管理層發言
Good afternoon, everyone. Welcome to the AEO, Inc. Fourth Quarter 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead.
Good afternoon, everyone. Today, we issued our fourth quarter and fiscal year 2025 press release. Note that included in the release and during this call, certain financial metrics are presented on both a GAAP and non-GAAP adjusted basis. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at www.aeo-inc.com in the Investor Relations section. Here, you can also find our fourth quarter investor presentation. During today's call, we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Today, we have a change to our conference call format. Due to the passing of Jay's mother, he is unable to join the question-and-answer section of the call. We extend our deepest condolences to Jay and the Schottenstein family. Today's call will include Jay's overview and highlights, which were prerecorded. Joining me for the call are Jen Foyle, President, Executive Creative Director for American Eagle and Aerie, and Mike Mathias, Chief Financial Officer. And now we will begin the call.
Thanks to the hard work of the team, we made meaningful progress this year and delivered a strong fourth quarter. Following a tough start to the year, I'm extremely proud of how the team course-corrected with a deliberate action plan that ignited growth, improved profitability, and cash flow, fueling a strong finish to 2025. Initiatives across merchandising, operations, and marketing continue to strengthen our company and position our brands for long-term success. We remain committed to driving enduring profitable growth and strong cash flow for our shareholders. Let me walk you through the highlights of the quarter, and Mike will go through the numbers in detail. We delivered double-digit sales growth in the fourth quarter ahead of plan. This represented an acceleration from the third quarter to produce our best quarter of the year. We also achieved record-breaking results through the Thanksgiving and holiday season, building on the trends that began last summer. Margin performance was solid and drove enhanced operating efficiencies. We were thrilled to see the remarkable momentum at Aerie and OFFLINE, which delivered 23% comp growth. Robust demand was broad-based across categories and channels. By leveraging our stronger market position and heightened demand, we exited the quarter with record brand awareness. Customer acquisition was up in the double digits. With successful expansion underway across a number of categories, we see significant runway to continue to build Aerie and OFFLINE and capture new audiences in the years ahead. I'm also pleased by the consistent and steady progress we've seen at American Eagle. Comps grew 2%, accelerating from the third quarter with growth across genders. Product initiatives are delivering more newness and fresh trends in right collections. Following impactful partnerships with Sydney Sweeney and Travis Kelce, Martha Stewart's holiday campaign reinforces AE's cross-generational appeal as the ultimate gift-giving destination. Customer counts and retention rates are proof points of success. This year, we look forward to creating more culture-defining moments with newly announced partnerships with Lamine Yamal, Ella Langley, Bailey Zimmerman, and more to come. In terms of the numbers, total revenue hit an all-time high for the fourth quarter, increasing 10% to $1.8 billion. Overall comp sales grew 8%. Adjusted operating income of $180 million was up 27% from the $142 million last year. Notably, we achieved these results despite significant tariff pressure. Successful tariff mitigation efforts centered on cost savings, greater efficiencies, and strategic management across our sourcing operations. Full-year 2025 annual revenue reached a record $5.5 billion, up 3% from last year, and adjusted operating income was $328 million. We ended 2025 in a strong financial position with nearly $240 million in cash and no debt. Our capital allocation strategy remains focused on investing in the business while returning cash to shareholders. We completed $256 million in share buybacks while paying $85 million in dividends last year. Now looking ahead, we remain confident in our strategy and our ability to build on our second half. As part of the continued effort to drive efficiencies and prioritize initiatives with the highest impact and strongest returns, we made the decision to exit Quiet Logistics during the quarter. This move keeps our focus and investment dollars on our core brands. As we exit the third-party business, we are left with a significantly enhanced logistics function, including much improved warehousing systems and technology, regionalized distribution capabilities, excellent speed to customer and a network that will support growth for several years. We entered 2026 from a position of strength and positive sales trends continuing. We have significant opportunities ahead, and our teams are energized and committed to executing on our plans. I am fully confident in our path forward and our strategy to drive long-term profitable growth and free cash generation, which in turn will create value for shareholders.
