Joan Hilson - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Judy Meehan - IR James O'Donnell - Chief Executive Officer, President and Executive Director Roger Markfield - Vice Chairman, Chief Design Officer, Executive Creative Director, Vice Chairman of the American Eagle Division and Interim President of Martin + Osa Brand

Sean Naughton - Piper Jaffray Dana Telsey - Telsey Advisory Group Richard Jaffe - Stifel, Nicolaus & Co., Inc. Stacy Pak - Prudential Lizabeth Dunn - FBR Capital Markets & Co. Jeff Black - Citigroup Inc Betty Chen - Wedbush Securities Inc. Paul Lejuez - Nomura Securities Co. Ltd. Michelle Tan - Goldman Sachs Group Inc. Adrienne Tennant - Janney Montgomery Scott LLC Paul Alexander - BofA Merrill Lynch Brian Tunick - JP Morgan Chase & Co Jennifer Davis - Lazard Capital Markets LLC Howard Tubin - RBC Capital Markets, LLC Marni Shapiro - The Retail Tracker Roxanne Meyer - UBS Investment Bank Janet Kloppenburg - JJK Research

Greetings, and welcome to the American Eagle First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Judy Meehan, Vice President of Investor Relations. Thank you, Ms. Meehan, you may begin.

Good morning, everyone. Joining me today are Jim O'Donnell, Chief Executive Officer; Roger Markfield, Vice Chairman and Executive Creative Director; and Joan Hilson, Executive Vice President, Chief Financial Officer. If you need a copy of our first quarter press release, it is available on our web site, ae.com. Before we begin today's call, I need to remind everyone that during this conference call, members of management will make certain forward-looking statements based upon information which represent the company's current expectations or beliefs. The results actually realized may differ materially from these expectations or beliefs based on risk factors included on our quarterly and annual reports filed with the SEC. And now I'd like to turn the call over to Jim. James O'Donnell: Thanks, Judy. Good morning, and thanks for joining us. I'll begin by providing an overview of our first quarter performance and an update on each of our businesses. Then Roger will provide his perspective and Joan will review our financials. Overall performance for the quarter was mixed. Although sales were below planned, we achieved EPS of $0.14, which was within the range of our expectations. Looking beyond the quarter, I'm pleased to report that we continue to move ahead on implementing the strategic initiatives I discussed on our last call, which will position the business for increasingly profitable long-term growth beginning in 2012. Now providing color for the first quarter, total sales declined 6% and comps were down 8%. Our top line was affected to some degree by external factors, yet also reflected internal missteps. We pursued an assortment strategy which, in hindsight, did not provide enough depth in key items. As a result, we were not positioned to fuel promotional activities as we did during the spring season of last year. At the same time, we faced a highly competitive and promotional retail landscape. We have made the appropriate assortment adjustments for the fall season, which Roger will review shortly. In spite of the lower sales, we were able to achieve higher merchandise margin. Additionally, our expense control initiatives continued to be successful with SG&A dollars down $10 million from last year, partially reflecting the positive impact of our corporate profit initiatives. As you recall, under this program, we are reducing overhead costs. Additionally, we are creating efficiencies across our supply chain and production operations. Another positive is our strong financial position. We ended the quarter with more than $600 million in cash and investments. We are using this cash to prudently invest in our business and to evaluate other opportunities to enhance shareholder value. When we spoke on our last call, I outlined key initiatives to position the business for growth beginning in 2012. Let me provide an update on our plans. Within the AE brand, our focus is on improving productivity levels. Merchandising changes are underway to strengthen our assortments. In addition, we have further strengthened the team as Roger will discuss in his remarks. We will defend our leading market position in denim and continue to grow this category as the go-to denim destination for our customer. We must also rebuild our market share in heritage categories such as tees and fleece where we're making bolder investments and underscoring a strong value proposition. In accessories, we're achieving positive results with our expanded assortments, including more handbags, footwear and jewelry, in addition to new offerings that are right for our customer. Currently, accessories represent just 10% of our sales and we see the potential for its growth to be at 20% over the longer term. An essential part of this strategy is adding dedicated accessory shops within our stores. We now have 46 accessory shops and approximately 250 are planned for the year. We see this as a very exciting growth opportunity. Together, these initiatives build on an incredibly strong foundation of the AE brand which remains one of the strongest in today's marketplace. Turning to aerie. For the quarter, although sales were below expectations, operating results were similar to the first quarter last year. As I noted on the last call, we are transitioning aerie to give greater prominence to the intimate apparel categories. We are introducing new offerings to build a more complete lifestyle brand. We continue to believe in this brand for the long-term. With increasing sales and strong profitability, AEO Direct is a powerful driver of the future growth. There are 2 key drivers. Number one, we're using our brands as springboards. We are expanding our online assortments with more unique offerings. We have already seen success with an expanded Dress business, extended sizes and third-party footwear, and we've only just begun and will continue to grow this channel through exclusive offerings. Number two, we're taking advantage of the Internet as a powerful vehicle for furthering our international expansion, bringing our brand and truly American-style to the global market. We are expanding our shipping capabilities and payment options to reach more consumers around the world. Importantly, to support our international strategy, we recently purchased trademarks which have solidified our ability to expand in additional markets. Now speaking of the American Eagle brand abroad, we are establishing a foothold in key international markets and our first Hong Kong store opened recently and the results so far have been really fabulous, well exceeding our expectations. Overall, we look forward to continuing our progress. We have tremendous opportunities across all brands and selling channels, and including significant progress in 77kids, which we expect will lead to growth in 2012 and beyond. Now let me turn it over to Roger.

