American Eagle Outfitters Inc: Form 10-Q for the period ended Oct 28, 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 39 weeks ended October 28, 2023, our 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.

Profit Improvement Program

We launched our profit improvement program during Fiscal 2023, which focused on a comprehensive review of our cost structure. Early actions have been focused on the components of gross margin and contributed to margin expansion in the second and third quarters. Other significant work streams have been identified, actioned and incorporated into the company’s 2024 plans. The results of these initiatives are expected to yield gross margin expansion, as well as SG&A and depreciation leverage, resulting in an improved operating profit rate.

Results of Operations

During the third quarter, we saw significant strength across both our digital channels and stores, with digital revenue increasing by 10% and store revenue increasing 3% on a year-over-year basis due to strong execution driving improved traffic across AE and Aerie. Additionally, our profit improvement program resulted in profit-flow through due to preliminary actions targeted at improving gross margin. Momentum across our brands has continued into the fourth quarter and we continue to make progress on profit improvement initiatives and our strategic priorities aimed at generating consistent, profitable growth.

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:

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

As of October 28, 2023, we operated 873 American Eagle retail stores, which includes 187 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, 307 Aerie stand-alone stores (including 38 OFFLINE™ stand-alone stores and 31 OFFLINE™ side-by-side locations), and AEO Direct. Additionally, there were 14 Todd Snyder stand-alone locations and five Unsubscribed locations.

Comparison of the 13 weeks ended October 28, 2023 to the 13 weeks ended October 29, 2022

Total Net Revenue

Total net revenue increased 5% for the 13 weeks ended October 28, 2023 at $1.301 billion, compared to $1.241 billion last year. Digital revenue increased 10%, while store revenue increased 3%. Digital results were driven by increased traffic due to several initiatives to improve customer engagement and experience. Last year included $12 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. Total comparable sales increased by 5% year-over-year, primarily due to strong traffic and transactions across channels. Average unit retail increased in the low-double digits, partially offset by lower units per transaction.

American Eagle

Total net revenue for the 13 weeks ended October 28, 2023 for the American Eagle brand was $857.4 million, a 2% increase compared to $837.6 million for the 13 weeks ended October 29, 2022. Last year included $6 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. Total comparable sales increased 2% year-over-year, primarily due to digital traffic and transactions increasing in the low-double digits year-over-year.

Aerie

Total net revenue for the 13 weeks ended October 28, 2023 for the Aerie brand was $393.0 million, a 12% increase compared to $349.7 million for the 13 weeks ended October 29, 2022. Last year included $6 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. Average unit retail price was up in the high-single digits year-over-year, partially offset by lower units per transaction. Total comparable sales increased 12% year-over-year driven by strong traffic and transactions.

Other

Total net revenue for the 13 weeks ended October 28, 2023 for our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms declined 3% to $111.8 million compared to $115.3 million for the 13 weeks ended October 29, 2022. The decrease is attributable due to $8 million of lower revenue from Quiet Platforms, partially offset by a $4 million increase in Todd Snyder brand revenue.

Gross Profit

Gross profit increased by $64.0 million, or 13% to $543.8 million for the 13 weeks ended October 28, 2023 compared to $479.8 million for the 13 weeks ended October 29, 2022. As a percentage of total net revenue, our gross margin increased 310 basis points to 41.8% for the 13 weeks ended October 28, 2023 from 38.7% for the 13 weeks ended October 29, 2022.

The increase in gross profit was primarily driven by incremental merchandise margin of $43 million related to the increase in total net revenue, including an improvement in markup, and $20 million of lower markdowns reflecting inventory control.

There was $4.5 million and $3.7 million of share-based payment expense included in gross profit for the periods ended October 28, 2023 and October 29, 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 16% or $50.9 million to $362.0 million from $311.1 million last year. As a percentage of total net revenue, SG&A expenses increased 270 basis points to 27.8%, compared to 25.1% last year. The increase in expenses was primarily related to $25 million of increased incentive compensation and $10 million of increased store compensation, as well as increases in advertising and corporate related expenses. Incentive compensation increased as we are accruing performance-based incentives this year based on improvements in trend profitability compared to no accrual last year. Store compensation increased as a result of wage increases and new store openings, partially offset by efficiencies in our store labor model.