Good afternoon, everyone. I want to begin by underscoring how pleased I am with the fourth quarter performance. Our commitment to product leadership continues to be a key engine that's driving our business, and that's true across all brands. As I'll share, we saw a widespread improvement in the majority of our categories. There has been a clear acceleration in demand in certain segments as our customers respond to newness, color, and trend-right fashion. Compelling new collections in fleece, tees, and knits, coupled with the growing accessories business within AE and Aerie are together supporting our layering and outfitting strategy. As you've heard, following the first quarter of 2025, we initiated a number of process changes and the reorganization of the teams and talent. We began to see the results of this work mid-year. I'm proud of the quick execution, and we are excited to carry this momentum forward. I'm confident that we remain very well positioned for profitable growth in 2026 and beyond. Now let's review our wins and opportunities by brand. Turning to Aerie first, where we have experienced strong acceleration in demand, strength has been broad-based across all categories, including intimate, soft dressing, and OFFLINE activewear. Fresh flows of new and exciting collections, coupled with category expansions in areas like sleepwear kept the customer engaged throughout the season. We grabbed our community’s attention with must-have products and position them in the most relevant ways. Aerie apparel was strong across both tops and bottoms as a result of great fabrication, on-trend fun prints, and winning color stories. I am particularly encouraged by the continued momentum in intimates, recording some of our best ever results in the quarter with match-back sets fueling demand. OFFLINE had another incredible quarter with steady sales in active bottoms and double-digit growth in sports bras, tops, and fashion bottoms. OFFLINE signature cloud fleece remains a customer favorite, and we continue to have significant opportunities to leverage the success of this key franchise. Our focus on new fashion silhouettes and fresh color drops are also contributing to strong growth across categories. As we look to accelerate the OFFLINE business in 2026, we will be focused on expanding our footprint, engaging more customers, and delivering great product. OFFLINE's brand awareness is rising, and the brand has a long runway ahead. Our share is still small, but growing, and I'm confident that we have only just begun to scratch the surface of this brand's massive and long-term potential. The powerful reacceleration of the Aerie brand coupled with the explosive trajectory of OFFLINE is cementing our position as a leader in the space. And with our brand positioning as relevant and strong as ever, we look to continue to expand our reach to more customers. New Aerie customers grew 14%, and brand awareness climbed 12% year-over-year. We know these customers are sticky, and we are focused on maintaining this healthy and engaged customer base. As we kick off 2026, expect to see a significant increase in buzz for Aerie as we launch a highly visible brand campaign, rooted in purpose and mission. And as you've heard, we're just getting started here, and I'm excited for what's ahead. Now moving on to American Eagle, which achieved a solid 2% increase in the quarter. Positive results were driven by men's and women's tops and our signature AE jeans across genders. The men's business continued to improve in the fourth quarter, delivering the third consecutive quarter of growth. Positive results were seen across nearly every category, with sweaters, shirts, and tees and sweatshirts emerging as favorites, with graphics leading the way as the hero. Our strategy to recapture the men's business is on track as we gain market share and expand our customer base. AE women's comps were flat in the quarter, strength in jeans and tops, including knits, sweaters, and fleece was offset by a slower demand in dresses and non-denim bottoms. Driving ongoing progress is a top priority, and we are working to ensure that we have the best styles and quality together with more frequent flows to support growth. Work is underway, and we are focused on investing in depth of key items and size integrity to drive sales. We expect to see continued improvements as we move through 2026. As Jay reviewed, AE brand marketing has been a clear strategic focus and is expanding brand awareness and driving purchase intent. In addition to talent-focused campaigns, we recently relaunched AE's creator community to bring together a network of passionate trendsetters and brand advocates to drive revenue and digital content. And just last week, we announced our partnership with Stagecoach, joining country music's biggest stage and connecting with a new generation of artists and fans as we continue to show up at the intersection of culture and fashion. The intention behind these initiatives is to maintain and drive our industry-leading position. Before turning the call over to Mike, I want to recognize the team for a strong finish to 2025. Their ability to drive improvement across multiple processes and to deliver results was impressive. We are incredibly optimistic about the profitable growth potential of our portfolio. We are moving forward decisively, and we know that our brands are uniquely positioned to win, scale, and deliver sustained long-term growth. And with that, I'll turn the call over to Mike.
