American Eagle Outfitters, Inc (NYSE: AEO) Q4 2025 Earnings Call dated Mar. 04, 2026
Corporate Participants:
Operator
Judy Meehan — Senior Vice President of Corporate Communications & Investor Relations
Jay Schottenstein — Executive Chairman and Chief Executive Officer
Jennifer Foyle — President, Executive Creative Director – AE & Aerie
Mike Matthias — Executive Vice President – Chief Financial Officer
Analysts:
Paul Lejuez — Analyst
Jay Sole — Analyst
Matthew R. Boss — Analyst
Jonna Kim — Analyst
Dana Telsey — Analyst
Janine Stichter — Analyst
Jonathan Keypour — Analyst
Corey Tarlowe — Analyst
Marni Shapiro — Analyst
Janet Kloppenburg — Analyst
Presentation:
Operator
Good afternoon, everyone. Welcome to the AEO Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]
I would now like to turn the conference over to Judy Meehan, Head of Investor Relations and Corporate Communications. Please go ahead.
Judy Meehan — Senior Vice President of Corporate Communications & Investor Relations
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 filing. 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 pre-recorded. 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.
Jay Schottenstein — Executive Chairman and Chief Executive Officer
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 during the Thanksgiving and holiday season, building on the approved 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, and 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 right collections. Quality impactful partnerships with Sydney Sweeney and Travis Kelce, Martha Stewart’s holiday campaign reinforced 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 Romania Mill, Ella Langley, and Bailey Zimmerman, and more to come.
In terms of the other 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% to 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 remain 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 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.
Jennifer Foyle — President, Executive Creative Director – AE & Aerie
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 a growing accessories business within AE and Aerie, are together supporting our layering and outfitting strategy. As you’ve heard, following the first quarter 2025, we initiated a number of process changes and a 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 and demand, strength has been broad-based across all categories, including intimates, 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 positioned 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 matchback 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’s 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 re-acceleration 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 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, 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 and 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 comp was 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.
Mike Matthias — Executive Vice President – Chief Financial Officer
Thanks, Jen. Good afternoon, everyone. 2025 results reflect the action 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% to 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. KPIs 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 tariffs and higher markdowns. Buying occupancy and warehousing leveraged 50 basis points due to higher sales and a continued focus on operational improvements. SG&A increased 4% to $418 million, and as a rate, leveraged 120 basis points to 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 discontinuation of Quiet Platforms, third-party logistics, store impairments, and a corporate restructuring. Net annual savings from these actions is 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 ending 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-$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 expense 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 impacts 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, any 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.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Our first question today comes from Paul Lejeuz with Citi. Please go ahead.
Paul Lejuez
Thanks. Two quick ones. Gross margin. Can you talk about what you expect once you move past the first quarter where obviously you’ve got easy comparisons? Maybe if you could talk 2Q through 4Q? 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 categories needed to be promoted to drive sales and how you think about the promotional outlook for the rest of the year? Thanks.
Mike Matthias
Hi, Paul. On gross margin, I think we know that last year was a little different with where we wrote down inventory in the first quarter and pulled markdowns forward. So I think as we talked a little bit at different points that if you really look at kind of 2024 gross margin cadence and then the impact of tariffs around that $30 million each quarter, we’re looking at gross margin sort of in that mid-to-high 30% range in the first quarter, a little lower than that in the second quarter. If actually 2024 less tariffs gets you pretty close to what we’re expecting for the first half of the year.
Second half, we’re looking to expand our gross margin performance, having anniversarying tariffs as is. We’re guiding tariffs to essentially the same thing we’ve been talking about, really the IEEPA impact of that $130 million plus per year. We’ll know a lot more come May of really what that’s going to look like by quarter. But if you start with that as what should be a worst case, then we’d look to expand upon the gross margin results we just saw in the third and fourth quarter of this year at, call it, like a mid-single digit comp results.
We got some early indications on costing for the third quarter timeframe at this point. The teams are doing a great job there and controlling costs, all the other costs within gross margin. We’ve been very successful with that to date and expect to continue that. We’d look to expand upon gross margin and improve upon gross margin in the back half.
On markdown front, yeah, I think we talked about in the January timeframe at ICR and after our holiday sales release around being well controlled across categories for the most part. We talked about bottoms in the jeans business, in the jeans category being promoted a little deeper to compete. And that was having kind of a mixed impact in the AE brand, where markdowns were up a bit in total.