There was $5.4 million and $3.1 million of share-based payment expense included in SG&A expenses for the 13 week periods ended October 28, 2023 and October 29, 2022, respectively, comprised of both time and performance-based awards.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 10% or $5.3 million, to $56.4 million for the 13 weeks ended October 28, 2023, compared to $51.1 million for the 13 weeks ended October 29, 2022, which was primarily driven by investments in new stores and technology. As a percentage of total net revenue, depreciation and amortization expense was 4.4% for the 13 weeks ended October 28, 2023 compared to 4.1% for the 13 weeks ended October 29, 2022.

Operating Income

Operating income increased 7% or $7.9 million, to $125.4 million, or 9.6% as a percentage of total net revenue, for the 13 weeks ended October 28, 2023, compared to $117.5 million, or 9.5% as a percentage of total net revenue, for the 13 weeks ended October 29, 2022. The increase was primarily driven by higher gross profit, offset by increased SG&A and depreciation and amortization expenses.

American Eagle

Operating income for the 13 weeks ended October 28, 2023 for the American Eagle brand was $184.0 million, or 21.5% as a percentage of American Eagle total net revenue, compared to $174.1 million, or 20.8% as a percentage of American Eagle total net revenue, for the 13 weeks ended October 29, 2022.

The increase was primarily the result of a $29 million increase in gross profit driven by incremental merchandise margin on the increase in total net revenue, as well as improved markup and lower markdowns reflecting inventory control.

The gross profit improvement was partially offset by a $16 million increase in SG&A costs, primarily from a $7 million increase in incentive and store compensation, as well as increases in advertising, variable selling and other store expenses, and a $3 million increase in depreciation and amortization expense related to new store openings.

Aerie

Operating income for the 13 weeks ended October 28, 2023 for the Aerie brand was $75.9 million, or 19.3% as a percentage of Aerie total net revenue, compared to $56.5 million, or 16.2% as a percentage of Aerie total net revenue, for the 13 weeks ended October 29, 2022.

The increase was primarily the result of a $33 million increase in gross profit driven by incremental merchandise margin on the increase in total net revenue, as well as improved markup and lower markdowns reflecting inventory control, partially offset by incremental rent from new store openings and higher delivery and variable expense from increased digital sales. The gross profit improvement was partially offset by a $12 million increase in SG&A expenses primarily driven by store compensation and increased incentives.

Other

Operating loss for the 13 weeks ended October 28, 2023 for our other operations was ($8.6) million compared to ($11.7) million for the 13 weeks ended October 29, 2022. The increase was primarily the result of a $4 million increase from Quiet Platforms as a result of improved gross profit and lower expenses offset by a $2 million decline in the Todd Snyder brand as a result of increased rent and SG&A costs from new store openings.

General Corporate Expenses

General corporate expenses increased by $24 million for the 13 weeks ended October 28, 2023, primarily due to a $19 million increase in corporate compensation and incentives, as well as various increases in other corporate expenses.

Interest (Income) Expense, net

Interest (income) expense increased $6.8 million, to ($2.9) million, for the 13 weeks ended October 28, 2023, compared to $3.9 million for the 13 weeks ended October 29, 2022. The change was primarily attributable to lower borrowings on our Credit Facility and the elimination of convertible note interest expense on the 2025 Notes due to their Early Redemption this year, as well as a $3 million increase in interest income this year.

Other (Income) Expense, net

Other (income) expense, net was ($4.0) million for the 13 weeks ended October 28, 2023, compared to other (income) expense, net of $0.8 million for the 13 weeks ended October 29, 2022. The increase was primarily attributable to foreign currency fluctuations.

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 13 weeks ended October 28, 2023 was 26.9% compared to 28.0% for the 13 weeks ended October 29, 2022. The decrease in the effective tax rate for the 13 weeks ended October 28, 2023 was primarily due to international tax provisions of the Tax Cuts and Jobs Act (the “Tax Act”), overall geographic mix of earnings in jurisdictions in which the Company operates, offset by non-deductible executive compensation.

