1444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444m ,,,,,nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnhbp;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~166,184,108~~167,716,802 Common Shares were outstanding at ~~December 1, 2020.~~May 28, 2021.

This Quarterly Report on Form 10-Q contains “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on the views and beliefs of management, as well as assumptions and estimates made by management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “potential,” and similar expressions may identify forward-looking statements. Our forward-looking statements include, but are not limited to, statements about:

Our forward-looking statements surrounding the novel strain of coronavirus (COVID-19) include, but are not limited ~~to:~~

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:

October 31,

February 1,

November 2,

(In thousands, except per share amounts)

2020

2020

2019

(Unaudited)

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$
692,356

$
361,930

$
214,514

Short-term investments

-

55,000

50,000

Merchandise inventory

559,961

446,278

647,329

Accounts receivable, net

124,560

119,064

112,304

Prepaid expenses and other

130,909

65,658

54,427

Total current assets

1,507,786

1,047,930

1,078,574

Property and equipment, at cost, net of accumulated depreciation

650,397

735,120

764,350

Operating lease right-of-use assets

1,243,311

1,418,916

1,486,133

Intangible assets net, including goodwill

50,864

53,004

55,466

Non-current deferred income taxes

12,774

22,724

16,833

Other Assets

33,083

50,985

50,896

Total assets

$
3,498,215

$
3,328,679

$
3,452,252

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$
304,552

$
285,746

$
366,676

Current portion of operating lease liabilities

346,321

299,161

292,312

Accrued income and other taxes

15,503

9,514

18,421

Accrued compensation and payroll taxes

117,736

43,537

43,473

Dividends payable

22,843

—

—

Unredeemed gift cards and gift certificates

39,794

56,974

32,411

Other current liabilities and accrued expenses

47,587

56,824

56,859

Total current liabilities

894,336

751,756

810,152

Non-current liabilities:

Long-term debt, net

321,081

—

—

Non-current operating lease liabilities

1,196,755

1,301,735

1,353,819

Other non-current liabilities

17,846

27,335

27,896

Total non-current liabilities

1,535,682

1,329,070

1,381,715

Commitments and contingencies

—

—

—

Stockholders’ equity:

Preferred stock, $0.01 par value; 5,000 shares authorized; NaN
   issued and outstanding

—

—

—

Common stock, $0.01 par value; 600,000 shares authorized;
   249,566 shares issued; 166,129, 166,993 and 166,974 shares
   outstanding, respectively

2,496

2,496

2,496

Contributed capital

655,891

577,856

574,391

Accumulated other comprehensive loss

(44,673
)

(33,168
)

(35,861
)
Retained earnings

1,865,370

2,108,292

2,127,312

Treasury stock, 83,437, 82,573 and 82,592 shares, respectively

(1,410,887
)

(1,407,623
)

(1,407,953
)
Total stockholders’ equity

1,068,197

1,247,853

1,260,385

Total liabilities and stockholders’ equity

$
3,498,215

$
3,328,679

$
3,452,252

13 Weeks Ended

39 Weeks Ended

October 31,

November 2,

October 31,

November 2,

(In thousands, except per share amounts)

2020

2019

2020

2019

Total net revenue

1,031,617

1,066,412

2,466,819

2,993,581

Cost of sales, including certain buying, occupancy and
warehousing expenses

616,840

659,350

1,758,537

1,879,027

Gross profit

414,777

407,062

708,282

1,114,554

Selling, general and administrative expenses

273,297

258,973

685,206

742,764

Impairment, restructuring and COVID-19 related charges

6,955

-

177,186

4,272

Depreciation and amortization expense

38,974

44,987

120,818

134,648

Operating income (loss)

95,551

103,102

(274,928
)

232,870

Interest expense (income), net

7,924

(1,238
)

16,617

(4,797
)
Other income, net

(2,223
)

(1,339
)

(793
)

(5,952
)
Income (loss) before income taxes

89,850

105,679

(290,752
)

243,619

Provision (Benefit) for income taxes

31,742

24,918

(77,943
)

57,125

Net income (loss)

58,108

80,761

(212,809
)

186,494

Net income (loss) per basic share

$
0.35

$
0.48

$
(1.28
)

$
1.09

Net income (loss) per diluted share

$
0.32

$
0.48

$
(1.28
)

$
1.09

Weighted average common shares outstanding - basic

166,185

167,912

166,385

170,463

Weighted average common shares outstanding - diluted

184,397

168,693

166,385

171,697

13 Weeks Ended

39 Weeks Ended

October 31,

November 2,

October 31,

November 2,

(In thousands)

2020

2019

2020

2019

Net income (loss)

$
58,108

$
80,761

$
(212,809
)

$
186,494

Other comprehensive income (loss):

Foreign currency translation adjustments

3,318

769

(11,505
)

(1,029
)
Other comprehensive income (loss):

3,318

769

(11,505
)

(1,029
)
Comprehensive income (loss)

$
61,426

$
81,530

$
(224,314
)

$
185,465

	May 1,			January 30,			May 2,
(In thousands, except per share amounts)	2021			2021			2020
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	716,679		$	850,477		$	855,769
Short-term investments		75,000			—			29,956
Merchandise inventory		466,698			405,445			421,729
Accounts receivable, net		149,056			146,102			106,751
Prepaid expenses and other		88,347			120,619			144,733
Total current assets		1,495,780			1,522,643			1,558,938
Property and equipment, at cost, net of accumulated depreciation		627,967			623,808			667,258
Operating lease right-of-use assets		1,130,743			1,155,965			1,292,769
Intangible assets net, including goodwill		69,696			70,332			51,973
Non-current deferred income taxes		45,995			33,045			25,612
Other Assets		30,485			29,013			33,561
Total assets	$	3,400,666		$	3,434,806		$	3,630,111
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	231,932		$	255,912		$	177,124
Current portion of operating lease liabilities		297,561			328,624			328,366
Accrued compensation and payroll taxes		87,488			142,272			21,622
Other current liabilities and accrued expenses		56,498			55,343			61,451
Unredeemed gift cards and gift certificates		50,754			62,181			48,503
Accrued income and other taxes		20,250			14,150			2,405
Dividends payable		-			-			22,756
Total current liabilities		744,483			858,482			662,227
Non-current liabilities:
Non-current operating lease liabilities		1,126,165			1,148,742			1,303,296
Long-term debt, net		329,718			325,290			642,972
Other non-current liabilities		24,737			15,627			24,633
Total non-current liabilities		1,480,620			1,489,659			1,970,901
Commitments and contingencies		—			—			—
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; NaN issued and outstanding		—			—			—
Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 167,671, 166,335, and 165,500 shares outstanding, respectively		2,496			2,496			2,496
Contributed capital		648,434			663,718			646,350
Accumulated other comprehensive loss		(37,810	)		(40,748	)		(55,050	)
Retained earnings		1,951,496			1,868,613			1,826,413
Treasury stock, 81,895, 83,231, and 84,066 shares, respectively		(1,389,053	)		(1,407,414	)		(1,423,226	)
Total stockholders’ equity		1,175,563			1,086,665			996,983
Total liabilities and stockholders’ equity	$	3,400,666		$	3,434,806		$	3,630,111

13 Weeks Ended October 31, 2020 and November 2, 2019

(In thousands, except per share amounts)

Shares
Outstanding

Common
Stock

Contributed
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
(Loss)

Stockholders'
Equity

Balance at August 3, 2019

168,962

$
2,496

$
568,413

$
2,070,077

$
(1,375,779
)

$
(36,630
)

$
1,228,577

Stock awards

—

—

5,565

—

—

—

5,565

Repurchase of common stock as part of
   publicly announced programs

(2,000
)

—

—

—

(32,381
)

—

(32,381
)
Repurchase of common stock from employees

(3
)

—

—

—

(50
)

—

(50
)
Reissuance of treasury stock

15

—

(175
)

20

257

—

102

Net income

—

—

—

80,761

—

—

80,761

Other comprehensive income (loss)

—

—

—

—

—

769

769

Cash dividends declared and dividend
   equivalents ($0.1375 per share)

—

—

588

(23,546
)

—

—

(22,958
)
Balance at November 2, 2019

166,974

$
2,496

$
574,391

$
2,127,312

$
(1,407,953
)

$
(35,861
)

$
1,260,385

Balance at August 1, 2020

166,090

$
2,496

$
647,284

$
1,807,687

$
(1,411,576
)

$
(47,991
)

$
997,900

Stock awards

—

—

8,946

—

—

—

8,946

Repurchase of common stock from employees

(11
)

—

—

—

(142
)

—

(142
)
Reissuance of treasury stock

50

—

(536
)

(420
)

831

—

(125
)
Net income

—

—

—

58,108

—

—

58,108

Other comprehensive income (loss)

—

—

—

—

—

3,318

3,318

Current period adjustment to dividend
   declared ($0.375 per share)

—

—

197

(5
)

—

—

192

Balance at October 31, 2020

166,129

$
2,496

$
655,891

$
1,865,370

$
(1,410,887
)

$
(44,673
)

$
1,068,197

39 Weeks Ended October 31, 2020 and November 2, 2019

(In thousands, except per share amounts)

Shares
Outstanding

Common
Stock

Contributed
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
(Loss)

Stockholders'
Equity

Balance at February 2, 2019

172,436

$
2,496

$
574,929

$
2,054,654

$
(1,309,692
)

$
(34,832
)

$
1,287,555

Stock awards

—

—

19,731

—

—

—

19,731

Repurchase of common stock as part of
   publicly announced programs

(6,336
)

—

—

—

(112,381
)

—

(112,381
)
Repurchase of common stock from employees

(425
)

—

—

—

(7,980
)

—

(7,980
)
Adoption of ASC 842, net of tax

—

—

—

(44,435
)

-

—

(44,435
)
Reissuance of treasury stock

1,299

—

(21,847
)

1,999

22,100

—

2,252

Net income

—

—

—

186,494

—

186,494

Other comprehensive income (loss)

—

—

—

—

—

(1,029
)

(1,029
)
Cash dividends declared and dividend
   equivalents ($0.1375 per share)

—

—

1,578

(71,400
)

—

—

(69,822
)
Balance at November 2, 2019

166,974

$
2,496

$
574,391

$
2,127,312

$
(1,407,953
)

$
(35,861
)

$
1,260,385

Balance at February 1, 2020

166,993

$
2,496

$
577,856

$
2,108,292

$
(1,407,623
)

$
(33,168
)

$
1,247,853

Stock awards

—

—

24,300

—

—

—

24,300

Repurchase of common stock as part of
   publicly announced programs

(1,720
)

—

—

—

(20,000
)

—

(20,000
)
Repurchase of common stock from employees

(447
)

—

—

—

(5,357
)

—

(5,357
)
Convertible Notes- Equity portion, net of tax

—

—

68,330

—

—

—

68,330

Reissuance of treasury stock

1,303

—

(15,324
)

(7,270
)

22,093

—

(501
)
Net loss

—

—

—

(212,809
)

—

—

(212,809
)
Other comprehensive income (loss)

—

—

—

—

—

(11,505
)

(11,505
)
Cash dividends declared and dividend
   equivalents ($0.1375 per share)

—

—

729

(22,843
)

—

—

(22,114
)
Balance at October 31, 2020

166,129

$
2,496

$
655,891

$
1,865,370

$
(1,410,887
)

$
(44,673
)

$
1,068,197

	13 Weeks Ended
	May 1,			May 2,
(In thousands, except per share amounts)	2021			2020
Total net revenue	$	1,034,614		$	551,692
Cost of sales, including certain buying, occupancy and warehousing expenses		598,424			523,386
Gross profit		436,190			28,306
Selling, general and administrative expenses		264,492			188,197
Impairment and restructuring charges		—			155,619
Depreciation and amortization expense		38,271			42,730
Operating income (loss)		133,427			(358,240	)
Interest expense, net		8,506			146
Other (income) expense, net		(1,860	)		2,983
Income (loss) before income taxes		126,781			(361,369	)
Provision (benefit) for income taxes		31,318			(104,207	)
Net income (loss)		95,463			(257,162	)

Net income (loss) per basic share	$	0.57		$	(1.54	)
Net income (loss) per diluted share	$	0.46		$	(1.54	)



Weighted average common shares outstanding - basic		167,257			166,781
Weighted average common shares outstanding - diluted		206,562			166,781