Aerie on the other hand, the AUR was up in the quarter. With the growth trajectory of the business, they’ve been able to really control or even reduce promotions a bit. AUR was up mid-single-digits in the fourth quarter, and markdowns are actually down favorable for Aerie. So the mix of the business is very favorable for us with really a couple bottoms categories, especially jeans being promoted a little deeper.
Paul Lejuez
Should we expect that to continue, the markdowns to be higher at AE and lower at Aerie?
Jennifer Foyle
It’s Jen, by the way, Paul. We do expect some pressure in denim. We feel good about our positioning though, as we bring in other bottoms. That’s what we’re really excited about. So there’s new bottoms that we’ve been testing, not only just in long legs, but skirts and shorts. Early reads have been positive. As you know, we have a huge spring break customer, and we’re just on the cusp of this right now.
In fact, we’re in Miami right now and we can see them coming into shops. We’re excited about the way we’re positioning. The beauty about these brands, Paul, is that we have a portfolio of brands, right? We can pulse, and throttle categories that we need to, but also get into new categories that are trending. We feel really good about where we’re headed as we get into peak spring break in all brands, and some of the new categories that you’ll see us introducing more.
Also just to lean on to Aerie, Mike said it, we’ve been pulling back on promotions. They’ve been doing a nice job balancing out competing and pulling back promotions. It’s only just begun here in Aerie. We have spring break again, I mentioned it already, for all brands. It’s coming our way. And on swim, early reads on swim have been strong, but that’s a category that we’re looking to build margin and not just unit-based promotions.
Paul Lejuez
Got it. Thank you. Good luck.
Operator
The next question comes from Jay Sole with UBS. Please go ahead.
Jay Sole
Super. Thank you. A few questions from me. Just number one, Mike, how are you thinking about store openings this year? Sort of you gave us comp sales guidance for the first quarter of the year, but how are you thinking about total sales? 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 change to Quiet Logistics, what impact is that having on EBITDA $? Those are my three questions to start. Thank you.
Mike Matthias
Sure, Jay. Store openings, we’re looking at 35 to 40 openings for Aerie and OFFLINE this year. Just to reiterate, we’re probably expecting somewhere in the 25 to 30 in terms of net closings for AE as we continue just to refine and optimize the AE store fleet. So you can model that or assume those plans for the year. Total sales then, we do have — total sales to comp actually would be pretty similar. So we gave high-single-digit comp guidance for the first quarter.
Total revenue will be similar to that just based on the fact we do have a bit of a comp spread in our brand sales. Then with the disposition or the closing of Quiet, you’ll see a reduction to total revenue because of that third-party revenue. So the net-net is that comp result and total revenue should be similar. Yeah, I mean, just to expand upon that guidance a bit, high-single-digit comp for the first quarter, we’re looking at sort of mid-to-high in the second quarter and then mid for the back half. So you get to kind of a mid-to-high comp expectation for the full year then. And again, with total revenue and comp being similar for the year.
In the Middle East, our team is doing a nice job just connecting with our business partners there, really Alshaya in the Middle East and then our JV partner with Fox in Israel. Definitely some disruption to their businesses at the moment. Alshaya stores are actually mostly open at this point, after some initial disruption, but the stores in Israel are still closed. Remind you that’s a licensed business on one hand and a JV on the other. So the EBITDA impact to us would be we quantified what we think is assuming that this — the war wraps up in the first quarter for now, that the impact of the first quarter would be very minimal to us from an income or EBITDA perspective, just based on the structure or the relationships there being kind of licensed in JV.
And then for Quiet, again, you’ll see some quarterly revenue reduction from what was about a probably about a $60 million total number in our 2025 results. That will wind down here at the beginning of the year and go to zero, as we get end of the year here. We talked about, the restructuring in total, which Quiet was a part of being around a $20 million benefit annually. Again, we’re in a bit of a wind down mode, but with the other kind of corporate restructuring and store impairments, we’re expecting probably at least 50% of that, maybe a little more to benefit this year. But we’ll provide some updated guidance with especially how the cadence of the Quiet business shutting down here in the next several months.
Jay Sole
All right, super. Very helpful. Thank you.