Net Income

Net income increased $15.4 million, to $96.7 million for the 13 weeks ended October 28, 2023, or 7.4% as a percentage of total net revenue, compared to net income of $81.3 million, or 6.6% as a percentage of total net revenue for the 13 weeks ended October 29, 2022.

Net income per share increased to $0.49 per diluted share for the 13 weeks ended October 28, 2023, compared to $0.42 per diluted share, for the 13 weeks ended October 29, 2022. The change in net income was attributable to the factors noted above.

Comparison of the 39 weeks ended October 28, 2023 to the 39 weeks ended October 29, 2022

Total Net Revenue

Total net revenue increased 3%, or $89.1 million, to $3.583 billion for the 39 weeks ended October 28, 2023 compared to $3.494 billion for the 39 weeks ended October 29, 2022. Store revenue increased 4% and digital revenue was flat to last year. Last year included $36 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 increased 1%.

American Eagle

Total net revenue for the 39 weeks ended October 28, 2023 decreased slightly for the American Eagle brand to $2.295 billion as compared to $2.301 billion for the 39 weeks ended October 29, 2022. Last year also included $16 million of revenue from excess end-of-season selloffs, which we did not anniversary this year. For the 39 weeks ended October 28, 2023, total comparable sales decreased by 1%.

Aerie

Total net revenue for the 39 weeks ended October 28, 2023 for the Aerie brand was $1.133 billion, a 9% increase compared to $1.043 billion for the 39 weeks ended October 29, 2022. The increase was primarily due to 53 net new store openings since the first quarter of Fiscal 2022, as well as a 5% comparable sales increase. These amounts were partially offset by $18 million of revenue from excess end-of-season selloffs in the prior year, which we did not anniversary this year.

Other

Total net revenue for the 39 weeks ended October 28, 2023 for our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms, was $329.5 million compared to $315.3 million for the 39 weeks ended October 29, 2022. The increase was primarily due to an increase in Todd Snyder brand revenue of $23 million offset by a decline in Quiet Platforms revenue of $10 million.

Gross Profit

Gross profit increased 14% or $172.2 million, to $1.410 billion for the 39 weeks ended October 28, 2023 compared to $1.238 billion last year. Our gross margin percentage increased to 39.4% of revenue from 35.5% of revenue last year.

The increase in gross profit was driven by the total net revenue increase in the Aerie brand, as well as $60 million of lower inbound transportation costs and product costs and $46 million of lower markdowns due to inventory control and lower end-of-season selloffs this year. Distribution, warehousing and delivery costs also decreased $22 million, partially offset by $20 million of incremental incentive compensation and increased rent of $7 million primarily related to new store openings.

There was $15.3 million and $13.1 million of share-based payment expense included in gross profit for the 39 week periods ended October 28, 2023 and October 29, 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 10% or $88.5 million to $1.006 billion from $917.7 million last year. As a percentage of total net revenue, SG&A expenses increased 180 basis points to 28.1%, compared to 26.3% last year.

The increase in expenses was primarily related to $41 million of increased incentive compensation and $10 million of increased store compensation, as well as increases in advertising, professional services, corporate and store related expenses. Incentive compensation increased as we are accruing a baseline of performance-based incentives this year based on improvements in trend profitability compared to no accrual last year.

There was $19.9 million and $16.9 million of share-based payment expense included in SG&A expenses for the 39 week periods ended October 28, 2023 and October 29, 2022, respectively, comprised of both time and performance-based awards.

Impairment, Restructuring and Other Charges

During the 39 weeks ended October 28, 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 charges, resulting from the restructuring of Quiet Platforms. There were no impairment, restructuring and other charges for the 39 weeks ended October 29, 2022.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 15%, or $22.4 million, to $169.0 million for the 39 weeks ended October 28, 2023, compared to $146.7 million for the 39 weeks ended October 29, 2022, which was primarily driven by investments in new stores and technology. As a percentage of total net revenue, depreciation and amortization expense was 4.7% this year compared to 4.2% last year.