(In thousands, except per share amounts)	Shares Outstanding			Common Stock		Contributed Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive (Loss)			Stockholders' Equity
Balance at February 1, 2020		166,993		$	2,496	$	577,856		$	2,108,292		$	(1,407,623	)	$	(33,168	)	$	1,247,853
Stock awards		—			—		3,919			—			—			—			3,919
Repurchase of common stock as part of publicly announced programs		(1,720	)		—		—			—			(20,000	)		—			(20,000	)
Repurchase of common stock from employees		(115	)		—		—			—			(1,430	)		—			(1,430	)
Convertible Notes- Equity portion, net of tax		—			—		68,330			—			-			—			68,330
Reissuance of treasury stock		342			—		(4,165	)		(1,961	)		5,827			—			(299	)
Net loss		—			—		—			(257,162	)		—			—			(257,162	)
Other comprehensive (loss)		—			—		—			—			—			(21,882	)		(21,882	)
Cash dividends declared and dividend equivalents ($0.1375 per share)		—			—		410			(22,756	)		—			—			(22,346	)
Balance at May 2, 2020		165,500		$	2,496	$	646,350		$	1,826,413		$	(1,423,226	)	$	(55,050	)	$	996,983

Balance at January 30, 2021		166,335		$	2,496	$	663,718		$	1,868,613		$	(1,407,414	)	$	(40,748	)	$	1,086,665
Stock awards		—			—		12,553			—			—			—			12,553
Repurchase of common stock from employees		(396	)		—		—			—			(10,944	)		—			(10,944	)
Reissuance of treasury stock		1,732			—		(28,515	)		11,020			29,305			—			11,810
Net income		—			—		—			95,463			—			—			95,463
Other comprehensive income		—			—		—			—			—			2,938			2,938
Cash dividends declared and dividend equivalents ($0.1375 per share)		—			—		678			(23,600	)		—			—			(22,922	)
Balance at May 1, 2021		167,671		$	2,496	$	648,434		$	1,951,496		$	(1,389,053	)	$	(37,810	)	$	1,175,563

	39 Weeks Ended						13 Weeks Ended
	October 31,			November 2,			May 1,			May 2,
(In thousands)	2020			2019			2021			2020
Operating activities:
Net (loss) income	$	(212,809	)	$	186,494
Net income (loss)							$	95,463		$	(257,162	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		123,094			136,355			39,297			43,419
Share-based compensation		24,685			19,946			12,618			4,101
Deferred income taxes		12,013			12,254			(16,434	)		(791	)
Loss on impairment of assets		153,617			—			—			153,617
Changes in assets and liabilities:
Merchandise inventory		(114,907	)		(223,181	)		(59,770	)		18,134
Operating lease assets		189,630			195,678			77,296			106,627
Operating lease liabilities		(146,809	)		(203,077	)		(106,319	)		(20,597	)
Other assets		(86,501	)		(23,578	)		24,657			(87,575	)
Accounts payable		17,769			125,910			(25,056	)		(109,482	)
Accrued compensation and payroll taxes		74,374			(38,646	)		(54,810	)		(21,598	)
Accrued and other liabilities		(44,550	)		(9,955	)		13,485			(38,587	)
Net cash (used for) provided by operating activities		(10,394	)		178,200
Net cash provided by (used for) operating activities								427			(209,894	)
Investing activities:
Capital expenditures for property and equipment		(92,591	)		(149,866	)		(36,806	)		(33,910	)
Purchase of available-for-sale investments		(14,956	)		(70,000	)		(75,000	)		(14,956	)
Sale of available-for-sale investments		69,956			112,135			—			40,000
Other investing activities		(511	)		(1,361	)		(381	)		(191	)
Net cash used for investing activities		(38,102	)		(109,092	)
Net cash (used for) investing activities								(112,187	)		(9,057	)
Financing activities:
Repurchase of common stock as part of publicly announced programs		(20,000	)		(112,381	)		—			(20,000	)
Repurchase of common stock from employees		(5,357	)		(7,980	)		(10,944	)		(1,430	)
Proceeds from revolving line of credit and convertible notes		736,108			—
Principal payments on revolving line of credit		(330,000	)		—
Proceeds from convertible senior notes, net								—			406,108
Proceeds from revolving credit facilities								—			330,000
Net proceeds from stock options exercised		—			2,119			12,086			—
Cash dividends paid		—			(69,822	)		(22,922	)		—
Other financing activities		(889	)		(83	)		(345	)		(107	)
Net cash provided by (used for) financing activities		379,862			(188,147	)
Net cash (used for) provided by financing activities								(22,125	)		714,571
Effect of exchange rates changes on cash		(940	)		223			87			(1,781	)
Net change in cash and cash equivalents		330,426			(118,816	)		(133,798	)		493,839
Cash and cash equivalents - beginning of period		361,930			333,330			850,477			361,930
Cash and cash equivalents - end of period	$	692,356		$	214,514		$	716,679		$	855,769

The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc. (the “Company, “we”, and “our”) at ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ and for the 13 ~~and 39~~ week periods ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q. Therefore, these Consolidated Financial Statements should be read in conjunction with the Company’s ~~Fiscal 2019~~ Annual Report on Form 10-K for the fiscal year ended January 30, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March ~~12, 2020~~11, 2021 (the “Fiscal ~~2019~~2020 Form 10-K”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and those described in the footnotes that follow) considered necessary for a fair presentation have been included. The existence of subsequent events has been evaluated through the filing date of this Quarterly Report on Form 10-Q.

~~American Eagle Outfitters, Inc.,~~The Company is a ~~Delaware corporation,~~leading global specialty retailer, operates under the American Eagle^® (“~~AE”~~AE or American Eagle”) and Aerie^®(“Aerie”) brands The Aerie brand includes OFFLINE^TM by Aerie, a new sub-brand offering a complete collection of active wear and accessories built for REAL movement and REAL comfort launched in Fiscal 2020 (as defined below). We operate and license over 1,300 retail stores worldwide and are online at www.ae.com ~~brands.~~ and www.aerie.com in the U.S. and internationally.

We also operate ~~Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and~~ Todd Snyder New York, a premium menswear brand, and Unsubscribed (a new brand with a focus on consciously-made, slow fashion launched in Fiscal 2020).

We offer a broad assortment of high quality, on-trend apparel, accessories, and personal care products at affordable prices for men and women under the AE brand, and intimates, apparel, active wear, and swim collections under the Aerie brand. We sell directly to consumers through our retail channel, which includes our stores and concession-based shop-within-shops. We operate stores in the U.S., Canada, Mexico, and Hong Kong. We also have license agreements with third parties to operate American Eagle and Aerie stores throughout Asia, Europe, India, Latin America, and the Middle East.

Founded in 1977, the Company is a leading multi-brand specialty retailer that operates more than 1,000 retail stores in the U.S. and internationally, online at www.ae.com and www.aerie.com, and www.toddsnyder.com (which e-commerce operations we refer to as “AEO Direct”) and more than 200 international store locations managed by third-party operators.

~~Our business is affected by the pattern of seasonality common to most retail apparel businesses.~~ Historically, our operations have been seasonal, with a large portion of total net revenue and operating income ~~occurs~~occurring in the third and fourth fiscal quarters, reflecting ~~the~~ increased demand during the back-to-school and year-end holiday selling seasons, respectively. ~~The~~Our quarterly results ~~for~~of operations also may fluctuate based upon such factors as the ~~current~~timing of certain holiday seasons, the number and ~~prior periods are not necessarily indicative~~timing of ~~future financial results.~~new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels, competitive factors, weather and general economic and political conditions. During Fiscal 2020, historic seasonal trends were impacted by consumer behavior due to the novel coronavirus global pandemic (“COVID-19”).

~~In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic by the World Health Organization.~~ ~~National, state and local governments have responded~~Impacts related to the COVID-19 pandemic in a variety of ways, including, but not limited to, by declaring states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing), requiring individuals to stay at home, and in most cases, ordering non-essential businesses to close or limit operations. ~~The Company’s business operations and financial performance~~have been significantly negative for the 13retail industry, our Company, our customers, and 39our associates. We have experienced significant disruptions to our business due to the COVID-19 pandemic and related suggested and mandated social distancing and shelter-in-place orders, which initially resulted in the temporary closure of all of our stores and furlough of our associates. During Fiscal 2021 and Fiscal 2020, while stores were impacted by negative mall traffic, we focused on our omni-channel capabilities. As of the 13 weeks ended ~~October 31, 2020 were materially impacted by COVID-19. These~~May 1, 2021, the vast majority of our stores had re-opened, although we continue to see residual impacts on foot traffic and in-store revenues.

The impacts of the COVID-19 pandemic on our business are discussed in further detail within these notes to the Consolidated Financial Statements and within Item 2 of this Quarterly Report on Form 10-Q, of which these notes form a part.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to address the COVID-19 pandemic. The income tax related impacts of the CARES Act are discussed within Note 10 to the Consolidated Financial Statements.

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. At ~~October 31, 2020, and in all periods presented,~~May 1, 2021, the Company operated in 12 reportable ~~segment.~~segments, American Eagle and Aerie.

Our fiscal year is a 52- or 53-week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal ~~2020”~~2021” refers to the 52-week period that will end on January 29, 2022. “Fiscal 2020” refers to the 52-week period ended January 30, 2021. “Fiscal 2019” refers to the 52-week period ended February 1, 2020. ~~“Fiscal 2018” refers to the 52-week period ended February 2, 2019.~~

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) ~~established Accounting Standards Codification (“ASC”) Topic 842,~~ ~~Leases~~ ~~(“ASC 842”) by issuing~~issued Accounting Standards Update (“~~ASU”) 2016-02. ASC 842 was subsequently amended by~~ ASU ~~2018-01,~~ ~~Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases; and ASU 2018-11,~~ ~~Targeted Improvements~~.

~~The standard establishes a right-of-use (“ROU”~~2016-13”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as financing or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted ASU 2016-02 and its subsequent amendments effective February 3, 2019. The Company elected this standard’s package of practical expedients, which permits the Company to maintain prior conclusions about lease identification, lease classification, and initial direct costs. The Company elected to use the go-forward practical expedient to not separate lease and non-lease components for all of our leases. The Company also elected to use the short-term lease recognition exemption for all leases that qualify.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income~~ ~~(“ASU 2018-02”).~~This guidance permits companies to reclassify the stranded tax effects of the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. The Company adopted ASU 2018-02 on February 3, 2019. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).~~ This ASU simplifies the accounting for goodwill impairments by eliminating the requirement to perform procedures to determine the fair value of the assets and liabilities of the reporting unit for the determination of the fair value of the goodwill and any impairment charge to be recognized. The Company adopted ASU 2017-04 on February 3, 2019. The adoption did not have an impact on the Company’s Consolidated Financial Statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ Financial Instruments–Credit Losses (Topic 326) (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. The Company adopted ASU 2016-13 on February 2, 2020. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB amended Accounting Standards Codification ("ASC") 740, Income Taxes (issued under ASU- 2019-12, Simplifying the Accounting for Income Taxes). This amendment removes certain exceptions to the general principles of ASC 740, and clarifies and amends the existing guidance to improve consistent application. AEO adopted the guidance effective January 31, 2021. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2020, the FASB issued ASU 2020-06, Debt ~~– Debt~~ with Conversion and Other Options(“ (“ASU 2020-06”), which simplifies accounting for convertible instruments. The new guidance eliminates two of the three models in ASC 470-20, Debt- Debt with Conversion and Other Options that require separating embedded conversion features from convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. The guidance is effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of ASU 2020-06 on its Consolidated Financial Statements, which may be material.

In accordance with ASC 830, Foreign Currency Matters, the Company translates assets and liabilities denominated in foreign currencies into United States dollars (“USD”) (the Company’s reporting currency) at the exchange rates prevailing at the balance sheet date. The Company translates revenues and expenses denominated in foreign currencies into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the consolidated results of operations, whereas related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income.

We are exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. ~~During the 13 weeks ended October 31, 2020, an~~An unrealized gain of ~~$3.3~~$2.9 million is included in accumulated other comprehensive income ~~which is~~for the period ended May 1, 2021, primarily related to the rise ofin the ~~US dollar~~USD to Mexican peso and ~~US dollar~~USD to Canadian dollar exchange rates. During the 39 weeks ended October 31, 2020, an unrealized loss of $11.5 million is included in accumulated other comprehensive income. This is primarily related to the decline in the US dollar to Mexican peso and US dollar to Canadian dollar exchange rates during the

13 ~~weeks ended May 2, 2020, partially offset by the strengthening of the US dollar during the 26 weeks ended October 31, 2020.~~

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

Short-term investments classified as available-for-sale include certificates of deposit and commercial paper with a maturity greater than three months, but less than one year.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents and short-term investments.

The Company maintains an allowance for doubtful accounts for estimated losses from the failure of certain of our customers to make required payments for products or services delivered. The Company estimates this allowance based on the age of the related receivable, knowledge of the financial condition of customers, review of historical and expected future receivables and reserve trends, and other pertinent information. If the financial condition of customers deteriorates or an unfavorable trend in receivable collections is experienced in the future, additional allowances may be required. Historically, the Company’s reserves have approximated actual experience.

Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when control of the merchandise has transferred to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected.