Thanks, Jen, and good afternoon, everyone. 2025 results reflect the actions we took to strengthen the fundamentals of the business, make operational improvements, introduce new compelling product collections, and launch strategic marketing initiatives. These steps strengthened our foundation for long-term success and drove a sharp improvement in trends throughout the year across brands and channels, even as we navigated a dynamic retail industry in an unprecedented tariff backdrop. Our strong performance in the fourth quarter is a testament to this work, with results coming in ahead of expectations across margins and profitability. In the quarter, consolidated revenue of $1.8 billion increased 10% from last year, fueled by comparable sales growth of 8%, with Aerie up 23% and American Eagle up 2%. We saw across-the-board improvement in trends with an acceleration from the prior quarter. Key performance indicators were favorable with growth in transactions across brands driven by higher traffic. The average unit retail price was flat to last year. Gross profit dollars of $651 million increased 9%. Gross margin declined 30 basis points to 37% from 37.3% last year, which included net tariff pressure of approximately $50 million. On the positive side, the leverage from strong revenue growth, lower costs, favorable currency, and overall operational efficiencies partially offset the tariffs and higher markdowns. Buying, occupancy, and warehousing leveraged 50 basis points due to higher sales and continued focus on operational improvements. SG&A increased 4% to $418 million and as a rate leveraged 120 basis points from last year, driven by strong revenue growth. Planned investments in advertising were offset by our continued focus on disciplined cost management and lower incentives. Adjusted operating income of $180 million was above our recent guidance of $167 million to $170 million, driven largely by very robust sales and margins at Aerie and OFFLINE. The adjusted operating margin of 10.2% increased from 8.9% last year. During the quarter, we recognized restructuring charges totaling approximately $85 million, of which $13 million was cash, primarily related to severance. These charges relate to the discontinuation of quiet platforms, third-party logistics, store impairments, and corporate restructuring. Net annual savings from these actions are estimated at about $20 million annually, with a portion of that expected to be realized in 2026. We ended the year with a strong balance sheet, with cash of $239 million after returning $341 million to shareholders. At year-end, total liquidity was approximately $930 million. Consolidated inventory cost was up 10%, with units up 3%. Cost inventory reflects the impact of tariffs. Fourth quarter CapEx totaled $59 million, bringing year-to-date spend to just over $260 million. As we look ahead to next year, we expect similar levels of CapEx in the range of $250 million to $260 million, reflecting investments in technology upgrades, general corporate maintenance, as well as 35 new Aerie, OFFLINE store openings and about 60 store remodels. In 2026, we expect to close another 25 to 30 lower productivity AE stores. Turning to our 2026 outlook. The first quarter is off to a good start. Comp sales are positive across brands, with notable strong performance continuing at Aerie and OFFLINE. For the first quarter, we expect comparable sales growth in the high single digits, with American Eagle comps in the positive low single digits and Aerie OFFLINE comps in the double digits. Our operating income expectation is in the range of $20 million to $25 million, which includes tariff headwinds of approximately $30 million and incremental advertising investment, which will drive total SG&A expenses up approximately 10% versus last year. For the full year, we expect operating profit in the range of $390 million to $410 million based on consolidated comparable sales growth in the mid-single digits. Guidance reflects the incremental tariffs that were put in place in 2025, which primarily impact the first half of the year. Our outlook does not incorporate developments related to the recent Supreme Court decisions and subsequent actions. For modeling purposes, please note that we expect approximately 80% of our annual operating profit to be generated in the second half of the year. This weighting reflects pressures from tariffs and incremental advertising spend, which will impact the first and second quarters. In the second half of the year, we will cycle tariffs and investments in advertising, which began mid-year 2025. To wrap it up, we ended the year on a strong note and remain confident in our forward trajectory. In 2026, we look forward to building on the significant progress we made last year to generate continued growth and enhanced value for our shareholders. With that, we'll open up for questions.