Operator
The next question comes from Matthew Boss with J.P. Morgan. Please go ahead.
Matthew R. Boss
Great, thanks. And congrats on another nice quarter.
Mike Matthias
Thanks, Matt.
Matthew R. Boss
So Jen, with Aerie comps up high-teens in the back half of the year, could you break down the inflection in the business if maybe if we looked at it by customer file or key category performance? And then so far in the first quarter, have you seen any flowing relative to the low-20s comps that you saw in the fourth quarter?
Jennifer Foyle
Yeah. Very similar, Matt. We’re seeing nice momentum headed into Q1. Look, back in Q1 last year, we knew it was the time for all brands, not just Aerie, for us to pivot, focus on our product, deliver and gain momentum going into the back half, which is typically our Super Bowl. We have all brands, it’s our big quarter, Q3. And I think the teams really — that’s what we did, right? We focused on our product.
So if you look at Aerie, certainly what was really exciting in Aerie, not only new categories, i.e. sleep, which delivered a lot of growth for the brand. OFFLINE is moving faster. Honestly, it’s one of our fastest growing brands in the total portfolio that I’ve seen in history. So OFFLINE is very exciting. And then of course, AE. But going back to Aerie, the most important thing is that all categories really worked. And I think that’s important as we look forward, Matt, because when you think about just the newer trends and trends are moving faster, I think Aerie then can throttle on either, let’s just say that a more hard lines become trending, whether it’s shooting or more straight lines, what I can say.
If Aerie is a softer business, we have all the layering pieces. We can support those businesses. I think that’s why we’re expanding our offerings in Aerie so that we can lean into other categories when trends change. I think it’s really working. There’s new things to come, too. We have new businesses that we’re developing, new ideas. The team’s running very flexible. I mean, we’re really trying to work on flexibility, newness, and I think that’s what’s winning. Just delivering these new product offerings, when it’s not expected, seems to be really working for the Aerie brand. More to come here, but we’ve seen nice momentum into Q1 and we’re going to focus and continue to deliver.
Matthew R. Boss
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?
Mike Matthias
Yeah. We have another two quarters here, this intentional and strategic increase in elevation of our advertising spend. So you’re going to see in the first quarter or first two quarters here, like, over a 50% increase in advertising dollars, which again is intentional. So I think that’s driving SG&A in the first half up in the low-double-digit range with all other expense categories being managed as we have successfully for a few years now, kind of low-to-mid single-digit and leveraging nicely on the sales expectations. It’s really advertising driving the dollar increase, and advertising is going to drive some deleverage in the first and second quarter.
When we get to the back at this point, looking to, at least our initial plans, is for advertising dollars to be relatively flat, maybe a slight increase. We plan to leverage advertising in the back half of the year once, because we’re anniversarying the elevated spend that started last year in the third quarter. The rest of the — again, the rest of the SG&A lines being well controlled. May have a little bit of an incentive comp increase compared to this year in both the third and fourth quarter, a little more in the fourth quarter. We’re looking to leverage SG&A though across the back half even with that.
We’ll get back into a cycle on that then starting in the back half of the year and forward 12 months into ’27 that we want to leverage this expense base on a low-to-mid single-digit comp. With our plans at the moment and the guidance we’re providing, we’re looking to expand upon some healthy operating rates in the back half once we anniversary tariffs and this elevated advertising spend. We want to carry that into ’27 on a 12-month basis going forward to get those operating rates back to the high-single-digits.
Jennifer Foyle
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. I’m sure you’ve seen many of the tactics that have gone viral out there for American Eagle. Then Aerie, it’s really been awareness. And boy, has that strategy worked. We’ve grown our brand awareness over 10 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 repeat 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.
Mike Matthias
Okay. That’s great, Jen. We’ll get to 5% this year. Jen, our teams work very closely on a week-to-week basis on — there’s the campaign pieces of it, and then there’s the week-to-week spend on kind of digital media performance marketing that we’re managing very closely. Our teams are doing it very well together and come to Jen and I on those fronts on kind of managing that week-to-week. The intent, as we talked about then, is kind of to maintain that 5% spend into the sales increase, maintaining that.
