American Eagle Outfitters Inc: Form 10-Q for the period ended Jul 29, 2023

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A") is intended to help the reader understand the Company, our operations and our present business environment. This MD&A is provided as a supplement to — and should be read in conjunction with — our MD&A for Fiscal 2022 which can be found in our Fiscal 2022 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.

Introduction

This MD&A is organized as follows:

Recent accounting pronouncements the Company has adopted or is currently evaluating prior to adoption, including the dates of adoption or expected dates of adoption, as applicable, and anticipated effects on the Company’s audited Consolidated Financial Statements, are included in Note 2. “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included herein.

Executive Overview

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.

We 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), which is a non-GAAP financial measure. See Note 12. “Segment Reporting,” of the notes to the Consolidated Financial Statements included herein for additional information.

Key Performance Indicators

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 fiscal years following those with 53 weeks, the prior year period is shifted by one week to compare similar calendar weeks. A store is included in comparable sales in the 13th month of operation. However, stores that have a gross square footage change of 25% or greater due to a remodel are removed from the comparable sales base but are included in total sales. These stores are returned to the comparable sales base in the 13th month following the remodel. Sales from American Eagle, Aerie, Todd Snyder, and Unsubscribed stores, as well as sales from AEO Direct and other digital channels, 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 include sales from stores and AEO Direct.

Omni-channel 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 this MD&A when we believe that 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):

• Average unit retail price represents the selling price of our goods. It is the cumulative net sales divided by the net units sold for a period of time.
• Total transactions represents the count of customer transactions over a period of time (inclusive of Company-owned stores and AEO Direct, unless specified otherwise).
• Units per transaction represents the number of units sold divided by total transactions over a period of time (inclusive of Company-owned stores and AEO Direct, unless specified otherwise).
• Consolidated comparable traffic represents visits to our Company-owned stores, limited to those stores that qualify to be included in comparable sales as defined above, including AEO Direct, over a period of time.

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, Quiet Platforms costs to service its customers and buying, occupancy and warehousing costs and services. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples.

Buying, occupancy and warehousing costs and services 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 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 consolidated profit and results of operations.

Operating income — Our management views operating income as a key indicator of our performance. The key drivers of operating income are net revenue, gross profit, our ability to control SG&A expenses, and our level of capital expenditures.

Cash flow and liquidity — Our management evaluates cash flow from operations and 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 liquidity will be sufficient to fund anticipated capital expenditures and working capital requirements for the next twelve months and beyond.

Current Trends and Outlook

Inflation

During Fiscal 2022 and the 26 weeks ended July 29, 2023, our quarterly results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior, which constrained revenue and increased margin pressure. Given ongoing external uncertainties, we have taken additional actions to improve financial performance, including more extensive expense and capital expenditure reductions. For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see “Risk Factors” in Part I, Item 1A of our Fiscal 2022 Form 10-K.

Results of Operations

During the second quarter, we saw customer demand accelerate during June and July reflecting brand strength and on trend collections that are resonating well with customers, supported by exciting new marketing campaigns. Momentum across brands and channels has continued into third quarter. For the second half of 2023, we will continue to leverage our dominant brand positioning and industry-leading creative and operational expertise to deliver exciting innovation, marketing and shopping experiences to our customers. We have also launched a formal, multi-year profit-improvement program designed to drive a more agile, strategic and profitable organization in the long-run.

Overview

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

The following table shows our consolidated store data:

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(1) International licensed/franchise stores are not included in the consolidated store data or the total gross square feet calculation.

As of July 29, 2023, we operated 866 American Eagle retail stores, which includes 185 Aerie side-by-side locations, five locations with AE brand, Aerie brand and OFFLINE™ connected as one store, and 2 OFFLINE™ side-by-side locations, 300 Aerie stand-alone stores (including 34 OFFLINE™ stand-alone stores and 30 OFFLINE™ side-by-side locations), and AEO Direct. Additionally, there were 13 Todd Snyder stand-alone locations and five Unsubscribed locations.