The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

~~The Company recognizes revenue pursuant to ASC 606,~~ ~~Revenue from Contracts with Customers~~ (“ASC 606”). Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and promotional price reductions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined using historical average return percentages.

Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption below.

The Company recognizes royalty revenue generated from its license or franchise agreements based on a percentage of merchandise sales by the licensee/franchisee. This revenue is recorded as a component of total net revenue when earned and collection is probable.

The Company defers a portion of the sales revenue attributed to loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606. Refer to the Customer Loyalty Program caption below for additional information.

~~The following table sets forth the approximate consolidated percentage of total net revenue attributable to each merchandise group for each of the periods indicated:~~

~~The following table disaggregates the Company’s total net revenue by geography for each of the periods indicated:~~

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively, “merchandise costs”) and buying, occupancy and warehousing costs.

Design costs are related to the Company's Design Center operations and include compensation, travel and entertainment, supplies and samples for our design teams, as well as rent and depreciation for our Design Center. These costs are included in cost of sales as the respective inventory is sold.

Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel and entertainment for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased.

Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales. Additionally, selling, general and administrative expenses do not include rent and utilities related to our stores, operating costs of our distribution centers, and shipping and handling costs related to our e-commerce operations, all of which are included in cost of sales.

Interest expense (income), net primarily consists of interest expense related to the Company’s Convertible Notes and borrowings under the Revolving Credit Facility, as well as interest income from cash, cash equivalents and short-term investments.

~~Other income (expense), net consists primarily of gains and losses resulting from foreign currency transactions.~~

Property and equipment is recorded on the basis of cost with depreciation computed utilizing the straight-line method over the asset’s estimated useful life. The useful lives of our major classes of assets are as follows:

As of ~~October 31, 2020,~~May 1, 2021, the weighted average remaining useful life of our assets was approximately ~~7.4~~7.1 years.

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company’s management evaluates the value of leasehold improvements, store fixtures, and operating lease ~~ROU~~right-of-use (“ROU”) assets associated with retail stores, which have been open for a period sufficient to reach ~~a Company-defined level of~~ maturity. The Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded separately as a component of operating income ~~(loss) within~~under impairment and restructuring ~~and COVID-19 related charges in the Consolidated Statements of Operations.~~

There were 0 long-lived asset impairment charges recorded during the 13 weeks ended October 31, 2020. During the 39 weeks ended October 31, 2020, the Company recorded impairment related to certain corporate and store property and equipment of $51.5 million. Refer to Note 12 to the Consolidated Financial Statements for additional information regarding the impairment of these assets.charges. ~~NaN long-lived asset impairment charges were recorded during the 13 and 39 weeks ended November 2, 2019.~~

When the Company closes, remodels, or relocates a store prior to the end of its lease term, the remaining net book value of the assets related to the store is recorded as a write-off of assets within depreciation and amortization expense. Refer

to Note 6 to the Consolidated Financial Statements for additional information regarding property and ~~equipment.~~equipment and to Note 13 to the Consolidated Financial Statements for additional information regarding impairment charges for the 13 weeks ended May 2, 2020.

The Company’s goodwill is primarily related to the acquisition of its importing operations, Canada business and Tailgate brand. In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least annually or more frequently if an ~~annual basis and last performed an annual~~ impairment ~~test as~~indicator exists, by comparing the estimated fair value of ~~February 1, 2020.~~each reporting unit to its carrying value. As a result of the ~~impact~~Company’s annual goodwill impairment test as of January 30, 2021, the ~~COVID-19 pandemic and the resulting significant decline in the Company’s results~~Company concluded that its goodwill was 0t impaired. NaN indicators of ~~operations~~impairment were present during the 13 weeks ended May 2, 2020, an interim indicator of potential goodwill impairment was present. As a result, the Company performed an interim impairment test as of May 2, 2020 and determined that the fair value of its goodwill continues to be in excess of its carrying value and therefore 0 impairment charge was recorded.1, 2021.

Definite-lived intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives. The Company’s definite-lived intangible assets, which consist primarily of trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates definite-lived intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows is less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. NaN definite-lived intangible asset impairment charges were recorded during the 13 ~~or 39~~ weeks ended ~~October 31, 2020~~May 1, 2021 and ~~November~~May 2, ~~2019.~~2020.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding intangible assets.

Revenue is not recorded on the issuance of gift cards. The value of a gift card is recorded as a current liability upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue.

The Company determines an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed. ~~The Company recorded approximately $1.6 million and $1.5 million of revenue related to gift card breakage during~~During the 13 weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019, respectively. During the 39 weeks ending October 31, 2020 and November 2, 2019,~~ the Company recorded ~~$4.9~~approximately $2.5 million and ~~$5.4~~$1.7 million, respectively, of revenue related to gift card breakage.

As part of certain lease agreements for retail stores, the Company receives construction allowances from lessors, which are generally comprised of cash amounts. The Company records a receivable and an adjustment to the operating lease ROU asset at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized as part of the single lease cost over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the lessor.

The Company uses a combination of insurance and self-insurance mechanisms for certain losses related to employee medical benefits and worker’s compensation. Costs for self-insurance claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Management believes that it has adequately reserved for its self-insurance liability, which is capped by stop loss contracts with insurance companies. However, any significant variation of future claims from historical trends could cause actual results to differ from the accrued liability.

The Company adopted ASC Topic 842, Leases (“ASC 842”), in Fiscal 2019. The standard establishes a ROU model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The Company leases all store premises, some of its office space, and certain information technology and office equipment. These leases are generally classified as operating leases.

Store leases generally provide for a combination of base rentals and contingent rent based on store sales. Additionally, most leases include lessor incentives such as construction allowances and rent holidays. The Company is typically responsible for tenant occupancy costs including maintenance costs, common area charges, real estate taxes, and certain other expenses.

Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s discretion and is not reasonably certain at lease commencement. When measuring operating lease ROU assets and operating lease liabilities, the Company only includes cash flows related to options to extend or terminate leases once those options are executed.

Some leases have variable payments. However, because they are not based on an index or rate, they are not included in the measurement of operating lease ROU assets and operating lease liabilities.

When determining the present value of future payments for an operating lease that does not have a readily determinable implicit rate, the Company uses its incremental borrowing rate as of the date of initial possession of the leased asset.

~~For leases that qualify for the short-term lease exemption, the Company does not record an operating lease liability or operating lease ROU asset.~~ Short-term lease payments are recognized on a straight-line basis over the lease term of 12 months or less.

NaN operating lease ROU asset impairment ~~charges were~~was recorded ~~during~~for the 13 weeks ended ~~October 31, 2020.~~May 1, 2021. During the 3913 weeks ended ~~October 31,~~May 2, 2020, the Company recorded impairment of operating lease ROU assets of $84.1 million. Refer to Note 1213 to the Consolidated Financial Statements for additional information regarding the impairment of these assets. ~~NaN operating lease ROU asset impairment charges were recorded during the 13 or 39 weeks ended November 2, 2019.~~

Deferred lease credits represent the unamortized portion of construction allowances received from lessors related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its lessor as part of the negotiated lease terms. The Company records a receivable and an adjustment to the operating lease ROU asset at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized as part of the single lease cost over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the lessor.

The FASB staff issued a Q&A document in April 2020 providing guidance on how to apply the lease modification guidance in ASC 842 to rent concessions arising from COVID-19, allowing companies to elect accounting for the concessions as if enforceable rights and obligations existed, regardless of whether they are explicitly stated in the lease contract. Per the FASB staff Q&A guidance, entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments, cash payments made to the lessee, reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

The Company offers a co-branded credit card and a private label credit card under the AE and Aerie brands. These credit cards are issued by a ~~third party~~third-party bank (the “Bank”) in accordance with a credit card agreement (the “Agreement”). The Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. We receive funding from the Bank based on the Agreement and card activity, which includes payments for new account activations and usage of the credit cards. We recognize revenue for this funding as we fulfill our performance obligations under the Agreement. This revenue is recorded in other revenue, which is a component of total net revenue in our Consolidated Statements of Operations.

For further information on the Company’s loyalty program, refer to the Customer Loyalty caption below.

In June of 2020, the Company launched a highly-digitized loyalty program called Real Rewards by American Eagle and Aerie™ (the “Program”). This Program features both shared and unique benefits for loyalty members and credit card holders. Under the Program, members accumulate points based on purchase activity and earn rewards by reaching certain point thresholds. Members earn rewards in the form of discount savings certificates. Prior to this launch in June 2020, under our previous program, AEO ~~Connected~~^TMConnected™, we also offered additional rewards for key items such as jeans and bras. Rewards earned are valid through the stated expiration date, which is 60 days from the issuance date of the reward. Rewards not redeemed during the 60-day redemption period are forfeited.

Points earned under the Program on purchases at American Eagle and Aerie are accounted for in accordance with ASC ~~606.~~606, Revenue from Contracts with Customers (“ASC 606”). The portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire, using the relative stand-alone selling price method. Additionally, reward points earned using the co-branded credit card on non-AE or Aerie purchases are accounted for in accordance with ASC 606. As the points are earned, a current liability is recorded for the estimated cost of the reward, and the impact of adjustments is recorded in revenue.

The Company defers a portion of the sales revenue attributed to the loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined using historical average return percentages.

The presentation on a gross basis consists of a separate right of return asset and liability. These amounts are recorded within (i) prepaid expenses and ~~other and~~ (ii) other current liabilities and accrued expenses, respectively, on the Consolidated Balance Sheets.

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws, and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance requires management to make estimates and assumptions. The Company believes that its estimates and assumptions are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances, or net ~~income.~~income (loss).

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.

The Company recognizes revenue pursuant to ASC 606. Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively, “merchandise costs”) and buying, occupancy and warehousing costs.

Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses, and travel and entertainment for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers, and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing, and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales. Additionally, selling, general and administrative expenses do not include rent and utilities related to our stores, operating costs of our distribution centers, and shipping and handling costs related to our e-commerce operations, all of which are included in cost of sales.

Interest expense, net primarily consists of interest expense related to the Company’s senior convertible notes (the “Notes”) and borrowings under the revolving credit facility, as well as interest income from cash, cash equivalents, and short-term investments.

Other (income) expense, net consists primarily of gains and losses resulting from foreign currency transactions.

~~In accordance with ASC 280,~~ ~~Segment Reporting~~ ~~(“ASC 280”),~~We have 2 reportable segments: American Eagle and Aerie. For additional information regarding the ~~Company has identified 2 operating segments (American Eagle Brand~~Company’s segment and ~~Aerie Brand) that reflect~~geographic information, refer to Note 12 to the ~~basis used internally to review performance and allocate resources. Both operating segments have been aggregated and are presented as 1 reportable segment, as permitted by ASC 280.~~Consolidated Financial Statements.

The following table summarizes the fair market values for the Company’s cash and short-term investments, which are recorded on the Consolidated Balance Sheets:

ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

The Company’s cash equivalents and short-term investments are Level 1 financial assets and are measured at fair value on a recurring basis, for all periods presented. Refer to Note 3 to the Consolidated Financial Statements for additional information regarding cash equivalents and short-term investments.

As of ~~October 31,~~May 1, 2021 and May 2, 2020, the Company ~~repaid the~~had $0 and $330 million, respectively, of outstanding borrowings ~~of $330 million~~ under its revolving credit facilities.

In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due in 2025.

The fair value of the ~~Company's convertible notes~~Notes is not required to be measured at fair value on a recurring basis. Upon issuance, the fair value of ~~these convertible notes~~the Notes was measured using ~~two approaches that consider market related conditions, including market benchmark rates and~~a using a secondary market quoted price, which considers market related conditions, and is therefore within Level 2 of the fair value hierarchy.

Refer to Note 8 to the Consolidated Financial Statements for additional information regarding long-term debt and other credit arrangements.

The Company’s non-financial assets, which include intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur and the Company is required to evaluate the non-financial asset for ~~potential~~ impairment, a resulting impairment would require that the non-financial asset be recorded at the estimated fair value.

Certain long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820. ~~There were 0 asset impairment charges recorded during~~During the 13 weeks ended ~~October 31, 2020. During the 39 weeks ended October 31,~~May 2, 2020, the Company recorded asset impairment charges of ~~$135.6~~$153.6 million. Included in this amount are retail store impairment charges of $109.6 million, ~~on the assets~~ of ~~272 retail stores and certain other corporate assets. Of the total,~~which $84.1 million ~~related~~relates to ~~the impairment of~~ operating lease ROU assets and ~~$51.5~~$25.5 million ~~related~~relates to store property and equipment (fixtures and equipment and leasehold improvements).This impairment was primarily driven by store closures due to the COVID-19 pandemic. We also recorded $26.0 million of impairment ~~of store and~~related charges to certain corporate property and ~~equipment.Additionally, we recorded impairment of~~equipment, as well as $18.0 million of impairment charges related to certain cost and equity method investments. The assets were adjusted to their fair valueand the loss on impairment was recorded within impairment ~~restructuring~~ and ~~COVID-19 related~~restructuring charges in the Consolidated Statements of Operations. The fair value of the impaired assets, after the recorded loss, iswas approximately $163.4 million. There was 0 long-lived asset impairment recorded for the 13 ~~or 39~~ weeks ended ~~November 2, 2019.~~May 1, 2021.