We think this elevated level, all the metrics Jen just said moving in the right direction. We like what we’re seeing. It’s why we’re continuing it. We think it’s the right new baseline to run the company. We’ll make some changes based on what we see, rebalancing some of the spend between kind of advertising strategies, maybe, you know, across tactics around talent versus media and performance spend. Just trying to find efficiencies in other line items like content creation. Are you looking at some plans into 2027 around rebalancing some of those things, and we’ll continue to manage it that way? This kind of 5% new baseline is working for us.
Operator
The next question comes from Jonna Kim with TD Cowen. Please go ahead.
Jonna Kim
Thank you for taking my question. 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 intimate 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? Thank you so much.
Jennifer Foyle
Yeah. For American Eagle, Mike mentioned it, number one, our fleet rationalization. We’re still working through some lower tier stores that we need to optimize and actually give back to our best stores. Just so you know, our new remodels in the American Eagle brand are really resonating with the customer. We’re seeing nice upticks versus the average base. And so we’re working on the remodels where we can justify and where it makes sense, depending on the mall. So excited about that. Our new Soho store has been outperforming, and it’s a great visualization to where we’re headed for, you know, our entire portfolio of our brands, but a great representation of the American Eagle brand. So number one, fleet optimization.
Number two, product, product. We focus on product. We’re focusing on new innovation, delivering new product, delivering excitement on top of our incredible marketing campaigns that again, are — we have relevancy now. Like, we needed to get back on the map. That’s what American Eagle was up to. We’re a more mature brand and we needed to turn heads. And certainly, the team really has stood out there, and I think some of these new campaigns and getting up to snuff on our marketing spend and competing, because we were a little — we underperformed there versus our competition, and I think now we’re ready to compete a little bit more. We’re building our new franchise businesses. We’re excited about men’s. Men’s has turned around, and now it’s just women’s.
Really looking at women’s dollar per square foot by store and making sure that we’re really optimizing the women’s business in our best stores and online. Let’s not forget about the direct business. Our direct business has been outperforming last year on the back half and going into Q1. We’re seeing really nice momentum on the direct business. It’s a new way of getting new acquired customers. Again, this is where we’re working on how do we get them to repeat shop either on the site or going into stores. That is a new initiative for us.
We’re talking a little bit more about omni customer. I’m not a huge fan of the word omni. There certainly is opportunity in this new world to understand where the customer is going to be leveraging some of our new capabilities and understand where they are and being there for the customer with what he or she wants. So those are really our tactics. And again, like I said, product, we have new product categories. We have new talent that we’re launching in American Eagle. We’re excited about that. You’ve heard some of the — you’ve seen it already. Ella Langley, by the way, we just launched her. She’s the number one song in the U.S. right now, her song, Choosin’ Texas, sorry. So we’re just excited about continuing to gain that relevancy in American Eagle. And keep in mind, it’s America’s 250th anniversary this year, and next year’s AE’s 50th anniversary. Lots of excitement around American Eagle.
On the intimates side, I think intimates is just getting going. We’re leveraging undies to bundle and to get new customers into our brand. We’re considering it the lipstick of our brand. But also we’re launching new bra silhouettes. Bralettes are back and these layering pieces. We have lots of categories now on the intimates side, again, that we can lean into and pulse, depending on the trends and where the trends are going. We’re feeling good about intimates. Again, they saw great success in Q4, and we’re continuing that momentum into Q1.
Jonna Kim
Thank you.
Operator
The next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.
Dana Telsey
Hi, good afternoon. 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? Thank you.
Jennifer Foyle
Sure. So I didn’t mention this before, but also not only are we leveraging talent, more so on the AE side of the business, but in both brands, AE and Aerie, we’re really leaning into our community and our customer base, and we’re really — I mean, both brands right now are starting new tactics to gain new customers as far as — well, there’s some I can’t tell you. But this creator community that I think we are just encroaching on for both brands, it’s real, and that is the difference, okay?
So there’s a lot of our competition’s out there. They’re getting — they’re finding tactics. But I think our tactics for our brands are about real and authentic and getting our community that believes in our brands to celebrate our brands. And so these influencers that we’re leveraging across all brands, I think we’re going to really lean into. We’re excited about it and we’re already starting to see some momentum gaining with this influencer program that we’re starting. And again, it’s more innate, we own it and we are excited about it. So the tactics are slightly different than some of what we see our competition doing.