Comparison of the 13 weeks ended July 29, 2023 to the 13 weeks ended July 30, 2022

Total Net Revenue

Total net revenue was relatively flat for the 13 weeks ended July 29, 2023 at $1.201 billion, compared to $1.198 billion last year. Store revenue increased 4% and digital revenue declined 7%, as digital demand continued to normalize from the impact of COVID-19 pandemic. Last year included $24 million of revenue from excess end-of-season selloffs, which we did not anniversary this year, impacting revenue growth across brands and channels for the current year [and offsetting overall store revenue increases]. Total comparable sales decreased 1% year-over-year, primarily due to a decline is digital units per transaction and conversion, partially offset by increased traffic.

American Eagle

Total net revenue for the 13 weeks ended July 29, 2023 for the American Eagle brand was $767.0 million, a slight decline compared to $777.8 million for the 13 weeks ended July 30, 2022. Last year included $10 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. Total comparable sales decreased 2% year-over-year, primarily due to average unit retail price decreased in the mid-single digits year-over-year, partially offset by increased units per transaction.

Aerie

Total net revenue for the 13 weeks ended July 29, 2023 for the Aerie brand was $380.4 million, an approximately 2% increase compared to $371.7 million for the 13 weeks ended July 30, 2022. The increase was primarily due to 46 net new store openings since the first quarter of Fiscal 2022, partially offset by a decline in Swimwear performance compared to last year. Last year included $12 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. Average unit retail price was up in the mid-single digits year-over-year, partially offset by units per transaction. Total comparable sales were flat to last year.

Other

Total net revenue for the 13 weeks ended July 29, 2023 for our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms declined slightly to $108.3 million compared to $110.4 million for the 13 weeks ended July 30, 2022. The decrease is attributable due to lower revenue from Quiet Platforms, partially offset by an increase in Todd Snyder brand revenue.

Gross Profit

Gross profit increased by $83.0 million, or approximately 22% to $453.0 million for the 13 weeks ended July 29, 2023 compared to $370.0 million for the 13 weeks ended July 30, 2022. Our gross margin percentage increased to 37.7% of revenue for the 13 weeks ended July 29, 2023 from 30.9% of revenue for the 13 weeks ended July 30, 2022. The increase in gross profit was primarily driven by lower markdowns reflecting inventory control, as well as lower transportation and product costs. Distribution, warehousing and delivery costs also decreased during the quarter compared to last year.

There was $5.0 million and $4.0 million of share-based payment expense included in gross profit for the periods ended July 29, 2023 and July 30, 2022, respectively, comprised of both 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 SG&A 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 Expenses

SG&A expenses increased 8% or $24.1 million to $331.9 million for the 13 weeks ended July 29, 2023 from $307.8 million for the 13 weeks ended July 30, 2022. As a percentage of total net revenue, SG&A expenses increased 190 basis points to 27.6% for the 13 weeks ended July 29, 2023, compared to 25.7% for the 13 weeks ended July 30, 2022. The increase in expenses was primarily related to increased incentive and store compensation, partially offset by lower advertising and professional service expenses.

There was $5.5 million and $4.6 million of share-based payment expense included in SG&A expenses for the 13 weeks ended July 29, 2023 and July 30, 2022, comprised of both time and performance-based awards.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 16% or $7.7 million, to $55.9 million for the 13 weeks ended July 29, 2023, compared to $48.2 million for the 13 weeks ended July 30, 2022, which was primarily driven by investments in new stores. As a percentage of total net revenue, depreciation and amortization expense was 4.7% for the 13 weeks ended July 29, 2023 compared to 4.0% for the 13 weeks ended July 30, 2022.

Operating Income (Loss)

Operating income increased 366% or $51.3 million, to $65.3 million, or 5.4% as a percentage of total net revenue, for the 13 weeks ended July 29, 2023, compared to $14.0 million, or 1.2% as a percentage of total net revenue, for the 13 weeks ended July 30, 2022. The increase was primarily driven by higher gross profit, partially offset by higher SG&A and depreciation and amortization expenses.