分析師問答
Our first question today comes from Paul Lejuez with Citi.
Two quick ones. Gross margin, can you talk about what you expect once you move past the first quarter where obviously you've got the comparisons? Maybe you could talk 2Q through 4Q. And then you mentioned increased markdowns again this quarter. I'm curious if you could talk more about which brand you saw the higher markdowns, maybe which category needed to be promoted to drive sales, and how you think about the promotional outlook for the rest of the year?
On gross margin, last year was different due to the inventory breakdown in the first quarter and early markdowns. Looking ahead to 2024, we expect gross margins to be in the mid- to high 30% range for the first quarter, slightly lower in the second quarter. Without tariffs, we would be close to our expectations for the first half. In the second half, we aim to improve gross margin performance, factoring in the ongoing impact of tariffs, which we estimate at over $130 million annually. We'll have more clarity on this by May. Starting from a conservative estimate, we plan to build on the gross margin performance from the third and fourth quarters, targeting mid-single-digit comparable growth. We're seeing positive trends in cost management for the third quarter. Our team is effectively controlling costs, contributing to our gross margin improvements. Regarding markdowns, we've managed them well across categories. In the jeans category, we have increased promotions to remain competitive, which slightly impacted the AE brand due to overall higher markdowns. Conversely, Aerie has seen growth, allowing them to reduce promotions and achieve a mid-single-digit increase in average unit retail, with markdowns decreasing favorably. Overall, the business mix is advantageous, particularly in bottom categories, where deeper promotions are observed.
Should we expect that to continue, the markdowns to be higher at AE and lower at Aerie?
We expect some pressure in denim, but we feel confident about our positioning as we introduce other bottom styles. We're particularly excited about new bottoms we've been testing, including long legs, skirts, and shorts, with early feedback being positive. We have a significant spring break customer base and we're currently in Miami observing them coming into our shops. We're enthusiastic about our positioning. The advantage of our portfolio is that we can adjust our focus on different categories as needed while also exploring trending categories. We feel optimistic about our direction as we approach peak spring break across all brands and the new categories we'll be launching. Regarding Aerie, we've been reducing promotions and managing competition well. With spring break approaching for all brands, we're also seeing strong early results in the swim category, which we aim to develop further in terms of margin rather than just relying on unit-based promotions.
The next question comes from Jay Sole with UBS.
A few questions for me. Just number one, Mike, how are you thinking about store openings this year? And sort of you gave us comp sales guidance for the first quarter of the year, but how do you think about total sales? And then the Middle East business, can you just give us an update on how you're thinking about that business given what's going on? And then can you also explain lastly, the impact of the quiet, the changes to the quiet logistics, what impact is that having on EBIT dollars? Those are my 3 questions, to start.
We are planning to open 35 to 40 stores for Aerie and OFFLINE this year. To clarify, we expect around 25 to 35 net store closings for AE as we refine and optimize that fleet, so you can consider those plans when modeling for the year. Total sales should be in line with that, as we provided high single-digit comp guidance for the first quarter, which should reflect in total revenue. There is some comp spread in our brand sales, but with the closure of Quiet, total revenue will decrease due to the loss of third-party revenue. Overall, the comp results and total revenue should be similar. To expand on the guidance, we anticipate high single-digit comps for the first quarter, mid to high in the second quarter, and mid-range for the second half, resulting in a mid- to high comp expectation for the year. The total revenue and comp are expected to align for the year. In the Middle East, our team is effectively collaborating with our partners, particularly Alshaya and our joint venture partner Fox in Israel, although there is currently some disruption. Most Alshaya stores are open again after the initial disruption, but the Israeli stores remain closed. It's important to note that our license business and joint venture are structured differently, so the EBIT impact for us is expected to be minimal in the first quarter, assuming the situation resolves soon. Regarding Quiet, we anticipate a quarterly revenue reduction from what was about $60 million in our 2025 results, which will taper off to zero by the end of the year. The restructuring involving Quiet is expected to yield around a $20 million annual benefit. We're currently in a winding-down phase, but with additional corporate restructuring and store impairments, we expect to see at least 50% of that benefit this year, with more updates on guidance as we progress through the Quiet business closure in the coming months.