The fair value of the impaired assets was determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest and a real estate market participant discount rate for the ROU assets. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located.

The following is a reconciliation between basic and diluted weighted average shares outstanding:

*For the 3913 weeks ended ~~October 31,~~May 2, 2020, there were ~~1.4~~0.7 million potentially dilutive equity awards ~~and 7.8 million potentially dilutive shares from the Company’s convertible notes~~ that were excluded from ~~the~~ diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive. ~~For all other periods, anti-dilutive shares relate to stock options and unvested restricted stock.~~

The Company has the right to settle ~~its convertible notes~~the Notes in any combination of cash and shares of common stock. However, the Company intends to settle the original principal portion of the ~~notes~~Notes in cash and any conversion value above the principal in stock. Because of this repayment policy election, only the conversion spread portion of the amount owed is reflected as dilutive in our weighted average diluted shares outstanding. The Company uses the average of the daily closing prices of its common stock (NYSE: AEO) as reported on the New York Stock Exchange to calculate the conversion spread.~~These convertible notes~~ The Notes could have a potential dilutive effect in future periods.

Refer to Note 8 and 9 to the Consolidated Financial Statements for additional information regarding ~~our convertible notes~~the Notes and share-based compensation, respectively.

Our long-term debt consisted of the following at each of ~~October 31, 2020, February~~May 1, ~~2020,~~2021, January 30, 2021, and ~~November~~May 2, ~~2019:~~2020:

In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due in 2025 ~~(the “Notes”)~~ in a private placement to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933. The Notes have a stated interest rate of 3.75%, payable semi-annually. The Company may redeem the Notes, in whole or in part, at any time beginning April 2023. The Company used the net proceeds from the offering for general corporate purposes.

The Company does not have the right to redeem the Notes prior to April 17, 2023. On or after April 17, 2023 and prior to the 40^th40th scheduled trading day immediately preceding the maturity date, the Company may redeem all or any portion of the Notes, at its option, for cash, if the last reported sale price of AEO’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. Beginning January 2025, noteholders may convert their Notes for approximately ~~114.3~~115.7 shares of common stock per $1,000 principal amount of the Notes, equivalent to ~~an initial~~a conversion price of approximately ~~$8.75~~$8.65 per share.

The Company has the right to settle conversions in any combination of cash and shares of common stock. However, the Company intends to settle the original principal portion of the Notes in cash and any conversion value above the principal in stock. Because of this repayment policy, only the conversion spread portion of the amount owed is reflected as dilutive in earnings per share.

The effective interest rate for the Notes is 10.0% and wethe Company calculated the effective yield using a market approach. The remaining amortization period of the discount is ~~4.50 years.~~4.0 years as of May 1, 2021.

The following table discloses conversion amounts if the Notes were all converted as of the end of the period:

In January 2019, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”) for five-year, syndicated, asset-based revolving credit facilities (the “Credit Facilities”). The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400 million, subject to customary borrowing base limitations. The Credit Facilities expire on January 30, 2024.

All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by a first-priority security interest in certain working capital assets of the borrowers and guarantors, consisting primarily of cash, receivables, inventory, and certain other assets and have been further secured by first-priority mortgages on certain real property.

As of ~~October 31, 2020,~~ May 1, 2021,the Company was in compliance with the terms of the Credit Agreement and~~has~~ had $7.9 million outstanding in stand-by letters of credit.

~~The interest rate for borrowing~~NaN loans were outstanding under the Credit ~~Facilities was one month LIBOR, plus an adjusted spread based on leverage~~Agreement as ~~reflected in~~of May 1, 2021. As of May 2, 2020, the Company had $330.0 million of outstanding loans under the Credit Facilities. The weighted average interest rate for the 13 and 39 weeks ended October 31, 2020 was 0.34% and 1.79%. The total interest expense for the 13 and 39 weeks ended October 31, 2020 was $0.1 million and $2.5 million, respectively.Agreement.

The Company accounts for share-based compensation under the provisions of ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires ~~companies~~the Company to measure and recognize compensation expense for all share-based payments at fair value.

Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 was ~~$9.0~~$12.6 million ($~~5.7~~9.4 million, net of tax) and ~~$24.7~~$4.1 million ($~~17.9 million, net of tax), respectively, and for the 13 and 39 weeks ended November 2, 2019 was $5.6 million ($4.3 million, net of tax) and $19.9 million ($15.3~~2.9 million, net of tax), respectively.

The Company ~~grants both~~has granted time-based ~~and performance-based~~ stock options. Time-based stock option awards vest over the requisite service period of the award or to an employee’s eligible retirement eligible date, if earlier. A summary of the Company’s stock option activity for the 3913 weeks ended ~~October 31, 2020~~May 1, 2021 follows:

Weighted-
Average

Weighted-
Average
Remaining
Contractual

Aggregate

Options

Exercise Price

Term

Intrinsic Value

(In thousands)

(In years)

(In thousands)

Outstanding - February 1, 2020

2,584

$
18.18

Granted

1,705

$
10.30

Cancelled

(139
)

$
18.96

Outstanding - October 31, 2020

4,150

$
14.92

5.0

$
5,810

Vested and expected to vest - October 31, 2020

3,100

$
15.54

3.4

$
5,166

Exercisable - October 31, 2020 (1)

1,742

$
17.09

1.5

$
-

				Weighted- Average		Weighted- Average Remaining Contractual		Aggregate
	Options			Exercise Price		Term		Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Outstanding - January 30, 2021		3,940		$	14.87
Granted		449		$	32.58
Exercised (1)		(713	)	$	16.39
Outstanding - May 1, 2021		3,676		$	16.74		5.2	$	65,533
Vested and expected to vest - May 1, 2021		2,706		$	16.67		3.6	$	34,033
Exercisable - May 1, 2021 (2)		1,578		$	16.88		1.7	$	27,902

~~There was 0 cash received from the exercise of stock options for the 39 weeks ended October 31, 2020.~~ Cash received from the exercise of stock options was $~~2.1~~12.1 million for the 3913 weeks ended ~~November 2, 2019.~~May 1, 2021. The actual tax benefit realized from stock option exercises totaled ~~$0.1~~$2.4 million for the 3913 weeks ended ~~November~~May 1, 2021. There were 0 stock options exercised during the 13 weeks ended May 2, ~~2019.~~2020.

As of ~~October 31, 2020,~~May 1, 2021, there was ~~$6.4~~$9.8 million of unrecognized compensation expense for stock option awards that is expected to be recognized over a weighted average period of ~~2.0~~2.4 years.

The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Time-based restricted stock awards are comprised of time-based restricted stock units. These awards vest over three years. Time-based restricted stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

Performance-based restricted stock awards include performance-based restricted stock units. These awards cliff vest at the end of a three-year period based upon the Company’s achievement of pre-established goals throughout the term of the award. Performance-based restricted stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

The grant date fair value of ~~some~~time-based restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant. A Monte-Carlo simulation was utilized for ~~the remaining~~performance-based restricted stock awards.

A summary of the Company’s restricted stock activity is presented in the following tables:

As of ~~October 31, 2020,~~May 1, 2021, there was ~~$32.1~~$41.8 million of unrecognized compensation expense related to non-vested, time-based restricted stock unit awards that is expected to be recognized over a weighted-average period of ~~2.1~~2.3 years. Based on current probable performance, there is ~~$6.7~~$12.0 million of unrecognized compensation expense related to performance-based restricted stock unit awards which will be recognized as achievement of performance goals is probable over a one- to ~~two-~~three- year period.

As of ~~October 31, 2020,~~May 1, 2021, the Company had ~~9.0~~7.6 million shares available for all equity grants.

On March 27, 2020, the U.S. government enacted the CARES Act to address the COVID-19 pandemic. One of the provisions of the CARES Act allows net operating losses generated within tax years 2018 through 2020 to be carried back up to five years, including years in which the U.S. federal corporate income tax rate was 35%, as opposed to the current U.S federal corporate income tax rate of 21%.

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended ~~October 31, 2020~~May 1, 2021 was ~~35.3%~~24.7% compared to ~~23.6%~~the effective tax benefit rate of 28.8% for the 13 weeks ended ~~November~~May 2, ~~2019.~~2020. The ~~effective income tax rate for the 39 weeks ended October 31, 2020 was 26.8% compared to 23.4% for the 39 weeks ended November 2, 2019.The increase~~decrease in the effective ~~income~~ tax rate, as compared to the prior period, is primarily due to benefits recognized as a result of the ~~above-described provisions~~passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which occurred in the 13 weeks ended May 2, 2020. The CARES Act ~~which permit the carry back of current year~~allowed net operating losses ~~to a~~generated within tax year ~~where~~2020 to be carried back to periods in which the U.S. federal corporate income tax rate was 35%, offset by an incremental rate increase on the revaluation of deferred tax assets and liabilities for current year activity, an unfavorable tax impact from share based payments in accordance with ASU 2019-16 recorded in the 26 weeks ended August 1, 2020, and an increaseas opposed to the ~~valuation allowances recorded~~current U.S. federal corporate income tax rate of 21%, which resulted in a higher benefit rate applicable to the 13 weeks ended May 2, 2020. ~~We recorded our income~~The effective tax ~~expense, deferred~~rate for the current period was also impacted by higher excess tax ~~assets and related liabilities based~~benefits on ~~management’s best estimates.~~share-based payments.

The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognizes income tax liabilities related to unrecognized tax benefits in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Unrecognized tax benefits did not change significantly during the 13 weeks ended ~~October 31, 2020.~~May 1, 2021. Over the next twelve months, the Company believes that it is reasonably possible that unrecognized tax benefits may decrease by approximately ~~$0.3~~$0.6 million due to settlements, expiration of statute of limitations, or other changes in unrecognized tax benefits.

The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies (“ASC 450”), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position, results of operations or consolidated cash flows of the Company. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified 2 operating segments (American Eagle and ~~COVID-19 Related Charges~~Aerie) that also represent our reportable segments and reflect the Chief Operating Decision Maker’s (defined as our CEO) internal view of analyzing results and allocating resources. Historically, all operating segments were aggregated as permitted by ASC 280 as 1 reportable segment. In the fourth quarter of Fiscal 2020, we revised our reportable segment structure and have 2 reportable segments, American Eagle and Aerie.

~~The~~Our CEO analyzes segment results and allocates resources based on adjusted operating income (loss). Adjusted operating income (loss) is defined as operating income excluding impairment and restructuring. Adjusted operating income (loss) may not be comparable to similarly titled measures of other companies. Adjusted operating income (loss) on a consolidated basis is presented in the following table ~~represents impairment, restructuring and COVID-19 related charges for~~to reconcile the ~~13 and 39 weeks ended October 31, 2020 and November 2, 2019. All amounts were recorded within impairment, restructuring and COVID-19 related charges~~segment operating performance measure to operating (loss) income as presented on the Consolidated ~~Statements of Operations.~~Financial Statements.

We do not allocate assets to the reportable segment level and therefore our CEO does not use segment asset information to make decisions.

Through its portfolio of brands, the Company offers on-trend clothing, accessories, and personal care products (collectively “merchandise”). The following table sets forth the approximate consolidated percentage of total net revenue from operations attributable to each merchandise category:

The following table represents impairment and restructuring charges for the 13 weeks ended May 2, 2020. There were 0 impairment and restructuring charges for the 13 weeks ended May 1, 2021. All amounts were recorded within impairment and restructuring charges on the Consolidated Statements of Operations.

A roll-forward of restructuring liabilities recognized in accrued compensation and ~~payroll taxes and~~ other ~~current~~ liabilities and accrued expenses in the Consolidated Balance Sheet is as follows:

Subsequent to October 31, 2020, the Company announced that its Board of Directors updated the record and payment dates of the previously-deferred first quarter 2020 cash dividend, which originally was declared on March 26, 2020 and deferred on April 2, 2020 in response to store closures resulting from the COVID-19 pandemic. The $0.1375 per share cash dividend is now payable on December 30, 2020 to stockholders of record at the close of business on December 16, 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our ~~Fiscal 2019~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations for Fiscal 2020 which can be found in our Fiscal ~~2019~~2020 Form 10-K.

In addition, the following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements and should be read in conjunction with these statements and notes thereto.

We are a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under our American Eagle® and Aerie® brands.