American Eagle

Operating income for the 13 weeks ended July 29, 2023 for the American Eagle brand was $128.7 million, or 16.8% as a percentage of American Eagle total net revenue, compared to $109.1 million, or 14.0% as a percentage of American Eagle total net revenue, for the 13 weeks ended July 30, 2022. The increase was primarily the result of increased gross profit from lower markdowns reflecting inventory control, partially offset by higher SG&A costs and higher depreciation and amortization expenses.

Aerie

Operating income for the 13 weeks ended July 29, 2023 for the Aerie brand was $57.3 million, or 15.1% as a percentage of Aerie total net revenue, compared to $11.8 million, or 3.2% as a percentage of Aerie total net revenue, for the 13 weeks ended July 30, 2022. The increase was primarily the result of increased gross profit from improved markup and lower markdowns reflecting inventory control, partially offset by higher SG&A costs and higher depreciation and amortization expenses.

Other

Operating loss for the 13 weeks ended July 29, 2023 for our other operations was ($10.4) million compared to ($11.5) million for the 13 weeks ended July 30, 2022. The increase was primarily the result of increased gross profit in the Todd Snyder brand, driven by eight incremental stores this year, partially offset by increased expenses.

General Corporate Expenses

General corporate expenses increased $14.9 million due to increased corporate compensation and incentives and professional fees.

Debt Related Charges

Debt related charges of $60.1 million for the 13 weeks ended July 30, 2022 consists primarily of a $55.7 million induced conversion expense related to the Note Exchange, along with certain other costs related to actions taken to strengthen our capital structure.

Interest Expense, net

Interest expense decreased $2.5 million, to $0.9 million, for the 13 weeks ended July 29, 2023, compared to $3.4 million for the 13 weeks ended July 30, 2022. The decrease was primarily attributable to the elimination of convertible note cash interest expense on the 2025 Notes due to their Early Redemption this year.

Other Income, net

Other income, net was $2.2 million for the 13 weeks ended July 29, 2023, compared to $1.8 million for the 13 weeks ended July 30, 2022. The increase was primarily attributable to foreign currency fluctuations and changes in other non-operating items.

Provision (Benefit) for Income Taxes

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 July 29, 2023 was 27.0% compared to the effective income tax benefit rate of 10.9% for the 13 weeks ended July 30, 2022. The change in the effective tax rate, as compared to the prior period, is primarily due to the Note Exchange in June 2022 as a portion of the inducement charge was not deductible and state legislative changes that occurred in Fiscal 2022.

Net Income (Loss)

Net income (loss) increased $91.0 million, to $48.6 million for the 13 weeks ended July 29, 2023, or 4.0% as a percentage of total net revenue, compared to a net loss of $42.5 million, or (3.5)% as a percentage of total net revenue for the 13 weeks ended July 30, 2022.

Net income per share increased to $0.25 per diluted share for the 13 weeks ended July 29, 2023, compared to net loss of $0.24 per diluted share, including $0.28 of debt related charges for the 13 weeks ended July 30, 2022. The change in net income was attributable to the factors noted above.

Comparison of the 26 weeks ended July 29, 2023 to the 26 weeks ended July 30, 2022

Total Net Revenue

Total net revenue increased 1%, or $28.6 million, to $2.282 billion for the 26 weeks ended July 29, 2023 compared to $2.253 billion for the 26 weeks ended July 30, 2022. Store revenue increased 4% and digital revenue declined 5%. Last year included $24 million of revenue from excess end-of-season selloffs, which we did not anniversary this year, impacting revenue growth across brands and channels. Total comparable sales decreased 1%.

American Eagle

Total net revenue for the 26 weeks ended July 29, 2023 for the American Eagle brand was $1.438 billion which was nearly flat compared to $1.463 billion for the 26 weeks ended July 30, 2022. This increase was primarily attributable to store revenue, which increased by 4% year over year, which was partially offset by a 5% decline in digital revenue. As described above, this period last year included $10 million of revenue from excess end-of-season selloffs, which we did not anniversary this year and which partially offset increases in store revenues. For the 26 weeks ended July 29, 2023, total comparable sales decreased 3%.