The next question comes from Matthew Boss with JPMorgan.
Congratulations on another strong quarter. Jen, with Aerie comparisons up in the high teens for the second half of the year, could you explain the changes in the business, perhaps by customer segments or key category performance? Additionally, in the first quarter so far, have you noticed any slowdown compared to the low 20s comparisons from the fourth quarter?
We are seeing strong momentum heading into Q1. Last year in Q1, we recognized the need for all our brands, not just Aerie, to pivot and concentrate on our products to build momentum for the latter half of the year, which is typically our most significant period. This quarter, Q3, is crucial for all our brands, and our team has genuinely focused on our products. Aerie has been particularly exciting, as new categories like sleep have driven substantial growth. OFFLINE is also progressing quickly, becoming one of the fastest-growing brands in our portfolio's history, which is very encouraging. Looking back at Aerie, the key takeaway is that all categories performed well. As we move forward, it's important to consider that with evolving trends, Aerie can adapt to changes in demand, whether that means shifting to more structured items or maintaining softer styles. We're expanding Aerie's offerings to support various categories as trends shift, and this strategy is effective. Additionally, we have new businesses and innovative ideas in development. Our team is focused on flexibility and delivering unexpected new product offerings, which seems to be resonating well with the Aerie brand. We're optimistic about the momentum we've built as we move into Q1, and we will continue to prioritize our delivery.
That's great color. And then, Mike, on the expense side, with reinvestments, I think you cited marketing this year. How best to think about the leverage point in the business for SG&A? Or any changes relative to historical flow-through to consider?
We are planning for another two quarters of a strategic increase in our advertising spend, with an anticipated over 50% rise in advertising dollars during the first half of the year. This increase is intentional and is expected to drive SG&A costs up in the low double-digit range, while we manage other expense categories in the low to mid-single digits, aligning well with our sales expectations. The rise in advertising will contribute to some deleverage in the first and second quarters. Looking ahead, we expect advertising spending to be relatively flat in the latter half of the year, possibly with a slight increase, allowing us to leverage advertising effectively as we compare against last year's elevated spending starting in the third quarter. The other SG&A lines are being well-controlled, although we might see a minor increase in incentive compensation in the third and fourth quarters, particularly in the latter. Overall, we want to leverage SG&A expenses in the second half of the year even with those adjustments. Our current plans suggest we will achieve some healthy operating rates in the latter half, which we aim to maintain into 2027 on a 12-month basis, working towards returning our operating rate to the high single digits.
Mike, I think that's a great point, too. When you think about marketing and our strategy, really, it was about relevancy for American Eagle for the American Eagle brand. And I'm sure you've seen many of the tactics that have gone viral out there for American Eagle. And then Aerie, it's really been awareness. And boy, has that strategy worked. We've grown our brand awareness over end points; it's huge. It's a huge number. I'm really proud of the team there. And now the teams are up because keep in mind, we share a platform. Now what we want to do is get that customer shopping back. Coming back to us. We want peak performance from these customers. We want them to come back through our doors or onto the site, and those are the tactics that we're working on.
The next question comes from Jonna Kim with TD Cowen.
As you think about American Eagle's brand positioning, what are key opportunities that you see for improvement over time? And then could you just speak to the intimates business performance during the quarter and just quarter-to-date, what you're seeing there? And how do you think that business will evolve over time as well?