Operating income

Operating income increased by 23%, or $40.0 million, to $213.5 million, or 6.0% as a percentage of total net revenue, for the 39 weeks ended October 28, 2023, compared to $173.5 million, or 5.0% as a percentage of total net revenue, for the 39 weeks ended October 29, 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 39 weeks ended October 28, 2023 for the American Eagle brand was $418.2 million, or 18.2% as a percentage of American Eagle total net revenue, compared to $387.2 million, or 16.8% as a percentage of American Eagle total net revenue, for the 39 weeks ended October 29, 2022.

The increase was primarily the result of a $63 million increase in gross profit from $25 million of lower markdowns reflecting inventory control and $27 million of incremental freight costs incurred last year, as well as a $14 million decrease in distribution, warehousing and delivery costs and a $10 million reduction in rent expense. These improvements were partially offset by an increase in incentive compensation expense. The gross profit improvement was partially offset by a $22 million increase in SG&A costs, primarily from increased incentive compensation of $10 million, advertising and store related expenses, partially offset by lower store salaries, as well as a $10 million increase in depreciation and amortization expense related to new store openings.

Aerie

Operating income for the 39 weeks ended October 28, 2023 for the Aerie brand was $188.8 million, or 16.7% as a percentage of Aerie total net revenue, compared to $111.4 million, or 10.7% as a percentage of Aerie total net revenue, for the 39 weeks ended October 29, 2022.

The increase was primarily the result of a $105 million increase in gross profit driven by incremental margin on the increase in total net revenue, as well as improved markup, including a $34 million benefit from incremental freight costs incurred last year, and $26 million of lower markdowns reflecting inventory control. These improvements were partially offset by $10 million in incremental rent related to new store openings and $5 million of incremental incentive compensation expense. The gross profit improvement was partially offset by a $20 million increase in SG&A costs, primarily from increased store and incentive compensation expense, as well as an $8 million increase in depreciation and amortization expense related to new store openings.

Other

Operating loss for the 39 weeks ended October 28, 2023 for our Todd Snyder and Unsubscribed brands, as well as Quiet Platforms was ($35.3) million, excluding the aforementioned $21.3 million of impairment, restructuring and other charges related to Quiet Platforms, compared to ($39.4) million for the 39 weeks ended October 29, 2022. The improvement was primarily the result of increased operating income from the Todd Snyder and Unsubscribed brands of $3 million and increased operating income of Quiet Platforms of $1 million.

General Corporate Expenses

General corporate expenses increased $51 million due to increased corporate compensation and incentive expense of $33 million, a $6 million increase in corporate office rent and depreciation, as well as various increases in other corporate expenses.

Debt Related Charges

Debt related charges of $60.1 million for the 39 weeks ended October 29, 2022 consists primarily of a $55.7 million induced conversion expense related to the Note Exchange in June 2022, along with certain other costs related to actions taken to strengthen our capital structure. There were no debt related charges for the 39 weeks ended October 28, 2023.

Interest (Income) Expense, net

Interest (income) expense, net decreased $13.1 million, to ($1.2) million, for the 39 weeks ended October 28, 2023, compared to $11.9 million for the 39 weeks ended October 29, 2022. The decrease was primarily attributable to $10 million of lower interest expense on the 2025 Notes as a result of the Note Exchanges and Early Redemption and lower borrowings on our Credit Facility, as well as increased interest income this year.

Other (Income) Expense, net

Other (income) expense, net increased $3.9 million, to ($9.4) million for the 39 weeks ended October 28, 2023, compared to ($5.5) million for the 39 weeks ended October 29, 2022. The increase was primarily attributable to foreign currency fluctuations.

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 39 weeks ended October 28, 2023 was 27.0% compared to 34.1% for the 39 weeks ended October 29, 2022. The decrease in the effective tax rate for the 39 weeks ended October 28, 2023 was primarily due to the Note Exchange in June 2022 as a porton of the inducement charge was not deductible and state legislative changes that occurred in Fiscal 2022.