Aerie

Total net revenue for the 26 weeks ended July 29, 2023 for the Aerie brand was $739.5 million, an approximately 6% increase compared to $693.4 million for the 26 weeks ended July 30, 2022. The increase was primarily due to 46 net new store openings since the first quarter of Fiscal 2022. Last year included $12 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. For the 26 weeks ended July 29, 2023, total comparable sales increased 1%.

Other

Total net revenue for the 26 weeks ended July 29, 2023 for our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms, was $217.7 million compared to $200.1 million for the 26 weeks ended July 30, 2022. The increase was primarily due to an increase in Todd Snyder brand revenue.

Gross Profit

Gross profit increased by $108.2 million, or approximately 14%, to $866.2 million compared to $758.0 million last year. Our gross margin percentage increased to 38.0% of revenue from 33.6% of revenue last year. The increase in gross profit was driven by lower inbound transportation costs and lower markdowns. Distribution, warehousing and delivery costs also decreased, partially offset by increased rent related to new store openings.

There was $10.8 million and $9.4 million of share-based payment expense included in gross profit for the periods ended July 29, 2023 and July 30, 2022, respectively, comprised of both 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 SG&A 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 Expenses

SG&A expenses increased by 6%, or $37.6 million to $644.2 million from $606.6 million last year. As a percentage of total net revenue, SG&A expenses increased 130 basis points to 28.2%, compared to 26.9% last year. The increase in expenses was primarily related to increased corporate compensation and incentives and professional service expenses.

There was $14.5 million and $13.5 million of share-based payment expense included in SG&A expenses for the 26 weeks ended July 29, 2023 and July 30, 2022, comprised of both time and performance-based awards.

Impairment, Restructuring and Other Charges

During the 26 weeks ended July 29, 2023, the Company recorded $21.3 million of impairment, restructuring and other charges related to Quiet Platforms, including $10.8 million of impairment of supply chain technology assets due to insufficient prospective cash flows to support the asset value resulting from the restructuring of Quiet Platforms, $5.6 million of employee severance, and $4.9 million of contract related costs related charges, resulting from the restructuring of Quiet Platforms. There were no impairment, restructuring and other charges for the 26 weeks ended July 30, 2022.

Depreciation and Amortization Expense

Depreciation and amortization expense increased by 18% or $17.1 million, to $112.6 million for the 26 weeks ended July 29, 2023, compared to $95.5 million for the 26 weeks ended July 30, 2022, which was primarily driven by investments in new stores. As a percentage of total net revenue, depreciation and amortization expense was 4.9% for the 26 weeks ended July 29, 2023 compared to 4.2% for the 26 weeks ended July 30, 2022.

Operating income (Loss)

Operating income increased 58%, or $32.2 million, to $88.1 million, or 3.9% as a percentage of total net revenue, for the 26 weeks ended July 29, 2023, compared to $55.9 million, or 2.5% as a percentage of total net revenue, for the 26 weeks ended July 30, 2022. The increase was primarily driven by higher gross profit, partially offset by higher SG&A and depreciation and amortization expenses, as well as $21.3 million of impairment, restructuring and other charges incurred this year.

American Eagle

Operating income for the 26 weeks ended July 29, 2023 for the American Eagle brand was $234.2 million, or 16.3% as a percentage of American Eagle total net revenue, compared to $213.0 million, or 14.6% as a percentage of American Eagle total net revenue, for the 26 weeks ended July 30, 2022. The increase was primarily the result of increased gross profit from lower markdowns reflecting inventory control, partially offset by higher SG&A costs and higher depreciation and amortization expenses.

Aerie

Operating income for the 26 weeks ended July 29, 2023 for the Aerie brand was $112.9 million, or 15.3% as a percentage of Aerie total net revenue, compared to $54.9 million, or 7.9% as a percentage of Aerie total net revenue, for the 26 weeks ended July 30, 2022. The increase was primarily the result of increased gross profit from lower markdowns reflecting inventory control and higher revenue, partially offset by higher SG&A costs and higher depreciation and amortization expenses.

Other

Operating loss for the 26 weeks ended July 29, 2023 for our other operations was ($26.6) million compared to ($27.7) million for the 26 weeks ended July 30, 2022.

General Corporate Expenses

General corporate expenses increased $26.8 million due to increased corporate compensation and incentives, general corporate expenses and depreciation.