In the fourth quarter of Fiscal 2020, we revised our reportable segment structure and have two reportable segments, American Eagle and Aerie. Our Chief Operating Decision Maker (defined as our CEO) analyzes segment results and allocates resources based on adjusted operating income (loss). See Note 12. “Segment Reporting,” of the Notes to the Consolidated Financial Statements included herein for additional information.

In the first quarter of Fiscal 2021, we realized better than expected sales, primarily due to continued increased strong demand for the Aerie brand. Strategically and operationally, we remain focused on driving our “Real Power. Real Growth” strategic plan. For the American Eagle brand, we continue to be focused on optimizing inventory and reducing promotions.

Financial highlights for the three months ended May 1, 2021 include comparisons to the first quarter of Fiscal 2019, which management believes is a more meaningful comparison due to the significant impacts of the COVID-19 pandemic on Fiscal 2020 financial results:

•All-time high first quarter revenue of $1.03 billion, compared to $886.3 million during the first quarter of Fiscal 2019;

•Record operating income of $133.4 million, compared to $47.8 million for the first quarter of Fiscal 2019;

Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:

Comparable sales — Comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period. In light of store closures and related disruptions from COVID-19, we have not disclosed comparable sales ~~this quarter as the periods are not comparable. In fiscal years following those with 53 weeks, including Fiscal 2018, the prior year period is shifted by one week to compare similar calendar weeks.~~

A store is included in comparable sales in its thirteenth month of operation. When stores have a gross footage increase of 25% or greater due to a remodel, they are removed from the comparable sales base, but are included in total sales. These stores are returned to the comparable sales base in the thirteenth month following the remodel.

Sales from company-owned stores, as well as e-commerce sales (AEO Direct), are included in total comparable sales. Sales from licensed stores are not included in comparable sales. Individual American Eagle and Aerie brand comparable sales disclosures represent sales from stores and AEO Direct. AEO Direct sales are included in the individual American Eagle and Aerie brand comparable sales metrics for the ~~following reasons:~~

~~Our management considers~~first quarter of Fiscal 2021 or Fiscal 2020, as Fiscal 2020 is not comparable ~~sales to be an important indicator of our~~with current ~~performance,~~ and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including store payroll, store supplies, rent, etc. Comparable sales also have a direct impact on our total net revenue, cash and working capital.prior periods.

Omni-channel ~~sales performance~~Sales Performance – Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within ~~Item 7 of~~ this ~~report~~Management’s Discussion and Analysis (“MD&A”) when we believe they enhance the understanding of the matter being discussed. Investors may find them useful as such. Each of these metrics is defined as follows (except comparable sales, which is defined separately above):

Gross profit — Gross profit measures whether we are optimizing the profitability of our sales. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage, and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples.

Buying, occupancy and warehousing costs consist of: compensation, employee benefit expenses, and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers, and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving, and inspection costs; and shipping and handling costs related to our e-commerce ~~operation.~~operations.

The inability to obtain acceptable levels of sales, initial markups, or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.

Operating ~~(loss)~~ income — Our management views operating income as a key indicator of our performance. The key drivers of operating ~~(loss)~~ income are ~~comparable sales,~~net revenue, gross profit, our ability to control selling, general, and administrative expenses, and our level of capital expenditures for a reasonable period of time. In light of store closures and disruptions from COVID-19, our operating income may not be comparable this year versus last year.

Cash flow and liquidity — Our management evaluates cash flow from operations, investing and financing activities in determining the sufficiency of our cash position and capital allocation strategies. Cash flow has historically been sufficient to cover our uses of cash. Our management believes that cash flow ~~and our current liquidity~~ will be sufficient to fund anticipated capital expenditures, dividends, and working capital ~~requirements.~~requirements for the next twelve months.

The spread of COVID-19, which was declared a pandemic by the World Health Organization in March 2020, caused state and municipal public officials to mandate jurisdiction-wide curfews, including “shelter-in-place” and closures of most non-essential businesses, as well as other measures to mitigate the spread of the virus. The COVID-19 pandemic remains highly volatile and continues to evolve on a daily ~~basis. See Part II, Item 1A. Risk Factors herein~~basis, and we continue to see disruption and volatility in our business caused by the COVID-19 pandemic.

As of May 1, 2021, nearly all of our stores have re-opened and remain open. Where opening is permitted, the majority of our stores are operating with restrictive and precautionary measures in place, such as reduced operating hours, physical distancing, enhanced cleaning and sanitation, and limited occupancy levels. Our consolidated results of operations continued to be significantly impacted by reduced customer traffic in re-opened store locations, partially offset by continued growth in e-commerce. Online sales represented 40% of our revenues for ~~additional discussion regarding~~the first quarter of Fiscal 2021. Despite our strength in digital sales, we have historically generated the majority of our revenue through stores. As a result, we do not believe that our results for the first quarter of Fiscal 2021 are directly comparable to the same period in Fiscal 2020.

The safety and health of our associates and customers remains of paramount concern. In March 2020, we hired a medical consultant to advise us on health and safety matters and to ensure that we are following science based guidance and best practices for associates and customers in all of our locations. We instituted a work-from-home plan in mid-March 2020 ahead of stay-at-home orders. We continue to take various precautions in our stores, which include sanitation stations and masks for all customers to provide a safe and secure environment. Plexiglas health guard partitions have also been installed at the registers along with the implementation of enhanced cleaning routines and protocols.

As of May 1, 2021, we had approximately $791.7 million in cash and cash equivalents and short-term investments, which includes the proceeds from our Notes issuance, discussed in greater detail below and in Note 8 to the Consolidated Financial Statements. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.

The unpredictability of the trajectory of the COVID-19 pandemic has significantly diminished visibility into the future operating environment, and we believe that the Company may continue to experience degrees of volatility and business disruptions, and remain at risk for periods of closure of our stores, distribution centers and corporate facilities through the remainder of Fiscal 2021. Past and future impacts of COVID-19 also have the ability to disrupt the operations of our partners, suppliers and vendors, which could lead to supply chain disruption, shipping delays, and freight cost increases. We are monitoring the ongoing developments as the COVID-19 vaccines are being distributed and administered, and will take further actions that are in the best interests of our associates and customers, as needed. For further information about the risks ~~to our business~~ associated with the COVID-19 ~~pandemic.~~pandemic, see “Risk Factors” in Part I, Item 1A of our Fiscal 2020 Form 10-K.

Our first quarter 2021 results reflected an acceleration in our business and excellent progress towards our “Real Power. Real Growth.” strategic plan. The Company recorded record first quarter revenue and operating income with positive growth across brands. Demand for Aerie’s product and powerful brand platform continued at a rapid pace, while American Eagle initiatives reignited the brand.

Absent the impacts of the COVID-19 pandemic, our business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the current and prior periods are not necessarily indicative of future financial results.Additionally, during the 13 weeks ended May 2, 2020, our consolidated results of operations were materially impacted by the effects of COVID-19.

Commencing in early March 2020, we experienced a significant reduction in customer traffic and demand resulting from the continued spread of COVID-19 and government actions to combat it. In response, we closed our stores to the public after the close of business on March 17, 2020; however, we continued to operate our digital business. ~~These actions significantly impacted~~Accordingly, our results for the first quarter of Fiscal ~~2020. Beginning May 2,~~ 2020 ~~we started~~were significantly impacted.

The following table shows the percentage relationship to ~~re-open stores and call back furloughed employees where state and local governments have lifted stay-at-home orders. As~~total net revenue of ~~October 31, 2020, nearly all of our stores have re-opened and remain open. However, our results of operations for~~ the ~~13 weeks ended October 31, 2020 continued to be significantly impacted by reduced customer traffic in re-opened store locations, partially offset by continued growth in e-commerce.~~

Since the first day that stores were closed to the public, our digital sales growth has accelerated, significantly exceeding our expectations through the third quarter of Fiscal 2020. In order to support online demand and utilize in-store inventory, we continued to leverage our store network for buy-online/ship-from-store capabilities, where possible. Despite our strength in digital sales, we have historically generated the majority of our revenue through stores and there can be no assurance that the current performancelisted line items included in our ~~digital sales growth will continue. As a result, we do not believe that~~Consolidated Statements of Operations:

The following table shows our ~~results for the 13 or 39 weeks ended October 31, 2020 are directly comparable to the same period in Fiscal 2019.~~consolidated store data:

The safety and health of our associates and customers remains a paramount concern. In March 2020, we hired a medical consultant to advise us on health and safety and to ensure we have the very best practices in all of our locations. We instituted a work from home in mid-March ahead of stay-at-home orders. We are taking various precautions in our stores, which include sanitation stations and masks for all customers to provide a safe and secure environment. Plexiglas health guard partitions have also been installed at the registers along with the implementation of enhanced cleaning routines and protocols.

Further, we continue to take precautionary measures and adjust our operational needs due to the impact of COVID-19. Since March 2020, the Company has taken the following actions to preserve our financial strength:

In addition, we have had productive discussions with our vendors to reduce purchases and extend payment terms, as well as with our landlords regarding the extension of payment terms and rent concessions.

As of October 31, 2020, we had approximately $692.4 million in cash and cash equivalents, which includes the proceeds from our convertible notes issuance, discussed in greater detail below. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity. Taking into account the measures described above, we believe that our current liquidity would enable us to continue operations beyond Fiscal 2020, if necessary, even if the majority of our retail locations were forced to close during the duration of that period.

While our digital business, including buy-online/ship-from-store capabilities, continues to operate, and subsequent to May 2, 2020, nearly all of our stores have reopened and remain open, we are unable to accurately predict the impact that the COVID-19 pandemic will have on our consolidated operations and financial results going forward due to:

~~Results~~Our operations consist of ~~Operations~~891 American Eagle retail stores, which include 177 Aerie side-by-side locations and 1 OFFLINE side-by-side location, 179 Aerie stand-alone locations (including 5 OFFLINE stand-alone locations), and AEO Direct. Additionally, there were two Todd Snyder stand-alone locations and two Unsubscribed locations.

Our business is affected by the pattern of seasonality common to most retail apparel businesses. Additionally, during the 13 and 39 weeks ended October 31, 2020, our results of operations were materially impacted by the effects of COVID-19.

Third quarter revenue strengthened as stores successfully reopened, the digital channel continued to accelerate and Aerie posted strong growth. Operational disciplines, inventory optimization and reduced spending resulted in sequential improvement in operating earnings and positive cash flow in the third quarter, fortifying our financial position, ending the quarter with $692.4 million in cash and cash equivalents.Non-GAAP Information~~The results for the current and prior periods are not necessarily indicative of future financial results.~~

This results of operations section contains net income (loss) per diluted share presented on an adjusted or non-GAAP basis, which is a non-GAAP financial ~~measures~~measure (“non-GAAP” or “adjusted”)~~, comprised of earnings per share information excluding non-GAAP items.~~. This financial measure is not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and is not necessarily comparable to

similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP consolidated financial ~~statements.~~statements and provides a higher degree of transparency. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. The table below reconciles the GAAP financial measure to the non-GAAP financial measure discussed above.

~~The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations.~~

13 Weeks Ended

39 Weeks Ended

October 31,

November 2,

October 31,

November 2,

2020

2019

2020

2019

Total net revenue

100.0

%

100.0

%

100.0

%

100.0

%
Cost of sales, including certain buying,
occupancy and warehousing expenses

59.8

61.8

71.3

62.8

Gross profit

40.2

38.2

28.7

37.2

Selling, general and administrative expenses

26.5

24.3

27.8

24.8

Impairment, restructuring and COVID-19 related charges

0.6

—

7.1

0.1

Depreciation and amortization expense

3.8

4.2

4.9

4.5

Operating income (loss)

9.3

9.7

(11.1
)

7.8

Interest expense (income), net

0.8

(0.1
)

0.7

(0.2
)

Other income, net

(0.2
)

(0.1
)

—

(0.1
)

Income (Loss) before income taxes

8.7

9.9

(11.8
)

8.1

Provision (Benefit) for income taxes

3.1

2.3

(3.2
)

1.9

Net Income (loss)

5.6

%

7.6

%

(8.6
)
%

6.2

%

Our operations are conducted in one reportable segment, consisting of 931 American Eagle retail stores which include 177 Aerie side-by-side locations, 167 Aerie stand-alone locations and AEO Direct. Additionally, there were four Tailgate and three Todd Snyder stand-alone locations.

Comparison of the 13 weeks ended ~~October 31, 2020~~May 1, 2021 to the 13 weeks ended ~~November~~May 2, ~~2019~~2020

Total net revenue ~~decreased 3%~~increased 88%, or ~~$34.8~~$483 million, to ~~$1.032~~a first quarter record $1,034.6 billion compared to ~~$1.066 billion~~$551.7 million last year. The COVID-19 pandemic and the associated closures of our retail stores beginning March 17, 2020 negatively affected our financial results for the ~~thirteen~~13 weeks ended ~~October 31,~~May 2, 2020. As of May 1, 2021, nearly all of our stores have reopened and remain opened.