Mike Matthias
On the store remodels, refreshes, Dana, we’ve got — as I said in pre-prepared remarks, we’ll do at least around 60, maybe a few more than that this year. We’re I think in our third to fourth year of that program. We still have about a 350 to 400 store total we’re working toward. Probably about another year away from that. I think we’ll get over the 300 mark or close to that with these next 60. Again, the average age of the fleet before we started this was about 12 years. We were behind the game, behind a little bit, due to COVID in our intentions of refreshing the fleet. The stores we know we want to sign leases for the longer term.
I think once we’ll get into a rhythm of, you know, keeping the average age more in that six to seven year sweet spot, which we think is the right thing to do. And then on a performance basis, we are seeing a comp result or an increase in these stores that’s above the chain average. We like what we’re seeing in terms of payback on that cash. It’s a bit of kind of maintenance/some payback by doing this. We have refined the cost of these down from where we started in the first year. So we’re — we’ve kind of — they’re yet the elements of the store that we need to touch and the biggest bang for our buck. It’s the average has come down on the spend since we started. We’re kind of more than halfway through the program. We like what we’re seeing in terms of performance and with the intent on an ongoing basis to kind of maintain the age of the fleet more in that six, seven year range.
Dana Telsey
Thank you.
Operator
The next question comes from Janine Sticher with BTIG. Please go ahead.
Janine Stichter
Hi, good afternoon. Just on the tariffs, can you remind us what you’ve done on pricing in response? Have you raised tickets at all? Any thoughts on pricing for the rest of the year?
Mike Matthias
Yeah. I think we’ve talked about really business as usual. We’ve approached kind of tickets and pricing just like we always have, where we — what’s the right price value equation for the customer? Where are we not seeing price resistance across items? Some strategic intent of increasing tickets a bit so we can kind of provide that right value equation from a promotion perspective to the customer.
So no, no specific intents around tariff pass-through. It’s really what we’ve always done from a pricing perspective. Maintaining — again, the AUR for the fourth quarter was relatively flat, like down a little bit in AE and up in Aerie. From a margin perspective, that’s not a bad place to be with some mixed benefits in there, aside from the tariff impact. So we’ll continue down that path with where there are opportunistic and kind of opportunities to raise tickets a bit just based on customer reaction and what’s right for that price value equation.
Janine Stichter
Great. And then maybe just back on Quiet Logistics, with the $20 million annualized savings, are you thinking about reinvesting any of that? Are there areas you would potentially spend more or is that flowing all the way to the bottom line? Thank you.
Mike Matthias
No, I think, everyone, not really we’re looking at reinvesting other than probably advertising. I mean, a lot of what we’ve been doing with the management of our expense base for several years was to find some funding to do what we’re doing on the advertising line. And actually, we’ve been measuring that ourselves and just looking at this, our own sort of internal scorecard over the last several years. We’ve done a nice job at kind of reducing the rate of sale on the majority of the expense base, the bigger line items that we’ve — the project we had a few years ago where we kind of addressed 85% of our overall opex base.
We’ve seen continued success there to kind of knock that down as a rate of sale, and we’ve sort of funding that back to advertising right now in total. We’ll anniversary that and start to leverage again, starting in the back half of the year. So no reinvestment of those dollars specifically. It’s sort of an ongoing program to improve our operating rate. Short term here, we’re investing some dollars back in advertising for sure these 12 months, but nothing else specific from that savings that we’re intending to do.
Operator
The next question comes from Jon Keypour with Goldman Sachs. Please go ahead.
Jonathan Keypour
Hi, everybody. Thank you, guys. I just had a question about the low-single-digit AE comp in 1Q. Just noticing that if you go from 4Q ’24 to 1Q ’25, the sequential comparable gets 3 points easier, but the low-single-digit sort of implies that on a two-year stack basis, there’s a slowdown. So just any commentary around that, and then I have a follow-up.
Mike Matthias
Yeah. Jon, I think if you look at the improvements to that point, I mean, I think we’ve seen a 5 point improvement from kind of the second quarter of last year through the fourth quarter result of plus 2. The guidance we’re providing now is based on what we’ve seen to date. We know there’s been some weather disruptions, some serious storms and things like that in this February, this year that we didn’t really see that dramatically last year, especially the Northeast getting pounded a bit. We have our store base is a nice concentration in that area. We’re pleased to see the kind of trend continue from fourth quarter.