Debt Related Charges

Debt related charges of $60.1 million for the 26 weeks ended July 30, 2022 consists primarily of a $55.7 million induced conversion expense related to the June 2022 Note Exchange, along with certain other costs related to actions taken to strengthen our capital structure. There were no debt related charges for the 26 weeks ended July 29, 2023.

Interest Expense, net

Interest expense decreased $6.4 million, to $1.6 million, for the 26 weeks ended July 29, 2023, compared to $8.0 million for the 26 weeks ended July 30, 2022. The decrease was primarily attributable to lower interest expense on the 2025 Notes as a result of the Note Exchanges and Early Redemption.

Other Income, net

Other income, net was $5.5 million for the 26 weeks ended July 29, 2023, compared to $6.3 million for the 26 weeks ended July 30, 2022. The decrease was primarily attributable to foreign currency fluctuations and changes in other non-operating items.

Provision for Income Taxes

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 26 weeks ended July 29, 2023 was 27.1% compared to (82.5)% for the 26 weeks ended July 30, 2022. The change in the effective tax rate, as compared to the prior period, is primarily due to the 2022 Note Exchange in June 2022 as a portion of the inducement charge was not deductible and state legislative changes that occurred in Fiscal 2022.

Net Income (Loss)

Net income increased by $77.7 million, to $67.0 million for the 26 weeks ended July 29, 2023, or 2.9% as a percentage of total net revenue, compared to a net loss of $10.7 million, or (0.5)% as a percentage of total net revenue for the 26 weeks ended July 30, 2022.

Net income (loss) per share increased to $0.34 per diluted share, including $0.08 of impairment, restructuring and other charges for the 26 weeks ended July 29, 2023, compared to net loss of $0.06 per diluted share, including $0.26 of debt related charges for the 26 weeks ended July 30, 2022. The change in net income was attributable to the factors noted above.

International Operations

We have agreements with multiple third-party operators to expand our brands internationally. Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given geographic area and to source products from us. International licensees' rights include the right to own and operate retail stores and may include rights to sell in wholesale markets, shop-in-shop concessions and operate online marketplace businesses. As of July 29, 2023, our international licensing partners operated in 297 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.

As of July 29, 2023, we had 105 company-owned stores in Canada, 74 in Mexico, 18 in Hong Kong, seven in Puerto Rico and two in Japan.

Liquidity and Capital Resources

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 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.

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 $700 million, which will expire in June 2027. As of July 29, 2023, we had borrowings under the Credit Facility of $3.0 million. In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due in 2025. As of July 29, 2023, the Company's 2025 Notes have been fully redeemed. Refer to Note 8 to the Consolidated Financial Statements for additional information regarding our long-term debt.

As of July 29, 2023, we had approximately $175.3 million in cash and cash equivalents. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.

The following sets forth certain measures of our liquidity:

Working capital increased $107.7 million compared to January 28, 2023 and decreased $20.3 million compared to last year. The $20.3 million decrease in our working capital compared to July 30, 2022, is driven by a $50.1 million decrease in merchandise inventory, a $40.0 million increase in accounts payable, and a $23.7 increase in accrued compensation and payroll taxes, partially offset by a $77.1 million increase in cash and cash equivalents and a $50.5 million increase in accounts receivable.

Cash Flows Provided by (Used For) Operating Activities

Net cash provided by operating activities totaled $147.9 million for the 26 weeks ended July 29, 2023, compared to net cash used for operating activities of $105.3 million for the 26 weeks ended July 30, 2022. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs.

Cash Flows Used for Investing Activities

Net cash used for investing activities totaled $98.5 million for the 26 weeks ended July 29, 2023, compared to net cash used for investing activities of $128.4 million for the 26 weeks ended July 30, 2022. Investing activities for the 26 weeks ended July 29, 2023 and July 30, 2022 primarily consisted of $92.0 million and $127.9 million, respectively, of capital expenditures for property and equipment.