Total net revenue for the ~~respective AEO Direct sales,~~13 weeks ended May 1, 2021 for the American Eagle brand ~~revenue decreased 11%~~was $727.7 million compared to ~~a 2% increase last year.~~$390.3 million for the 13 weeks ended May 2, 2020. Traffic for AE was up 51% and average unit retail price increased 23%.

Total net revenue for the 13 weeks ended May 1, 2021 for the Aerie brand ~~revenue increased 34%,~~was $297.5 million compared to ~~a 26% increase last year.~~$155.0 million for the 13 weeks ended May 2, 2020. Traffic for the Aerie brand was up 83% and average unit retail price increased 30%.

Gross profit increased ~~2% or $7.7~~$407.9 million, to ~~$414.8~~$436.2 million compared to ~~$407.1~~$28.3 million last year. ~~As a rate to revenue~~Our gross margin ~~improved~~percentage increased to ~~40.2% compared~~42.2% of revenue from 5.1% of revenue last year.

The 13 weeks ended May 2, 2020 were significantly impacted by disruptions related to ~~38.2% last year. The~~COVID-19, which resulted in a decline in revenue from retail store closures; higher markdowns and promotions to clear through spring and summer merchandise, and inventory provisions.

This year’s gross margin ~~increase~~ reflected significantly higher merchandise margins across brands, primarily due to higher full-priced sales, lower promotions and inventory optimization initiatives. Lower ~~product costs and~~ rent expense ~~due to the impairments taken in recent quarters, as well as negotiations with landlords,~~ also benefited the gross margin. This was ~~partially~~partly offset by higher delivery and distribution center costs, due to ~~a strong~~increased digital ~~business~~mix and higher ~~cost per shipment.~~shipment costs, as well as increased performance-based incentive compensation.

There was ~~$4.5~~$4.3 million and ~~$3.0~~$2.6 million of share-based payment expense included in gross profit for the periods ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively, comprised of both ~~time~~time- and performance-based awards.

Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as well as design costs in cost of sales and others may exclude a portion of these costs from cost of sales, including them in a line item such as selling, general and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.

Selling, general and administrative (“SG&A”) expenses increased ~~6%,~~41% or ~~$14.3~~$76.3 million to ~~$273.3~~$264.5 million from ~~$259.0~~$188.2 million last year. As a percentage of total net revenue, SG&A expenses decreased 850 basis points to 25.6%, compared to 34.1% last year.

The ~~increase primarily reflects~~13 weeks ended May 2, 2020 were significantly impacted by the disruption related to COVID-19, including the impact of lower store salaries from furloughs that took effect in early April 2020 related to the retail store closures resulting from COVID-19.

The 13 weeks ended May 1, 2021 reflected increased SG&A expenses due to higher ~~performance based~~levels of performance-based incentive compensation, ~~expense. As a rate to revenue, SG&A increased to 26.5% compared to 24.3% last year.~~an increase in corporate salaries and higher variable selling expenses.

There was ~~$4.5~~$8.3 million and ~~$2.6~~$1.4 million of share-based payment expense included in SG&A expenses for the periods ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively, comprised of both time and performance-based awards.

There were no impairment and restructuring charges recorded for the 13 weeks ended May 1, 2021. Impairment ~~restructuring~~ and ~~COVID-19 related~~restructuring charges were ~~$7.0~~$155.6 million, or ~~0.6%,~~28.2% as a percentage of total net revenue, for the 13 weeks ended ~~October 31,~~May 2, 2020. These ~~expenses~~charges consisted of ~~$6.0~~$153.6 million of ~~incremental COVID-19 related expenses including personal protective equipment~~impairment charges and ~~supplies for our associates and customers and $1.0~~$2.0 million of severance costs.For further information regarding impairment ~~restructuring~~ and ~~COVID-19 related~~restructuring charges, refer to Note 1213 to the Consolidated Financial Statements. ~~There were no restructuring charges recorded for the 13 weeks ended November 2, 2019.~~

Based on the uncertainty from the COVID-19 pandemic, we are unable to accurately predict the ultimate impact that COVID-19 will have on our consolidated operations going forward, including, among other things, the length of time that such disruptions continue and the impact of governmental regulations that may be imposed in response to the COVID-19 pandemic. Accordingly, we may be required to record further impairment and/or restructuring charges in future periods and expect to continue to incur charges for personal protective equipment and supplies for our associates and customers.

Depreciation and amortization expense decreased ~~13%~~10% or ~~$6.0~~$4.4 million, to ~~$39.0~~$38.3 million for the 13 weeks ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$45.0~~$42.7 million for the 13 weeks ended ~~November~~May 2, 2019. The decrease was due to asset impairments taken in recent quarters, as well as lower capital spending. As a percentage of total net revenue, depreciation and amortization expense was 3.8% for the 13 weeks ended October 31, 2020 compared to 4.2% for the 13 weeks ended November 2, 2019.

Interest expense was $7.9 million for the 13 weeks ended October 31, 2020, compared to interest income of $1.2 million for the 13 weeks ended November 2, 2019. The increase in expense was primarily attributable to interest expense related to our convertible notes issued this year.

~~Other income increased $0.9 million, to $2.2 million for the 13 weeks ended October 31, 2020, compared to $1.3 million for the 13 weeks ended November 2, 2019.~~

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended October 31, 2020 was 35.3% compared to 23.6% for the 13 weeks ended November 2, 2019. The increase in the effective income tax rate is primarily a result of provisions of the CARES Act which permits the carry back of current year losses to a tax year where the U.S. federal corporate income tax rate was 35%, offset by an incremental rate increase on the revaluation of deferred tax assets and liabilities for current year activity. We recorded our income tax expense, deferred tax assets and related liabilities based on management’s best estimates.

Net income decreased $22.7 million, to $58.1 million for the 13 weeks ended October 31, 2020, or 5.6% as a percentage of total net revenue, as compared to $80.8 million, or 7.6% as a percentage of total net revenue for the 13 weeks ended November 2, 2019. Net income per share decreased to $0.32 per diluted share for the 13 weeks ended October 31, 2020, which included $0.02 of incremental COVID-19 related expenses and restructuring and $0.01 of amortization of the non-cash discount on the Company’s convertible notes, compared to net income of $0.48 per diluted share for the 13 weeks ended November 2, 2019. The change in net income was attributable to the factors noted above.

~~Comparison of the 39 weeks ended October 31, 2020 to the 39 weeks ended November 2, 2019~~

Total net revenue decreased 18%, or $526.8 million, to $2.467 billion compared to $2.994 billion last year. Included in total net revenue last year was $40 million recognized for license royalties from a third-party operator of AE stores in Japan. The COVID-19 pandemic, the associated closures of our retail stores and decline in retail stores traffic since March 17, 2020 negatively affected our financial results for the 39 weeks ended October 31, 2020. As of October 31, 2020 nearly all of our stores have opened and remain opened.

By brand, including the respective AEO Direct revenue, American Eagle brand revenue decreased 24% compared to a 4% increase last year. Aerie brand revenue increased 23%, compared to a 25% increase last year.

Gross profit decreased 36%, or $406.3 million for the 39 weeks ended October 31, 2020, to $708.3 million compared to $1.115 billion last year. Our gross margin percentage declined to 28.7% of revenue from 37.2% of revenue last year. This reflected the decline in revenue from retail store closures and the impact of fixed buying, occupancy and warehousing costs as a result of the revenue decline due to the impact of COVID-19 on our business.

There was $11.6 million and $9.4 million of share-based payment expense included in gross profit for the periods ended October 31, 2020 and November 2, 2019, respectively, comprised of both time and performance-based awards.

SG&A expenses decreased 8% or $57.6 million to $685.2 million from $742.8 million last year. As a percentage of total net revenue, SG&A expenses increased 300 basis points to 27.8%, compared to 24.8% last year, primarily due to lower revenue from retail store closures resulting from COVID-19.

There was $13.0 million and $10.6 million of share-based payment expense included in SG&A expenses for the periods ended October 31, 2020 and November 2, 2019, respectively, comprised of both time and performance-based awards.

Impairment, restructuring and COVID-19 related charges were $177.2 million, or 7.1% as a percentage of total net revenue, for the 39 weeks ended October 31, 2020. These charges consisted of $153.6 million of impairment charges, $19.8 million of incremental COVID-19 related expenses, and $3.7 million of severance costs. For further information regarding impairment, restructuring and COVID-19 related charges, refer to Note 12 to the Consolidated Financial Statements. Restructuring charges were $4.3 million, or 0.1% as a percentage of total net revenue for the 39 weeks ended November 2, 2019. These charges were primarily the result of corporate severance and closure costs for our company-owned and operated stores in China.

Based on the uncertainty from the COVID-19 pandemic, we are unable to accurately predict the ultimate impact that COVID-19 will have on our operations going forward, including, among other things, the length of time that such disruptions continue and the impact of governmental regulations that may be imposed in response to the COVID-19 pandemic. Accordingly, we may be required to record further impairment and restructuring charges in future periods.

Depreciation and amortization expense decreased 10% or $13.8 million, to $120.8 million for the 39 weeks ended October 31, 2020, compared to $134.6 million for the 39 weeks ended November 2, 2019. The decrease was due to asset impairments taken in recent quarters, as well as lower capital spending in fiscal 2020. As a percentage of total net revenue, depreciation and amortization expense was ~~4.9%~~3.7% for the 3913 weeks ended ~~October 31, 2020~~May 1, 2021 compared to ~~4.5%~~7.7% for the 3913 weeks ended ~~November~~May 2, ~~2019.~~2020. The decrease in expense was primarily attributable to asset impairment recorded in Fiscal 2020 and lower capital spending.

Interest expense ~~was $16.6~~increased $8.4 million, to $8.5 million, for the 3913 weeks ended ~~October 31, 2020,~~May 1, 2021, compared to ~~interest income of $4.8~~$0.1 million for the 3913 weeks ended ~~November~~May 2, ~~2019.~~2020. The increase in expense was primarily attributable to increased interest expense related to our ~~convertible notes issued this year~~Notes and ~~credit facility borrowings prior to full repayment during~~lower interest income.

~~Other income decreased $5.2 million, to $0.8~~expense, net was $3.0 million for the 3913 weeks ended ~~October 31, 2020, compared to $6.0 million for the 39 weeks ended November~~May 2, ~~2019.~~2020. The ~~decrease~~increase was primarily attributable to foreign currency fluctuations and changes in other non-operating ~~expense.~~items.

The ~~increase~~decrease in the effective ~~income~~ tax rate, as compared to the prior period, is primarily due to benefits recognized as a result of ~~provisions~~the passage of the CARES Act which ~~permit~~occurred during the ~~carry back of current year~~13 weeks ended May 2, 2020. The CARES Act allowed net operating losses ~~to a~~generated within tax year ~~where~~2020 to be carried back to periods in which the U.S. federal corporate income tax rate was 35%, offset by an incremental rate increase on the revaluation of deferred tax assets and liabilities for current year activity, an unfavorable tax impact from share based payments in accordance with ASU 2019-16, and an increaseas opposed to the ~~valuation allowances recorded~~current U.S federal corporate income tax rate of 21%, which resulted in a higher benefit rate applicable to the 13 weeks ended May 2, 2020. The effective tax rate for the current ~~year. We recorded our income~~period was also impacted by higher excess tax ~~expense, deferred tax assets and related liabilities based~~benefits on ~~management’s best estimates.~~share-based payments.

Net ~~loss was $212.8~~income increased $352.6 million, to $95.5 million for the 3913 weeks ended ~~October 31, 2020,~~May 1, 2021, or ~~-8.6%~~9.2% as a percentage of total net revenue, as compared to a net ~~income~~loss of ~~$186.5~~$(257.2) million, or ~~6.2%~~(46.6%) as a percentage of total net revenue for the 3913 weeks ended ~~November~~May 2, ~~2019.~~2020.

Net income per share increased to $0.46 per diluted share for the 13 weeks ended May 1, 2021, which included $0.02 of the amortization of the non-cash discount on the Notes, compared to a net loss of $1.54 per diluted share, including $0.70 of impairment and restructuring charges, for the 13 weeks ended May 2, 2020. The change in net income ~~(loss)~~ was attributable to the factors noted above.

We have agreements with multiple ~~third party~~third-party operators to expand our brands internationally. Through these agreements, a series of franchised, licensed, or other brand-dedicated American Eagle stores have opened and will continue to open in areas including Asia, Europe, India, Latin America, and the Middle ~~East, Central and South America, Northern Africa and parts of Asia.~~East. These agreements do not involve a significant capital investment or operational involvement from us. We continue to increase the number of countries in which we enter into these types of arrangements as part of our strategy to expand internationally. As of ~~October 31, 2020,~~May 1, 2021, we had ~~225~~236 stores operated by our third party operators in 2633 countries. International ~~third party~~third-party operated stores are not included in the consolidated store data or the total gross square feet calculation.