That being said, Jen said it, the spring break time is ahead of us. Short season is coming. The mark whole timeframe is more like 75% of our total first quarter, so we’ve got a long way to go. But continuation of the trend we saw and the teams are working hard to capture these next two months, and we’ll see how the quarter pans out. But it’s the right place to be at the moment.
Jonathan Keypour
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?
Jennifer Foyle
That was actually brand awareness. I just wanted to let you know. We were roughly at 55% of the increased that, but we do have a new customer base too. 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 far so good. That continues into Q1. 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. We’re going to bring in newness, monthly, more so than we did in the past to excite 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 were really tough, across the board.
That’s a huge category for us in Aerie, OFFLINE and in American Eagle. So there’s still a lot of volume in front of us and we’re going to set ourselves up for success here.
Jonathan Keypour
Great. Thank you.
Operator
The next question comes from Corey Tarlowe with Jefferies. Please go ahead.
Corey Tarlowe
Yeah. Thanks, Mike. On tariffs, could you remind us again what the impact is that you’re expecting? And then I ask that in the vein of, you guided with IEEPA in, how much upside is there to the current guide if that is struck down?
Mike Matthias
Yeah. Just the quarterly impact of how we laid things out with IEEPA tariffs that were in place. So about a $30 million impact each of the first and second quarter, so kind of $60 million total for the spring season. We incurred $20 million of impact in Q3 of ’25, but probably more like a $30 million, $35 million on a full quarter basis because of the timing of the effective tariff rates last year. And then we incurred $50 million of impact this past fourth quarter. So that gets you to your $130 million plus number for — on an annual basis.
We left that guidance or that the approach to guidance in place, because to your second question, I don’t think any of us know what’s about to happen. We’ve got this 10% Section 122 in place. All indication is that’s going to go to 15% based on kind of recent communication. We know there’s things happening on the 301 front that this administration tends to do. So the impact to the total year, we believe the guidance we just gave should be the worst case, knock on wood. I hope I didn’t distinct ourselves in the entire industry with that comment. But there would be upside.
We’ve done some back of the envelope math of what it could look like based on the cadence of when we think the Section 122 tariffs expiring after 150 days and if 301 take effect, but it’s all guesstimates at this point. So I think we’ll know a lot more by the first quarter call at the end of May. I expect to provide a bit of upside to this guidance at that point, but better off to quantify that over these next couple of months once we actually know more than kind of put numbers out there that we’re not 100% sure of at the moment.
Corey Tarlowe
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? Thanks so much.
Mike Matthias
Yeah. We purchased about 1 million shares there before the end of the year. Share counts in our projection right now would be about 177 million for the year versus 176 million last year. We are going to look at — again, we always talk about, capital allocation being investing back in the business first. We’re committed to our $0.50 per share dividend. And then looking at buybacks to offset dilution minimally. So that would — the January buyback was part of that.
If you look at the full year, last year, we returned again $341 million to shareholders, $85 million in dividends and over $250 million in share repurchases. So we’ll continue to look at it, Corey. We’ll minimally offset kind of internal dilution from internal grants in general. We’ll kind of prioritize that, look at anything above and beyond that as we kind of get into the year and see how cash flow is trending.
Operator
The next question comes from Marni Shapiro with The Retail Tracker. Please go ahead.
Marni Shapiro
Hey, everybody. Congratulations, and please extend my condolences to Jay. Jen, the stores look fantastic. So I have a couple quick hit 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 two 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’s back? Are you kind of thinking along the lines there in Aerie?
Jennifer Foyle
I like that thinking, Marni. First and foremost, Aerie has some great things in store. But again, Aerie has many different tactics. And I just mentioned we do a little bit more grassroots, the community, and it just, they vote for us and it’s a winning recipe. But I will say, Marni, we do have some, some fun things in store. And as you know, back in October, we leaned into, you know, not using AI on our models. And it’s, a nice uptick to where we were, you know, when we launched Aerie Real, I think it’s just.
It’s a great. It actually addresses the new generation. I’m quite excited about it. And we’ve all just begun here. So really that’s what we’re up to in Aerie. And again, Marni, with all these new customers, we’ve got to get them to come back more often. You can’t imagine the dollars on the table if we could just get them to come back one more time annually. So those will be some of our focuses. And can we go back to your first question? I’m sorry, I got so excited about Aerie for a minute.