Cash Flows Used for Financing Activities

Net cash used for financing activities totaled $46.4 million for the 26 weeks ended July 29, 2023, compared to net cash used for financing activities of $102.1 million for the 26 weeks ended July 30, 2022. Cash used for financing activities for the 26 weeks ended July 29, 2023 consisted primarily of $39.4 million used for cash dividends paid at a quarterly rate of $0.10 per share, and $10.4 million for the repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments, partially offset by $3.0 million of net borrowings under our Credit Facility.

Cash used for financing activities for the 26 weeks ended July 30, 2022 consisted primarily of $200.0 million used to repurchase the Company's common stock under the ASR Agreement, $136.1 million used for the principal paid in connection with the Note Exchange, $64.8 million used for cash dividends paid at a quarterly rate of $0.18 per share and $9.6 million used for the repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments, partially offset by $307.7 million of proceeds from borrowings under our Credit Facility.

Revolving Credit Facility

In June 2022, we entered into an amended and restated Credit Agreement, which provides senior secured asset-based revolving credit for loans and letters of credit up to $700 million, subject to customary borrowing base limitations. The Credit Facility expires on June 24, 2027. Before amendment and restatement, the Company's previous credit agreement provided senior secured asset-based revolving credit for loans and letters of credit up to $400 million and was scheduled to expire on January 30, 2024.

All obligations under the Credit Facility are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by certain assets of the Company and certain subsidiaries.

As of July 29, 2023, the Company was in compliance with the terms of the Credit Agreement and had $3.0 million in borrowings and $7.7 million outstanding in stand-by letters of credit. As of July 30, 2022, the Company had $307.7 million in outstanding borrowings under the Credit Agreement.

Capital Expenditures for Property and Equipment

Capital expenditures for the 26 weeks ended July 29, 2023 were $92.0 million, and included $44.1 million related to investments in our stores, including 14 new stores (6 American Eagle stores, 5 combined Aerie stand-alone stores and OFFLINE™ stand-alone stores, and 3 Todd Snyder stores), and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology initiatives ($31.6 million), Quiet Platforms ($11.5 million), our supply chain infrastructure ($2.9 million), and other home office projects ($1.9 million).

For Fiscal 2023, we expect capital expenditures to be in the range of approximately $150 million to $175 million related to the continued support of our expansion efforts, stores, information technology upgrades to support growth, and investments in e-commerce, as well as to support and enhance our supply chain and Quiet Platforms. We expect to be able to fund our capital expenditures through current cash holdings and cash generated from operations.

Share Repurchases

During Fiscal 2019, our Board of Directors (“Board”) authorized the repurchase of 30.0 million shares under a share repurchase program.

During the 26 weeks ended July 29, 2023, we did not repurchase any shares under our publicly announced share repurchase program. As of July 29, 2023, our total remaining share repurchase authorization was 13.0 million shares.

During the 26 weeks ended July 29, 2023 and July 30, 2022, we repurchased approximately 0.7 million and 0.6 million shares, respectively, from certain employees at market prices totaling $10.4 million and $9.6 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 repurchased shares have been recorded as treasury stock.

Dividends

During the 13 weeks ended July 29, 2023, our Board declared a quarterly cash dividend of $0.10 per share on June 7, 2023, which was paid on July 21, 2023.

The Company maintains the right to defer the record and payment dates of any declared dividends, depending upon, among other factors, 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 United States taxation, and other relevant factors.

Critical Accounting Estimates

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 to our Consolidated Financial Statements for the year ended January 28, 2023 contained in our Fiscal 2022 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. 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 $15.2 million and $21.1 million is included in accumulated other comprehensive income during the 13 and 26 weeks ended July 29, 2023, respectively. Our market risk profile as of January 28, 2023 is disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Fiscal 2022 Form 10-K, which is unchanged as of July 29, 2023.

Disclosure Controls and Procedures

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 SEC’s rules and forms, and that such information is accumulated and communicated to the management 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, as of July 29, 2023, 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 concluded that, as of the end of the period covered by this Quarterly Report, 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.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Risk factors that affect our business and financial results are discussed within Part I, Item 1A of our Fiscal 2022 Form 10-K. There have been no material changes to our risk factors as disclosed in the Fiscal 2022 Form 10-K.