Yes. For American Eagle, we're focusing on fleet rationalization. We're still optimizing some lower-tier stores to strengthen our best locations. Our new remodels in the American Eagle brand are resonating well with customers, leading to positive increases compared to the average base. We're strategically working on remodels that make sense for each mall situation. Our new SoHo store is performing excellently, showcasing the future direction of our entire brand portfolio. Fleet optimization is key, along with a strong emphasis on product. We're innovating and launching exciting new products alongside impactful marketing campaigns that keep us relevant. We recognize the need to compete more effectively, as we previously lagged behind competitors. Our men's segment has improved significantly, and we are now focusing on optimizing the women's business, both in-store and online, ensuring maximum efficiency in our best locations. Our direct business has been strong, gaining momentum as we acquire new customers and encourage repeat shopping, either online or in-store. While I'm not a fan of the term omni-channel, we see potential in understanding customer behaviors with our new capabilities. Our tactical approach includes new product categories and fresh talent in American Eagle. Recently, we launched Ella Langley, who currently has the number one song in the U.S., which helps us maintain our brand relevance. This year marks the 250th anniversary for America, and next year, American Eagle will celebrate its 50th anniversary, generating excitement. In the intimates category, we are just getting started. We're leveraging our underwear offerings to attract new customers, viewing them as the "lipstick" of our brand. We're also introducing new bra silhouettes, as bralettes and layering pieces make a comeback. We have a variety of categories in intimates that we can explore based on current trends, and we're optimistic about this segment. We had great success in Q4 and are carrying that momentum into Q1.
The next question comes from Dana Telsey with Telsey Advisory Group.
As you think about the advertising, which has been so successful. Obviously, Stagecoach now being the next thing. How do you think of it for the balance of the year? And how do you see lapping whether it's Sydney Sweeney or the others? And then on the refreshes in stores, how many store refreshes are you doing? And what kind of productivity gains have you seen from these refreshes?
Sure. I didn’t mention this earlier, but we are not only utilizing talent more on the AE side of the business. Both brands, AE and Aerie, are really connecting with our community and customer base. Right now, both brands are implementing new strategies to attract new customers. While there are some details I can't share, we're tapping into a creator community that we have just begun to explore, and it’s significant. This sets us apart. Our competitors are finding their own strategies, but we believe ours are genuine and authentic, focusing on getting our community, which supports our brands, to celebrate them. We are leveraging influencers across all brands and are excited about the momentum we are already starting to see with this influencer program. It feels more natural to us, and we are enthusiastic about it. Our strategies differ slightly from those of our competitors.
On the store remodels and refreshes, we'll complete at least 60 this year, possibly a few more. We're in our third to fourth year of this program, which includes about 350 to 400 stores in total, and we're about a year away from completing this phase. With these next 60, we should exceed the 300 mark. Before we started, the average age of the fleet was around 12 years. We fell behind a bit due to COVID and our plans to refresh the fleet. We have identified the stores where we want to sign long-term leases. Our goal is to keep the average age around 6 to 7 years, which we believe is optimal. Performance-wise, these remodeled stores are showing a comparable increase in sales that exceeds the chain average, indicating positive returns on our investment. We've refined costs since the first year, allowing us to optimize spending on improvements. We're more than halfway through the program and are pleased with the performance, aiming to maintain the fleet's age in that 6- to 7-year range.
The next question comes from Janine Stichter with BTIG.
Just on the tariffs, can you remind us what you've done on pricing in response? Have you raised tickets at all and any thoughts on pricing for the rest of the year?
Yes, we have discussed our approach as maintaining business as usual. We've always evaluated tickets and pricing based on the right price value equation for our customers, identifying where we encounter little price resistance across items, and strategically aiming to increase ticket prices slightly to ensure we deliver the appropriate value from a promotional standpoint. There is no specific plan regarding tariff pass-through; we continue with our established pricing practices. In the fourth quarter, our average unit retail was mostly unchanged, slightly decreasing in AE and increasing in Aerie. From a margin standpoint, we are in a solid position, benefiting from some favorable mix effects aside from the tariff impact. We will keep pursuing opportunities to raise ticket prices as long as it aligns with customer feedback and maintains the right price value equation.
Great. And then maybe just back on Quiet Logistics with the $20 million in annualized savings. Are you thinking about reinvesting any of that? Are there areas you potentially spend more, or is that flowing all the way through the bottom line?
