American Eagle Outfitters, Inc. (AEO) Business, 2016

General

American Eagle Outfitters, Inc., (“AEO Inc.,” the “Company,” “we,” “our”) a Delaware corporation, was founded in 1977. We are a leading specialty retailer, operating over 1,000 retail stores and online at ae.com and aerie.com in the U.S. and internationally. We offer a broad assortment of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. We also have license agreements with third parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, Latin America and the Middle East. As of January 30, 2016, we operated 949 American Eagle Outfitters stores and 97 Aerie stand-alone stores. Our licensed store base has grown to 141 locations in 22 countries and our online business ships to 81 countries worldwide.

Information concerning our segments and certain geographic information is contained in Note 2 of the Consolidated Financial Statements included in this Form 10-K and is incorporated herein by reference. Additionally, a five-year summary of certain financial and operating information can be found in Part II, Item 6, Selected Consolidated Financial Data, of this Form 10-K. See also Part II, Item 8, Financial Statements and Supplementary Data.

Brands

American Eagle Outfitters Brand (“AEO Brand”)

The AEO Brand is an optimistic, authentic, energetic American brand. Our passion for denim is at the heart of everything we do, and our bottoms collection is complemented by a rich assortment of other apparel categories, as well as footwear and accessories. We work to craft high-quality, on-trend clothing that represents a terrific value in every style. Each season, it is our goal to create an aspirational collection and campaign that encourages our customers to take what we make, and LIVE YOUR LIFE.

As of January 30, 2016, the AEO Brand operated 949 stores and online at ae.com.

Aerie

Aerie is an intimates brand, offering bras, undies, swim and so much more for every girl. Aerie embodies a youthful spirit, which is fun, relaxed, sexy, natural, strong and real. We are committed to not retouching our images and our brand DNA is deeply rooted in our Aerie REAL campaign, which focuses on body positivity and inspiring confidence in our customers. We believe beauty comes from the inside out.

As of January 30, 2016, the Aerie brand operates 97 stand-alone stores and 67 side-by-side stores connected to AEO brand stores. In addition, the Aerie brand is sold in AEO brand stores and online at aerie.com.

Other brands

On November 2, 2015, AEO Inc. acquired Tailgate Clothing Company, which owns and operates Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and Todd Snyder New York, a premium menswear brand. As of January 30, 2016, we operated one Tailgate store in Iowa City, Iowa. Tailgate and Todd Snyder product is also sold online at TailgateClothing.com and ToddSnyder.com, respectively.

Business Priorities & Strategy

We are focused on delivering revenue growth and improved profitability as we execute on our key priorities. Our current priorities include:

· Capitalize on the strength of our brands to achieve growth through continued product innovation and product-focused marketing across both stores and digital channels to drive customer acquisition.

· Grow the Aerie brand through digital expansion, new customer acquisition and new store growth.

· Grow the digital business through our continued focus on advancing mobile, investing in digital marketing, expanding our product offerings and improving the desktop experience.

· Pursue international expansion by advancing our digital capabilities and through our blended approach of licensed and Company-owned store growth.

Real Estate

We ended Fiscal 2015 with 1,188 Company-owned and licensed store locations. Our AEO brand stores average approximately 6,500 gross square feet and approximately 5,200 on a selling square foot basis. Our Aerie brand stores average approximately 3,900 gross square feet and approximately 3,000 on a selling square foot basis. The gross square footage of our Company-owned stores remained flat during Fiscal 2015.

Company-Owned Stores

Our Company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the U.S., Canada, Mexico, China, Hong Kong and the United Kingdom. Stores are located in high-traffic locations in most retail centers in which we operate.

The following table provides the number of our Company-owned stores in operation as of January 30, 2016 and January 31, 2015.

January 30, January 31, 2016 2015 AEO Brand: United States 822 834 Canada 86 86 Mexico 23 18 China 9 9 Hong Kong 6 5 United Kingdom 3 3 Total AEO Brand 949 955 Aerie Brand: United States 82 86 Canada 15 15 Mexico — — Total Aerie Brand 97 101 Tailgate 1 — Total Consolidated 1,047 1,056

The following table provides the changes in the number of our Company-owned stores for the past five fiscal years:

Fiscal Year Beginning of Year Opened Closed End of Year 2015 1,056 23 (32 ) 1,047 2014 1,066 60 (70 ) 1,056 2013 1,044 64 (42 ) 1,066 2012 1,069 16 (41 ) 1,044 2011 1,077 21 (29 ) 1,069

Licensed Stores

In addition to our Company-owned stores, our merchandise is sold at stores operated by licensees. Under these agreements, our merchandise is sold at American Eagle Outfitters and Aerie stores owned and operated by third party operators. Revenue recognized under license agreements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers.