As of ~~October 31, 2020,~~May 1, 2021, we had ~~100~~92 company-owned stores in Canada, 4548 in Mexico, 8nine in Hong Kong and 6seven in Puerto Rico.

ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

As of ~~October 31, 2020,~~May 1, 2021, we held certain assets that are required to be measured at fair value on a recurring basis. These include cash and cash equivalents and short-term investments.

In accordance with ASC 820, the following table represents the fair value hierarchy of our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of ~~October 31, 2020:~~May 1, 2021:

~~As of October 31, 2020, the Company had repaid alloutstanding borrowings under its Credit Facilities.~~

The fair value of the ~~Company's~~ Notes is not required to be measured at fair value on a recurring basis. Upon issuance, the fair value of ~~these~~the Notes was measured using two approaches that consider market related conditions, including market benchmark rates and a secondary market quoted price, and is therefore within Level 2 of the fair value hierarchy.

Our uses of cash have historically been for working capital, the construction of new stores and remodeling of existing stores, information technology and e-commerce upgrades and investments, distribution center improvements and expansion and the return of value to shareholders through the repurchase of common ~~stock.~~stock, and the payment of dividends. Additionally, our uses of cash have included the development of the Aerie brand, investments in technology and omni-channel capabilities, and our international expansion efforts. The rapid expansion of the COVID-19 global pandemic, the related economic impact, and the closure of our retail stores, resulted in a decline in net sales and earnings for the 13 and 39 week periods ended October 31, 2020, which had a corresponding impact on our liquidity and uses of cash.

Historically, our uses of cash have been funded with cash flow from operations and existing cash on hand. We also maintain an asset-based revolving credit facility that allows us to borrow up to $400 million, which will expire in January 2024. In April 2020, wethe Company issued $415 million aggregate principal amount of 3.75% convertible senior notes due in ~~2025.~~

~~As discussed~~2025 in a private placement to qualified institutional buyers. Interest is payable semi-annually. Refer to Note 8 to the ~~overview, we are focused on preserving~~Consolidated Financial Statements for additional information regarding our liquidity and managing our cash flows through certain actions to enhance our ability to meet short-term liquidity needs. We have taken a series of actions to reinforce our liquidity and financial flexibility, including:long-term debt.

As of ~~October 31, 2020,~~May 1, 2021, we had approximately ~~$692.4~~$791.7 million in cash and cash equivalents and short-term investments, which includes the proceeds from ~~our~~the Notes. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity. Taking into account the measures described above, we believe that our on-hand liquidity would enable us to continue operations beyond Fiscal 2020, if necessary, even if the majority of our retail locations were forced to close during the duration of that period.

Working capital increased ~~$317.3~~$87.1 million compared to ~~February 1, 2020~~January 30, 2021 and ~~increased $345.0~~decreased $145.4 million compared to last year. The ~~largest increase came from increased cash of $275.4~~$145.4 million ~~due~~decrease in our working capital compared to ~~the proceeds from our Notes issuance. Compared to February 1, 2020, the remaining change was primarily due to a $113.7 million increase in merchandise inventory, offset~~May 2, 2021, is driven by a ~~$74.2~~$94.0 million decrease in cash and short-term investments, a $56.4 million decrease in prepaid expenses, a $65.9 million increase in accrued ~~compensation.~~compensation, and a $54.8 million increase in accounts payable; a $45.0 increase in inventory, and a $42.3 million increase

in net accounts receivable, a $30.8 million decrease in current operating lease liabilities and a $22.8 million decrease due to dividends payable.

Net cash provided by operating activities totaled $0.4 million for the 13 weeks ended May 1, 2021, compared to net cash used for operating activities ~~totaled $10.4~~of $(209.9) million for the 3913 weeks ended ~~October 31, 2020, compared to cash flows provided by operating activities of $178.2 million~~May 2, 2020. Our primary outflow for the 3913 weeks ended ~~November 2, 2019. Our primary outflow~~May 1, 2021 was for the payment of operational costs. For the ~~39-week~~ period ended ~~November~~May 2, ~~2019,~~2020, our major source of cash from operations was merchandise sales and our primary outflow of cash for operations was for the payment of operational costs.

Net cash used for investing activities totaled ~~$38.1~~$112.2 million for the 3913 weeks ended ~~October 31, 2020,~~May 1, 2021, compared to net cash used for investing activities of ~~$109.1~~$9.1 million for the 3913 weeks ended ~~November~~May 2, ~~2019.~~2020. Investing activities for the 3913 weeks ended ~~October 31, 2020~~May 1, 2021 primarily consisted of ~~$55.0~~$75.0 million of ~~net~~ short-term investment ~~sales, offset by $92.6~~purchases and $36.8 million of capital expenditures for property and equipment. ~~We anticipate our capital expenditures for the remainder of Fiscal 2020 to be lower compared to prior years as we manage spending to help mitigate the negative impact of COVID-19 on our business.~~

Investing activities for the 3913 weeks ended ~~November~~May 2, ~~2019~~2020 primarily included ~~$149.9~~$33.9 million of capital expenditures for property and equipment, partially offset by ~~$42.1~~$25.0 million of net short-term investment sales.

Cash Flows ~~Provided~~(used for) provided by ~~(Used for)~~ Financing Activities

Net cash used for financing activities totaled $22.1 million for the 13 weeks ended May 1, 2021, compared to net cash provided by financing activities ~~totaled $379.9~~of $714.6 million for the 3913 weeks ended ~~October 31, 2020, compared to net cash~~May 2, 2020. Cash used for financing activities for the 13 weeks ended May 2, 2021 consisted primarily of ~~$188.1~~$22.9 million for cash dividends paid at a quarterly rate of $0.1375 and $10.9 million for the ~~39 weeks ended November 2, 2019.~~ repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments, partially offset by $12.1 million of proceeds from stock option exercises.

Cash provided by financing activities for the 3913 weeks ended ~~October 31,~~May 2, 2020 consisted primarily of $406.1 million of net proceeds from the issuance of ~~convertible notes. This was~~the Notes and $330.0 million of borrowings on our Credit Facilities, partially offset by $20.0 million used for purchases of 1.7 million shares of common stock under publicly-announced programs in ~~early March~~early-March 2020, and ~~$5.4~~$1.4 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments.

~~Early in Fiscal 2020, we~~We borrowed on our Credit Facilities and issued the Notes to strengthen our cash position and provide us with additional financial flexibility during the remainder of the ongoing COVID-19 pandemic. ~~As of October 31, 2020, we had repaid the $330 million in Credit Facilities borrowings.~~

Cash used for financing activities for the 39 weeks ended November 2, 2019 consisted primarily of $112.4 million used for repurchase of 6.3 million shares of common stock under publicly announced programs, $69.8 million for cash dividends paid at a quarterly rate of $0.1375 per share, and $8.0 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments.

In January 2019, we entered into a Credit Agreement for five-year, syndicated, asset-based revolving Credit Facilities. The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400 million, subject to customary borrowing base limitations. The Credit Facilities expire January 30, 2024.

As of ~~October 31, 2020,~~May 1, 2021, the Company was in compliance with the terms of the Credit Agreement and had $7.9 million outstanding in stand-by letters of credit. No loans were outstanding under the Credit Agreement as of May 1, 2021.

Capital expenditures for the 3913 weeks ended ~~October 31, 2020~~May 1, 2021 were ~~$92.6~~$36.8 million, and included ~~$40.4~~$18.9 million related to investments in our stores, including 1011 new AEO stores ~~(seven~~(four American Eagle stores, six Aerie stand-alone stores (including one OFFLINE store), and ~~three American Eagle stores)~~one Unsubscribed store), ~~eight~~three remodeled and refurbished stores, and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology initiatives ($~~23.6~~10.8 million), e-commerce ($~~19.6~~3.2 million) and other home office projects ($~~8.8~~3.9 million).

For Fiscal 2021, we expect capital expenditures to ~~preserve financial liquidity~~be in ~~response~~the range of $250 million to $275 million related to the ~~uncertainty created by the impact~~continued support of ~~COVID-19, the company has reduced its Fiscal 2020~~our expansion efforts, stores, information technology upgrades to support growth, and investments in e-commerce. We expect to be able to fund our capital ~~spending plans to a range of $100 to $125 million, prioritizing strategic omni-channel, store~~expenditures through current cash holdings and ~~supply-chain investments aimed at further strengthening its competitive position.~~cash generated from operations.

During Fiscal 2019, our Board of Directors (our “Board”) authorized the repurchase of 30.0 million shares under a new share repurchase program, which expires on February 3, 2024, bringing our total share repurchases authorization to 33.6 million shares. In early March 2020, as part of our publicly-announced share repurchase program, we repurchased 1.7 million shares for $20.0 million, at a weighted average price of $11.63 per share.

As previously announced, to preserve cash liquidity in response to the uncertainty created by the impact of COVID-19, the company has suspended the stock repurchase program. Accordingly, during the 13 weeks ended October 31, 2020, we did not repurchase any shares pursuant to this program. During the 39 weeks ended November 2, 2019, as part of our publicly announced share repurchase program, we repurchased 6.3 million shares for $112.4 million, at a weighted average price of $17.74 per share.

During Fiscal 2019, our Board authorized the repurchase of 30.0 million shares under a new share repurchase program, which expires on February 3, 2024, bringing our total share repurchases authorization to ~~33.6~~30.0 million shares.As

In Fiscal 2020, to preserve cash liquidity in response to the uncertainty created by the impact of ~~October 31, 2020, 3.6 million shares remained under~~COVID-19, the Company suspended its publicly-announced share repurchase program. The Company unsuspended its share repurchase program ~~authorized by~~at the beginning of Fiscal 2021, but did not repurchase any shares under this program during the 13 weeks ended May 1, 2021. During the 13 weeks ended May 2, 2020, as part of our ~~Board in April 2016 that expires on January 30, 2021.~~ publicly-announced share repurchase program, we repurchased 1.7 million shares for $20.0 million, at a weighted average price of $11.63 per share.

During the 3913 weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ we repurchased approximately 0.4 million and 0.1 million shares, respectively, from certain employees at a market prices totaling ~~$5.4~~$10.9 million and ~~$8.0~~$1.4 million, respectively. These shares were repurchased for the payment of taxes, in connection with the vesting of share-based payments, as permitted under our equity incentive plans. The aforementioned shares repurchased shares have been recorded as treasury stock.

~~Our~~During the 13 weeks ended May 1, 2021, our Board of Directors (“Board”) declared a quarterly cash dividend of $0.1375 per share on March 2, 2021, which was paid on March 26, 2021.

During the 13 weeks ended May 2, 2020, our Board declared a quarterly cash dividend of $0.1375 per share on March 26, 2020, ~~for the first quarter of 2020, which was subsequently delayed as part of our efforts to carefully manage the impact of COVID-19 on our liquidity. It was~~ originally payable on May 14, 2020 to stockholders of record at the close of business on April 30, ~~2020,~~2020.As part of our efforts to carefully manage the impact of COVID-19 on our liquidity, the first quarter dividend payment was deferred and ~~was delayed to be~~ paid on ~~April 23, 2021,~~December 30, 2020 to stockholders of record at the close of business on ~~April 9, 2021.~~

Subsequent to October 31, 2020, based on positive third quarter results and improved financial liquidity, our Board updated the record and payment dates of the previously deferred dividend, which is now payable on December 30, 2020 to stockholders of record on December 16, 2020.

~~To preserve liquidity, the Company suspended its second and third quarter dividend and does not anticipate declaring a dividend for the rest of Fiscal 2020.~~ The Company maintains the right to defer the record and payment dates of its dividends, depending upon, among other factors, the progression of the COVID-19 outbreak, business performance, and the macroeconomic environment. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation, and other relevant factors.