Net Income

Net income increased $93.2 million to $163.7 million for the 39 weeks ended October 28, 2023, or 4.6% as a percentage of total net revenue, compared to $70.5 million, or 2.0% as a percentage of total net revenue for the 39 weeks ended October 29, 2022.

Net income per share increased to $0.83 per diluted share for the 39 weeks ended October 28, 2023, including $0.08 of impairment, restructuring and other charges, compared to net income of $0.36 per diluted share, including $0.24 of debt related charges for the 39 weeks ended October 29, 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 October 28, 2023, our international licensing partners operated in 301 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.

As of October 28, 2023, we had 104 company-owned stores in Canada, 79 in Mexico, 18 in Hong Kong, seven in Puerto Rico and three 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 stockholders 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 October 28, 2023, there were no borrowings under the Credit Facility. In April 2020, the Company issued $415 million aggregate principal amount of convertible senior notes due in 2025. As of October 28, 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 October 28, 2023, we had approximately $240.9 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:

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Working capital increased $190.9 million compared to January 28, 2023 and decreased $69.5 million compared to last year. The $69.5 million decrease in our working capital compared to October 29, 2022, is driven by a $158.8 million increase in cash and cash equivalents offset by a $111.6 million increase in accounts payable, a $60.0 million increase in accrued compensation and payroll taxes, a $42.6 million decrease in prepaid expenses and other, and a $11.5 million decrease in accounts receivable.

Cash Flows Provided by (Used For) Operating Activities

Net cash provided by operating activities totaled $284.3 million for the 39 weeks ended October 28, 2023, compared to net cash used for operating activities of $86.7 million for the 39 weeks ended October 29, 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 $144.3 million for the 39 weeks ended October 28, 2023, compared to net cash used for investing activities of $200.1 million for the 39 weeks ended October 29, 2022. Investing activities for the 39 weeks ended October 28, 2023 and October 29, 2022 primarily consisted of $134.9 million and $199.4 million, respectively, of capital expenditures for property and equipment.

Cash Flows Used for Financing Activities

Net cash used for financing activities totaled $69.0 million for the 39 weeks ended October 28, 2023, compared to net cash used for financing activities of $64.1 million for the 39 weeks ended October 29, 2022. Cash used for financing activities for the 39 weeks ended October 28, 2023 consisted primarily of $59.1 million used for cash dividends paid at a quarterly rate of $0.10 per share, and $10.7 million for the repurchase of common stock from employees for the payment of taxes in connection with vesting of share-based payments.

Cash used for financing activities for the 39 weeks ended October 29, 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 during the 26 weeks ended July 30, 2022 and $9.8 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 $343.0 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 October 28, 2023, the Company was in compliance with the terms of the Credit Agreement and had no borrowings and $7.7 million outstanding in stand-by letters of credit. As of October 29, 2022, the Company had $343.0 million in outstanding borrowings under the Credit Agreement.

Capital Expenditures for Property and Equipment

Capital expenditures for the 39 weeks ended October 28, 2023 were $134.9 million, and included $67.8 million related to investments in our stores, including 31 new stores (14 American Eagle stores, 13 combined Aerie stand-alone stores and OFFLINE™ stand-alone stores, and 4 Todd Snyder stores), and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology initiatives ($44.5 million), Quiet Platforms ($15.7 million), our supply chain infrastructure ($3.9 million), and other home office projects ($3.0 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 39 weeks ended October 28, 2023, we did not repurchase any shares under our publicly announced share repurchase program. As of October 28, 2023, our total remaining share repurchase authorization was 13.0 million shares.

During the 39 weeks ended October 28, 2023 and October 29, 2022, we repurchased approximately 0.8 million and 0.6 million shares, respectively, from certain employees at market prices totaling $10.7 million and $9.8 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 October 28, 2023, our Board declared a quarterly cash dividend of $0.10 per share on September 13, 2023, which was paid on October 27, 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 loss of $21.3 million and $0.2 million is included in accumulated other comprehensive income during the 13 and 39 weeks ended October 28, 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 October 28, 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 October 28, 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.