As of January 30, 2016, our products are sold at 141 locations operated by licensees in 22 countries. We continue to increase the number of locations under these types of arrangements as part of our balanced approach to global expansion.

AEO Direct

We sell merchandise through our websites, ae.com and aerie.com, both domestically and internationally. The websites reinforce each particular brand’s lifestyle, and are designed to complement the in-store experience.

Over the past several years, we have invested in building its technologies and digital capabilities. We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the desktop experience.

Omni-Channel

In addition to our investments in technology, we have invested in building omni-channel capabilities to better serve customers and gain operational efficiencies. These upgraded technologies have provided a single view of inventory across channels, connecting physical stores directly to our digital business, providing our customers with a more convenient and improved shopping experience. Our store-to-door tool enables store customers to seamlessly make purchases from online inventory. Additionally, we fulfill online orders at stores through our buy online, ship from store tool, improving online order fulfillment rates. We also offer a reserve online, pick up in store service to our customers. We will continue to optimize these tools and services to build ongoing improvements to the customer shopping experience.

Merchandise Suppliers

We design our merchandise, which is manufactured by third-party factories. During Fiscal 2015, we purchased substantially all of our merchandise from non-North American suppliers. For the year, we sourced merchandise through approximately 300 vendors located throughout the world, primarily in Asia, and did not source more than 10% of our merchandise from any single factory or supplier during the year.

We maintain a quality control department at our distribution centers to inspect incoming merchandise shipments for overall quality of manufacturing. Periodic inspections are also made by our employees and agents at manufacturing facilities to identify quality issues prior to shipment of merchandise.

We uphold an extensive factory inspection program to monitor compliance with our Vendor Code of Conduct. New garment factories must pass an initial inspection in order to do business with us and we continue to review their social compliance performance both through internal audits by our compliance team and through the use of third-party monitors. We strive to partner with suppliers who respect local laws and share our dedication to utilize best practices in human rights, labor rights, environmental practices and workplace safety.

Inventory and Distribution

Merchandise is shipped directly from our vendors to our U.S. distribution centers in Hazelton, Pennsylvania and Ottawa, Kansas, or to our Canadian distribution center in Mississauga, Ontario. Additionally, an increasing amount of product is shipped directly to stores, by-passing our distribution centers which reduces transit times and lowers operating costs. We contract with third-party distribution centers in the Netherlands, Mexico City, Hong Kong and Shanghai.

We strive to maintain sufficient quantities of inventory in our retail stores and distribution centers to offer customers a full selection of current merchandise. We emphasize rapid turnover and take markdowns as required to keep merchandise fresh and current.

Regulation

We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities. We are subject to a variety of customs regulations and international trade arrangements.

Competition

The retail apparel industry is highly competitive both in stores and on-line. We compete with various individual and chain specialty stores, as well as the casual apparel and footwear departments of department stores and discount retailers, primarily on the basis of quality, fashion, service, selection and price.

Trademarks and Service Marks

We have registered AMERICAN EAGLE OUTFITTERS®, AMERICAN EAGLE®, AE®, AEO®, LIVE YOUR LIFE®, Aerie® and the Flying Eagle Design with the United States Patent and Trademark Office. We also have registered or have applied to register these trademarks with the registries of the foreign countries in which our stores and/or manufacturers are located and/or where our product is shipped.

We have registered AMERICAN EAGLE OUTFITTERS®, AMERICAN EAGLE®, AEO®, LIVE YOUR LIFE®, Aerie® and the Flying Eagle Design with the Canadian Intellectual Property Office. In addition, we have acquired rights in AETM for clothing products and registered AE® in connection with certain non-clothing products.

In the U.S. and in other countries around the world, we also have registered, or have applied to register, a number of other marks used in our business, including our pocket stitch designs.

These registered trademarks are renewable indefinitely, and their registrations are properly maintained in accordance with the laws of the country in which they are registered. We believe that the recognition associated with these trademarks makes them extremely valuable and, therefore, we intend to use and renew our trademarks in accordance with our business plans.

Employees

As of January 30, 2016, we had approximately 37,800 employees in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom of whom approximately 31,300 were part-time and seasonal hourly employees.