No, I think we're focusing on reinvesting, but not in areas other than advertising. For several years, we have been managing our expense base to find funding for advertising. We've been tracking this internally and have successfully reduced the rate of sale in most of our expenses, especially following a project where we addressed 85% of our overall operating expenses. We have continued to see success in lowering that rate, allowing us to allocate funds back to advertising right now. As we move into the second half of the year, we will begin to leverage this. However, we are not reinvesting those specific dollars; instead, we have an ongoing program aimed at improving our operating rate. In the short term, we are definitely putting some dollars back into advertising for at least the next 12 months, but we do not have any other specific plans for spending from those savings.
The next question comes from Jon Keypour with Goldman Sachs.
I have a question about the low single-digit AE comp in the first quarter. I've noticed that going from the fourth quarter of 2024 to the first quarter of 2025 makes the sequential comparable easier by 3 points, but the low single-digit figure suggests a slowdown on a two-year stack basis. Could you provide any insights on that? I also have a follow-up question.
Yes, Jon, looking at the improvement, we have seen a 5-point increase from the second quarter of last year to this fourth quarter result of plus 2%. The guidance we're providing is based on what we've observed so far. We are aware of the weather-related disruptions, including some significant storms in February this year that we didn't experience as severely last year, particularly in the Northeast where we have a strong store presence. We are pleased with the trend continuing from the fourth quarter. However, as Jen mentioned, spring break is approaching, and the short season is ahead of us. The overall timeframe represents approximately 75% of our total first quarter. We still have a lot ahead of us. Despite the challenges, the continuation of the trend we observed is encouraging, and our teams are working hard to optimize the next two months. We will see how the quarter unfolds, but we believe we are in a good position at this time.
Got it. Okay. And then just in terms of the Aerie comp, which was very impressive, just any way that we can get a sense of buckets that contributed to that 23%. Like I guess, there was a different question to try to get at this, but you mentioned like 14% new customer addition. Just any ways we can piece together the building blocks to get to the 23%?
Yes. That was actually branded witness. I just wanted to let you know. We were roughly at 55% as we increase that, but we do have a new customer base to solidly growing our customer base. In Aerie, I have to say this. Literally, all categories worked, whether it was set dressing, fleece, knit, tees, sweaters, sleep really was unbelievable and intimate and layering. We have this new layering business that we're pretty excited about, so, so far so good. And that continues into Q1. And again, we still have some categories that we actually lean on more as we head into the spring break time period. So strategically, we didn't pull swim in as hard as we used to in the past because we believe that there's a different strategy for swim where we can lean on. It's a great margin category. And I think that's what we're looking to do. And we're going to bring in newness monthly, more so than we did in the past, past just like that girl. So I think there's still more to come here because we still have some new category introductions or seasonal introductions that I think are still in play. Early reads on these seasonal categories, including in AE, are strong. Last year, if you remember, we had weather and shorts are really tough across the board. So there's still a lot of volume in front of us, and we're going to set ourselves up for success here.
The next question comes from Corey Tarlowe with Jefferies.
Yes. Mike, on tariff, could you remind us again what the impact is that you're expecting? And then I asked that in the vein that you guided with IEEPA in, how much upside is there to the current guide if that is struck down?
Yes. The quarterly impact of the IEEPA tariffs amounted to about $30 million in both the first and second quarters, totaling around $60 million for the spring season. In the third quarter of '25, the impact was approximately $20 million, though it may be closer to $30 million or $35 million for a full quarter due to the timing of last year's effective tariff rates. Additionally, the fourth quarter suffered an impact of $50 million, leading to an annual total of over $130 million. We maintained our guidance because we are uncertain about future developments, particularly with the 10% Section 122 tariff potentially increasing to 15%. The administration may implement further actions regarding the 301 front. We believe the guidance we've provided should be considered the worst-case scenario. While I hope this doesn't set us apart from the industry, there could be positive factors at play. We've done some rough calculations regarding potential outcomes based on when we think the Section 122 tariffs will expire after 150 days and if the 301 tariffs take effect, but it's mostly speculation right now. We expect to have clearer information by the first quarter call at the end of May, at which point I anticipate being able to offer some positive adjustments to our guidance, but it's best to wait until we have more certainty before putting forward any specific numbers.