Our critical accounting policies and estimates are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the ~~notes~~Notes to our Consolidated Financial Statements for the year ended ~~February 1, 2020~~January 30, 2021 contained in our Fiscal ~~2019~~2020 Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Consolidated

Financial Statements in this Quarterly Report on Form 10-Q. The application of our critical accounting policies and estimates may require our management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Our management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

We are primarily exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. An unrealized gain of ~~$3.3~~$2.9 million is included in accumulated other comprehensive income during the 13 weeks ended ~~October 31, 2020 and an unrealized loss of $11.5 million is included in accumulated other comprehensive income during the 39 weeks ended October 31, 2020.~~May 1, 2021. Our market risk profile as ~~of February 1, 2020~~January 30, 2021 is disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Fiscal ~~2019~~2020 Form ~~10-K.~~10-K, which is unchanged as of May 1, 2021.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to the ~~management~~Company’s of American Eagle Outfitters, Inc. (the “Management”), including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In connection with the preparation of this Quarterly Report on Form 10-Q, as of ~~October 31, 2020,~~May 1, 2021, the Company performed an evaluation under the supervision and with the participation of our Management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing, and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our Management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the ~~period~~quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are involved, from time to time, in actions associated with or incidental to our business, including, among other things, matters involving ~~credit card fraud,~~consumer privacy, trademark and other intellectual property, licensing, importation of products, taxation, and employee relations. We believe at present that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial position or results of operations. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact ~~which~~that are not in accord with management's evaluation of the possible liability or outcome of such litigation or claims. Consistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental proceedings with a governmental entity as a party where the company reasonably believes such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1.0 million or more. Applying this threshold, there are no environmental matters to disclose for this period.

Refer to Note 11. “Legal Proceedings” of the Notes to the Consolidated Financial Statements included herein for additional information.

Risk factors that affect our business and financial results are discussed within Part 1, Item 1A of our Fiscal ~~2019~~2020 Form 10-K. The information presented below updates, and should be read in conjunction with the risk factors and information disclosed in our Fiscal ~~2019~~2020 Form 10-K our Form 10-Q for the thirteen weeks ended May 2, 2020, which was filed with the SEC on June 4, 2020, our Form 10-Q for the thirteen weeks ended August 1, 2020, which was filed with the SEC on September 9, 2020, and any other filings that we make with the SEC. ~~Except as presented below, there~~There have been no material changes to our risk factors as disclosed in the Fiscal ~~2019~~2020 Form 10-K ~~our Form 10-Q for the thirteen weeks ended May 2, 2020, our Form 10-Q for the thirteen weeks ended August 1, 2020,~~ and in our subsequent filings with the SEC.

~~The novel coronavirus (COVID-19) pandemic has had, and is expected to continue to have, an adverse effect on our business and results of operations.~~

In late 2019, COVID-19 was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending have led to an economic downturn in many of our markets. We continue to operate our e-commerce business, and had to temporarily close our corporate offices and American Eagle and Aerie physical stores. We have begun to reopen stores where the applicable state and local governments have lifted stay-at-home orders, but have had to operate at lower capacities than normal.

The COVID-19 pandemic also directly threatens the health of our associates and customers. The operation of all of our stores is critically dependent on our associates who staff these locations. In the event that an associate tests positive for COVID-19, we have had to, and may in the future have to, temporarily close one or more stores, offices or distribution centers for cleaning and/or quarantine one or more associates, which could negatively impact our financial results.

We are unable to accurately predict the impact that COVID-19 will have on our operations going forward due to uncertainties that will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration of the COVID-19 pandemic, any resurgences of COVID-19 in areas where our stores, customers, or associates are located, and the impact of governmental regulations that might be imposed in response to the pandemic, which could, among other things, require that we close our distribution and fulfillment centers or otherwise make it difficult or impossible to operate our e-commerce business. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Such orders and restrictions have resulted in temporary store closures, work stoppages, slowdowns and delays, travel restrictions and cancellations of events, among other effects, thereby negatively impacting our operations. In addition, we expect to be impacted by a deterioration of economic conditions in the United States, which potentially could have an impact on discretionary consumer spending. To the extent that our target customer demographic is disproportionately impacted by unemployment or otherwise as a result of the COVID-19 pandemic, our business may be further adversely affected. Additionally, historically, a large portion of the Company’s revenue and operating income occurs during the third and fourth fiscal quarters. Changes in consumer behavior and traditions, or changes mandated or recommended by government or health officials, could significantly impact the Company’s year-end holiday selling season. While it is premature to accurately predict the ultimate impact of these developments, we expect our results for the remainder of the COVID-19 pandemic to be adversely impacted in a significant manner.

~~To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in~~ ~~Risk Factors~~ ~~under Item 1A and~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operation~~ under Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2020, filed with the SEC on March 12, 2020, including, but not limited to, risks relating to change in consumer demand or shopping patterns, our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the covenants contained in the agreements that govern our indebtedness, availability of adequate capital, our ability to execute our strategic plans, our real estate portfolio, disruptions to our supply chain and third party delivery service providers, our ability to access to adequate quantities of product and materials, tariffs, and regulatory restrictions.

The following table provides information regarding our repurchases of our common stock during the 13 weeks ended ~~October 31, 2020.~~May 1, 2021.

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 undersigned thereunto duly authorized.

Delaware		No. 13-2721761
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

77 Hot Metal Street, Pittsburgh, PA		15203-2329
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AEO	New York Stock Exchange

		Page Number
PART I - FINANCIAL INFORMATION
	Forward Looking Statements	3
Item 1.	~~Forward Looking Statements~~ Financial Statements	57
	Consolidated Balance Sheets: ~~October 31,~~May 1, 2021, January 30, 2021 and May 2, 2020 ~~February 1, 2020 and November 2, 2019~~	5
	~~Consolidated Statements of Operations: 13 and 39 weeks ended October 31, 2020 and November 2, 2019~~	6
	~~Consolidated Statements of Comprehensive Income: 13 and 39 weeks ended October 31, 2020 and November 2, 2019~~	7
	Consolidated Statements of ~~Stockholders’ Equity:~~Operations: 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~	8
	Consolidated Statements of ~~Cash Flows: 39~~Comprehensive Income: 13 weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~	9
	Consolidated Statements of Stockholders’ Equity: 13 weeks ended May 1, 2021 and May 2, 2020	10
	Consolidated Statements of Cash Flows: 13 weeks ended May 1, 2021 and May 2, 2020	11
	Notes to Consolidated Financial Statements	1012
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2629
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	3738

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3839
Item 1A.	Risk Factors	3839
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	N/A
Item 4.	Mine Safety Disclosures	N/A
Item 5.	Other Information	N/A
Item 6.	Exhibits	40

Buildings		25 years
Leasehold improvements		Lesser of 10 years or the term of the lease
Fixtures and equipment Information technology		Five years
~~Information technology~~		Three - five years

	October 31,			February 1,			November 2,			May 1,			January 30,			May 2,
(In thousands)	2020			2020			2019			2021			2021			2020
Goodwill, gross	$	17,331		$	17,353		$	17,374		$	17,591		$	17,463		$	17,164
Accumulated impairment ⁽¹⁾		(4,196	)		(4,196	)		(2,484	)		(4,196	)		(4,196	)		(4,196	)
Goodwill, net	$	13,135		$	13,157		$	14,890		$	13,395		$	13,267		$	12,968

Trademarks, at cost		72,194			71,685			71,382		$	93,039		$	92,663		$	71,879
Accumulated amortization		(34,465	)		(31,838	)		(30,806	)		(36,738	)		(35,598	)		(32,874	)
Trademarks, net	$	37,729		$	39,847		$	40,576		$	56,301		$	57,065		$	39,005

Intangible assets, net, including goodwill	$	50,864		$	53,004		$	55,466		$	69,696		$	70,332		$	51,973

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

(In thousands)	October 31, 2020		February 1, 2020		November 2, 2019		May 1, 2021		January 30, 2021		May 2, 2020
Cash and cash equivalents:
Cash	$	317,027	$	126,087	$	134,602	$	466,014	$	524,970	$	149,205
Money market securities								—		—		350,054
Interest bearing deposits		325,319		235,843		79,912		225,665		275,507		296,509
Money market securities		50,010		—		—
Certificates of deposit								25,000		50,000		60,000
Total cash and cash equivalents	$	692,356	$	361,930	$	214,514	$	716,679	$	850,477	$	855,769
Short-term investments
Certificates of deposit		—		55,000		50,000		75,000		—		15,000
Commercial paper								—		—		14,956
Total short-term investments		—		55,000		50,000		75,000		—		29,956
Total	$	692,356	$	416,930	$	264,514	$	791,679	$	850,477	$	885,725

	Time-Based Restricted Stock Units					Performance-Based Restricted Stock Units
	39 Weeks Ended					39 Weeks Ended					Time-Based Restricted Stock Units					Performance-Based Restricted Stock Units
	October 31, 2020					October 31, 2020					May 1, 2021					May 1, 2021
(Shares in thousands)	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
Nonvested - February 1, 2020		2,196		$	18.56		2,138		$	18.38
Nonvested - January 30, 2021												3,698		$	12.42		1,868		$	17.44
Granted		2,701		$	9.31		503		$	15.83		619		$	32.58		307		$	39.85
Vested		(948	)	$	16.66		(319	)	$	14.50		(739	)	$	8.83		(275	)	$	19.48
Cancelled		(247	)	$	16.47		(467	)	$	22.28		(76	)	$	11.82		(301	)	$	19.09
Nonvested - October 31, 2020		3,702		$	12.41		1,855		$	17.37
Nonvested - May 1, 2021												3,502		$	16.65		1,599		$	21.08

(in thousands)	American Eagle			Aerie			Corporate⁽¹⁾			Total⁽²⁾
13 weeks ended May 1, 2021
Total net revenue	$	727,702		$	297,487		$	9,425		$	1,034,614

Operating income (loss)	$	151,232		$	69,978		$	(87,783	)	$	133,427

Capital Expenditures	$	13,439		$	10,819		$	12,548		$	36,806


13 weeks ended May 2, 2020
Total net revenue	$	390,250		$	154,981		$	6,461		$	551,692

Operating loss	$	(213,749	)	$	(19,129	)	$	(125,362	)	$	(358,240	)
Impairment and restructuring charges		90,926			18,215			46,478			155,619
Adjusted Operating loss	$	(122,823	)	$	(914	)	$	(78,884	)	$	(202,621	)

Capital Expenditures	$	8,099		$	8,788		$	17,023		$	33,910

	13 Weeks Ended
Total revenue (in thousands)	May 1, 2021			May 2, 2020
American Eagle merchandise	$	727,702		$	390,250
Aerie merchandise		297,487			154,981
Total merchandise⁽¹⁾	$	1,025,189		$	545,231

As a percentage of total revenue
American Eagle merchandise		70	%		71	%
Aerie merchandise		29	%		28	%
Total merchandise⁽¹⁾		99	%		99	%

	Fair Value Measurements at October 31, 2020								Fair Value Measurements at May 1, 2021
(In thousands)	Carrying Amount		Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount		Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Cash	$	317,027	$	—	$	—	$	—	$	466,014	$	466,014	$	—	$	—
Interest bearing deposits		325,319		—		—		—		225,665		225,665		—		—
Money market securities		50,010		—		—		—
Certificates of Deposit										25,000		25,000		—		—
Total cash and cash equivalents	$	692,356	$	—	$	—	$	—	$	716,679	$	716,679		—		—

Short-term investments
Certificates of Deposit									$	75,000	$	75,000		—		—
Total short-term investments									$	75,000	$	75,000
Total									$	791,679	$	791,679		—		—

	Total				Total Number of		Maximum Number of
	Number of		Average		Shares Purchased as		Shares that May
	Shares		Price Paid		Part of Publicly		Yet Be Purchased
Period	Purchased		Per Share		Announced Programs		Under the Program
	(1)		(2)		(1)		(1) (3)
Month #1 (August 2, 2020 through August 29, 2020)		4,129	$	10.66		—		33,643,909
Month #2 (August 30, 2020 through October 3, 2020)		6,265	$	14.42		—		33,643,909
Month #3 (October 4, 2020 through October 31, 2020)		284	$	14.06		—		33,643,909
Total		10,678	$	12.96		—		33,643,909

* Exhibit 10.1
* Exhibit 31.1		~~Separation Agreement between the registrant and Robert Madore, dated September 21, 2020~~ Certification by Jay L. Schottenstein pursuant to Rule 13a-14(a) or Rule 15d-14(a)

* Exhibit 31.2		Certification by Michael A. Mathias pursuant to Rule 13a-14(a) or Rule 15d-14(a)

** Exhibit 32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

** Exhibit 32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Exhibit 101		The following materials from the Company’s Annual Report on Form 10-Q for the quarter ended ~~October 31, 2020,~~May 1, 2021, formatted as inline eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets as of ~~October 31,~~May 1, 2021, January 30, 2021 and May 2, 2020, ~~February 1, 2020 and November 2, 2019,~~ (ii) Consolidated Statements of Operations for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ (iii) Consolidated Statements of Comprehensive Income for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ (iv) Consolidated Statements of Stockholders’ Equity for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ and (v) Consolidated Statements of Cash Flows for the 3913 weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~
* Exhibit 104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~October 31, 2020,~~May 1, 2021, formatted in inline XBRL

		American Eagle Outfitters, Inc. (Registrant)

By:		/s/ Jay L. Schottenstein
		Jay L. Schottenstein
		Chief Executive Officer
		(Principal Executive Officer)

By:		/s/ Michael A. Mathias
		Michael A. Mathias
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)