Executive Officers of the Registrant

Mary M. Boland, age 58, has served as our Executive Vice President, Chief Financial and Administrative Officer, and Principal Financial Officer since July 2012. Prior to joining us, Ms. Boland served Levi Strauss & Co. as Senior Vice President Finance of Global Levi’s from 2011 to 2012 and as Senior Vice President Finance of the Americas from 2006 to 2011. Prior to that time, Ms. Boland held a variety of finance positions with General Motors Corporation from 1979 to 2006 including Vice President and Chief Financial Officer, North America from 2003 to 2006.

Jennifer M. Foyle, age 49, has served as our Global Brand President – Aerie since January 2015. Prior thereto, Ms. Foyle served as Executive Vice President, Chief Merchandising Officer – Aerie from February 2014 to January 2015 and Senior Vice President, Chief Merchandising Officer – Aerie from August 2010 to February 2014. Prior to joining us, Ms. Foyle was President of Calypso St. Barth from 2009 to 2010. In addition, she held various positions at J. Crew Group, Inc., including Chief Merchandising Officer, from 2003 to 2009.

Charles F. Kessler, age 43, has served as our Global Brand President – American Eagle Outfitters since January 2015. Prior thereto, he served as our Executive Vice President, Chief Merchandising and Design Officer – American Eagle Outfitters from February 2014 to January 2015. Prior to joining us, Mr. Kessler served as Chief Merchandising Officer at Urban Outfitters, Inc. from October 2011 to November 2013 and as Senior Vice President, Corporate

Merchandising at Coach, Inc. from July 2010 to October 2011. Prior to that time, Mr. Kessler held various positions with Abercrombie & Fitch Co. from 1994 to 2010, including Executive Vice President, Female Merchandising from 2008 to 2010.

Michael R. Rempell, age 42, has served as our Executive Vice President and Chief Operations Officer since June 2012. Prior thereto, he served as our Executive Vice President and Chief Operating Officer, New York Design Center, from April 2009 to June 2012, as Senior Vice President and Chief Supply Chain Officer from May 2006 to April 2009, and in various other positions since joining us in February 2000.

Jay L. Schottenstein, age 61, has served as our Executive Chairman, Chief Executive Officer since December 2015. Prior thereto, Mr. Schottenstein served as our Executive Chairman, Interim Chief Executive Officer from January 2014 to December 2015. He has also served as our Chairman and its predecessors since March 1992. He served as our Chief Executive Officer from March 1992 until December 2002 and prior to that time, he served as a Vice President and Director of our predecessors since 1980. He has also served as Chairman of the Board and Chief Executive Officer of Schottenstein Stores Corporation (“SSC”) since March 1992 and as President since 2001. Prior thereto, Mr. Schottenstein served as Vice Chairman of SSC from 1986 to 1992. He has been a Director of SSC since 1982. Mr. Schottenstein also served as Chief Executive Officer from March 2005 to April 2009 and as Chairman of the Board since March 2005 of DSW Inc., a company traded on the New York Stock Exchange. He has also served as an officer and director of various other entities owned or controlled by members of his family since 1976.

Fiscal Year

Our fiscal year ends on the Saturday nearest to January 31. As used herein, “Fiscal 2016” refers to the 52 week period ending January 28, 2017. “Fiscal 2015”, “Fiscal 2014” and “Fiscal 2013” refer to the 52-week periods ended January 30, 2016, January 31, 2015 and February 1, 2014, respectively. “Fiscal 2012” refers to the 53-week period ended February 2, 2013.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available under the “Investors” section of our website at www.ae.com. These reports are available as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (the “SEC”).

Our corporate governance materials, including our corporate governance guidelines, the charters of our audit, compensation, and nominating and corporate governance committees, and our code of ethics may also be found under the “Investors.” section of our website at www.ae.com. Any amendments or waivers to our code of ethics will also be available on our website. A copy of the corporate governance materials is also available upon written request.

Additionally, our investor presentations are available under the “Investors” section of our website at www.ae.com. These presentations are available as soon as reasonably practicable after they are presented at investor conferences.

Certifications

As required by the New York Stock Exchange (“NYSE”) Corporate Governance Standards Section 303A.12(a), on June 24, 2015, our Chief Executive Officer submitted to the NYSE a certification that he was not aware of any violation by the Company of NYSE corporate governance listing standards. Additionally, we filed with this Form 10-K, the Principal Executive Officer and Principal Financial Officer certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.