Got it. That's super helpful. And then just as a quick follow-up, it looks like there's no buyback embedded in the outlook. So I was just curious how you're thinking about that specifically.
Yes, we repurchased approximately 1 million shares before the year ended. Our current projection indicates a share count of about 177 million for this year, compared to 176 million last year. We prioritize capital allocation by investing back into the business first. We're committed to our $0.50 per share dividend and will consider buybacks primarily to offset dilution. The January buyback was part of this strategy. Last year, we returned a total of $341 million to shareholders—$85 million in dividends and over $250 million in share repurchases. We will continue to evaluate this, focusing on offsetting dilution from internal grants and considering additional actions as we see how cash flow develops throughout the year.
The next question comes from Marni Shapiro with The Retail Tracker.
Congratulations, and please extend my condolences to Jay. Jen, the stores look fantastic. So I have a couple of quick questions for you. Following on the denim conversation, I'm curious if part of the denim is a shift in what's working in denim from higher rises to lower from very baggy to boot and the customer is a little slower to move. Or is it something else that you're thinking? And then on your collaborations, which have been incredibly successful, and I love the 2 new ones, are you thinking about expanding this into Aerie at all to do something there, along the similar vein, now that Aerie is kind of like, Aerie is back, so are you kind of thinking along the lines there in Aerie?
I appreciate your thoughts, Marni. Aerie has some exciting plans ahead. We employ various strategies, and as I mentioned, we focus more on grassroots efforts and community engagement, which has proven successful for us. I'm looking forward to the new initiatives we have coming. We decided not to use AI for our models last October, which has positively impacted our growth since launching Aerie Real. I believe this approach resonates with the new generation, and I'm enthusiastic about our progress. With all these new customers, it's crucial to encourage them to return more frequently. If we could manage to have them come back just once more each year, the revenue potential would be significant. That's one of our key focuses. Now, regarding your initial question, I got a bit carried away with my excitement for Aerie.
I'm curious about the changes happening in denim styles, as baggy fits are giving way to a cleaner, slightly narrower boot cut. I thought there was some confusion among customers right now, as this is something everyone is discussing.
I agree with you. The rises are definitely getting lower, and we're seeing more midriffs being shown. However, I think there’s a shift towards other styles like skirts, shorts, and various types of bottoms such as khaki and utility. It's important for us to pivot in that direction. You're correct that we are addressing the lower rise trend, and it's been effective for us. Our business has undergone significant changes, and there are many new fits available. We're seeing positive results with the Ella and the boots. Currently, we are in the testing phase for back-to-school and will gather more insights in the next few weeks. We are experimenting with various fits and determining where to focus our efforts. There’s a lot more to come, and the team is prepared to implement the changes. Thanks, Marni. Operator, we have time for one more question.
That question will be coming from Janet Kloppenburg with JJK Research Associates, Inc.
I was a little surprised to hear that denim bottoms were not performing. I don't know, maybe I'm misinterpreting it, Jen. Are they performing to your expectations and because you've made investments in other denim areas or maybe denim isn't where you think the brand should be right now. So...
Yes, denim is central to everything we do at American Eagle. We have maintained our market share and our positioning, which is our core strategy for the business. Both men's and women's sections performed well this quarter, but we faced challenges regarding the price consumers are willing to pay for certain fashion items. We learned from this experience and are moving forward, especially as Q3 is crucial for our business. We're applying these lessons, but denim remains at the heart of our operations. The issues arose from some styles that did not perform as well as we hoped, and we've learned from that to improve in the future.
Yes, Janet. Overall, the Average Unit Retail at the company level remained unchanged. American Eagle was slightly down, while Aerie saw an increase in the mid-single digits. This aligns with the margin insights we discussed earlier. As Jen mentioned, we've seen positive results from jeans, although there’s been a bit of pressure and more promotions to achieve those outcomes. We expect similar trends to continue at the start of the year. The Aerie team is managing well, being more targeted and adaptable, while American Eagle remains consistent with our previous discussions. We anticipate similar conditions in the short term and will monitor how the season unfolds.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Thank you.