Marni Shapiro
I’m curious. There are changes happening in denim, rises, the baggy. Baggy is going. Giving way to a cleaner, a little more narrow boot cut. So is that kind of. I feel like there’s a confusion with the customers right now because you’re not the only ones talking about this. All my peeps are talking about this.
Jennifer Foyle
I like that thinking, Marni. First and foremost, Aerie has some great things in store. Again, Aerie has many different tactics. I just mentioned we do a little bit more grassroots, the community, and it just — they vote for us, and it’s a winning recipe. But I will say, Marni, we do have some fun things in store. And as you know, back in October, we leaned into not using AI on our models.
It’s a nice uptick to where we were when we launched AerieREAL. I think it’s great. It actually addresses the new generation. I’m quite excited about it, and we’ve only just begun here. So really, that’s what we’re up to in Aerie. And again, Marni, with all these new customers, we’ve got to get them to come back more often. You can’t imagine the dollars on the table if we could just get them to come back one more time annually. So those will be some of our focuses.
And can we go back to your first question? I’m sorry. I got so excited about Aerie for a minute.
Marni Shapiro
It was just, I’m curious, there are changes happening in denim, rises…
Jennifer Foyle
Yes. Absolutely, yes.
Marni Shapiro
The baggy is giving way to a cleaner, a little more narrow boot cut. So is that kind of — I feel like there’s a confusion with the customers right now because you’re not the only ones talking about this, all my peeps are talking about this.
Jennifer Foyle
I think you’re right. I think definitely the rises are getting lower. You’re seeing more midriffs being shown. But I also think it is about these other bottoms, including skirts, shorts and other fabrics, khaki, chino, utility. Those ideas I think are here and I think it is about pivoting into those. But you’re right. Definitely the lower rise is something that we are addressing and we do have and that is working for us. So now it’s about just moving the business.
This business has changed drastically, Marni. There’s so many new fits to your point. With Ella, we’re seeing the boot work for us, for sure. That makes a lot of sense. Right now we’re in the process of our test and scale for back-to-school. So I’ll learn more in a couple of weeks as far as — and we have all these fits out there that we test and learn from and where we want to place our bets. So there’s more to come here, and the team’s ready to execute.
Marni Shapiro
Well, the stores look fantastic. Your denim shorts look absolutely fantastic. Congratulations. Best of luck.
Jennifer Foyle
They are great. Thank you, Marni.
Judy Meehan
Thanks, Marni. Operator, we have time for one more question.
Operator
Sure. That question will be coming from Janet Kloppenburg with JJK Research Associates, Inc. Please go ahead.
Janet Kloppenburg
Thank you, and thank you for squeezing me in. Yeah, 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? Because you’ve made investments in other denim areas or maybe denim isn’t where you think the brand should be right now?
Jennifer Foyle
Yeah, that is at the center of everything we do in American Eagle. Like, we have maintained our market share, like our positioning, everything we do. That is our core recipe for that business. And both men’s and women’s did comp on the quarter. It was just, in some cases, what price people are willing to pay for some fashion. So that’s some of the pressure that we felt. But we’ve learned that lesson and we’re trying to take that forward, particularly — the most important quarter obviously is Q3 for this business, so applying those learnings. But no, — denim, it’s at the core of everything we do. It’s just — it was more about just leaning into some steps that didn’t work as successfully as we were hoping to and learning from that and reapplying those lessons.
Janet Kloppenburg
Okay, great. And then just for Mike. I think you said AUR was flat. Can you just talk a little bit more about the traffic and unit trends in the quarter? And how we should think about that going forward? Thank you.
Mike Matthias
Yeah. Yes, Janet. AUR overall at a company level was flat. AE was down slightly or kind of low-single and Aerie was up in the mid-single-digits. So it kind of ties to the margin color we were providing earlier as well, and what Jen just mentioned about, we’ve been talking about jeans specifically as being positive, but then a little pressure, a little kind of more promotional to drive those results.
We’re expecting something similar as we continue, like right now beginning in the first — early into the year here. Again, the Aerie team on the current trajectory is being able to kind of manage intelligently and pull back and be more targeted. AE is really still fighting the same game we just talked about. So we’re expecting something similar in the short term and we’ll see how the rest of the season progresses.
Operator
[Operator Closing Remarks]