American Eagle Outfitters, Inc. (NYSE:AEO) Q3 2020 Earnings Conference Call - Final Transcript
Nov 24, 2020 • 04:15 pm ET
Greetings and welcome to American Eagle Outfitters Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Judy Meehan, Vice President of Investor Relations. Thank you. You may begin.
Good afternoon, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Executive Chairman and Chief Executive Officer; Jen Foyle, Chief Creative Officer for AEO Inc. and Aerie Global Brand President; Michael Rempell, Chief Operating Officer; and Mike Mathias, Chief Financial Officer. In addition, Chad Kessler, AE Global Brand President will be available during the question-and-answer session. Before we begin today's call, I need to remind you that 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.
Also, please note that during this call and in the accompanying press release 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 website at www.aeo-inc.com in the Investor Relations section. Here you can also find the third quarter investor presentation. And now, I'd like to turn the call over to Jay.
Jay L. Schottenstein
Thanks, Judy and good afternoon everyone. I hope all of you are well and staying safe. I'm very pleased with our third quarter performance, especially in the midst of the pandemic. Earlier this year, we were not expected to deliver these results and have over $1 billion of liquidity entering the fourth quarter. This is due to operating discipline as well as much credit to the incredible team work across our company. In the third quarter, we produced our best gross margin in some years and our adjusted operating income was flat to last year. Despite numerous headwinds related to COVID, we saw stronger full price selling and had limited promotional activity, leading to a meaningful increase in merchandise margin. This is a testament to the strength of our brands and our product as well as our disciplined inventory management. I'm extremely proud of the team for their brilliant execution and ability to deliver these results while working remotely.
Our approach to the fall season was to go on offense and play to win. That approach paid off. Aerie extended its incredible track record of growth with a 34% increase in revenue and record profits and AE merchandise assortment were well received and product margins improved. I'm very pleased to see continued growth in our core businesses such as jeans and bottoms. I'm encouraged by