for our associates, including providing resources  focused on the importance of mental and physical health, financial planning, and family and work life  We presented training on technology that enabled associates to work from home if they chose to do so. We also launched new communication tools so that we could contact our associates more frequently and through a  myriad of ways, including video messaging and a new rewards and recognition app. These efforts are clearly benefitting us today, as our teams face the necessity of integrating their professional and personal lives in ways we never envisioned. Through the AEO Foundation, we created a mechanism for associates to give back to their colleagues in need, through monetary donations or by dedicating time or needed supplies. We are now able to mobilize our helping arm of the AEO Foundation to give back to associates impacted by COVID-19 and provide personal protective equipment to our associates and communities in need.

We Care About our World: In addition to delivering strong business performance, at AEO we take our responsibility as a corporate citizen very seriously. Building a better world is consistent with our values and corporate culture. In Fiscal 2019, we made significant progress in the Environmental, Social and Governance (ESG) arena. We have been an industry leader in our sustainability efforts and during the year unveiled key environmental goals, which included carbon neutrality in our owned and operated facilities by 2030 and a 60% reduction in carbon emissions by 2040. We furthered inclusion and diversity initiatives, and committed to supporting causes that empower young people and make a REAL difference in our communities. In Fiscal 2019, AEO, our brands and our customers had a record year in charitable giving, donating over $6 million dollars to philanthropic causes. Now, since the pandemic began, we have been true to who we are and have continued to give back, including in-kind donations of product, meals and gift cards to shelters and health care providers, donations of protective equipment and supplies to first responders in our local communities, and direct financial support to charities to help those impacted by the pandemic.

“In addition to delivering strong business performance, at AEO we take our responsibility as a corporate citizen very seriously… our brands and our customers had a record year in charitable giving, donating over $6 million dollars to philanthropic causes.”

In summary, our purpose is to show the world there is REAL power in the optimism of youth. This strong north star, along with our core values—PEOPLE, PASSION, INNOVATION, INTEGRITY, and TEAMWORK—have served as the solid and steady foundations for all of our actions as we manage through the challenges of the COVID-19 pandemic. I am grateful for the resilience, creativity and talent of our teams. Because of our work in 2019 and prior years, and the amazing agility that our teams have shown in 2020, I have every confidence that when the crisis ends and our stores re-open, AEO Inc. will be ready to serve our associates, customers, and communities stronger than ever, with purpose and optimism toward the future.

Jay SchottensteinExecutive Chairman to the Board and Chief Executive Officer