Thanks, Jim. Good morning, everyone. As Jim noted, we have made significant progress in positioning the company for long-term growth. In a nutshell, I think you can see us returning to our roots in order to accelerate our growth and profit. To achieve our goals, we have made some important management changes. Fred Grover is now leading AE Brand Merchandise, in addition to e-commerce and marketing. This appointment is important for several reasons. First, Fred has been a great partner over the past 18 years in making American Eagle a leading lifestyle brand for the 15- to 25-year-old. He has vast experience across all disciplines and knows our process well. Most importantly, Fred understands the substance of our brand DNA. By consolidating AE Brand Merchandising, store visual, e-commerce and marketing, under Fred, we are bringing a singular focus to all brand experiences. I'm very excited to have Fred in this new role. Secondly, I am delighted to announce that Michael Leedy has rejoined our company's Chief Marketing Officer. Some of you who remember Michael who led AE marketing from 1996 to 2005. He was a driving force during our most successful years. Michael created innovative ideas and strong impactful imaging. Like Fred, he knows our company and our process extremely well and helped us build AE to the premier lifestyle brand. Michael is incredibly excited to be back, and I know that, I had dinner with him last night. I have every confidence that he will deliver top-notch marketing programs, which will help drive traffic and create greater excitement around all of our brands. In addition to these key changes, we have also strengthened the merchandising and design teams in key businesses. We have hired leaders with proven track record with AE. They know our process, our brand and our customers well. I am extremely pleased to have them back at AE, and I'm confident they will have a positive impact in a very short order. Now let me address the first quarter. Our sales performance did not meet our expectations. Our assortments were a bit too broad and incorporated too many styles. As a result, inventories in denim were light, and as Jim noted, we did not plan enough inventory depth in key items to fuel price promotions. Additionally, the environment was highly promotional and competitive. With that said, our sell-throughs were decent and we achieved a merchandise margin rate above last year. Now moving forward, we will be in stock to drive our heritage businesses. Starting with denim, we will support our number one market leading position. Over the past several weeks, we have replenished some of our denim inventories and are getting back to a stronger position to support demand in this business. For back-to-school, we will be ramping up our offers with new fits, updated washes, backed by an exciting and targeted marketing campaign. This newness in the Denim business and that's very exciting for us in the upcoming season. Across the assortment, we must reclaim the classic preppy styles for our core 15- to 25-year-old customers. Our approach is consistent with our heritage and how we built our most successful seasons. You will see a real change around over the next several months. The transition within aerie will also occur in full force this fall, with powerful broad launches and a more complete assortment across apparel categories. Overall, with the changes we have made across our organization, I am confident we will deliver on our objectives. Now to provide you with a further breakdown on the quarter and the outlook, I'll turn the call over to Joan.

Thanks, Roger, and good morning, everyone. Although sales for the quarter came in lower than anticipated, we are pleased that we were able to deliver earnings within our expected range. Our improved merchandise margin reflecting strong inventory discipline, combined with cost savings from our profit initiative, were key contributors to this performance. Now reviewing the details. Total first quarter sales of $610 million were down 6% from the first quarter last year, and comparable store sales declined 8%. This was against our best quarter last year when comps increased 5%. This year by brand, AE decreased 8% and aerie was down 7%. AE Direct sales increased 3% in the quarter. Looking at consolidated first quarter metrics. Transactions declined in the low double-digits. The average transaction value increased in the mid-single digits, driven by a high single-digit increase in the average unit retail price. Fueled price promotions during the quarter contributed to the higher AUR. Now moving on to margin. The gross margin decreased 170 basis points to 38%. The merchandise margin increased 70 basis points compared to last year, primarily due to lower product cost and decreased promotional activity. BOW increased 240 basis points as a rate to sales primarily due to rents related to new store openings and the impact of negative comps. Now turning to operating expense. SG&A dollars declined $10 million or 6% to $158 million. As a rate to sales, SG&A was flat to last year. The decrease resulted from expense reduction efforts, which yielded savings and compensation, supplies and services, partially offset by planned investments in advertising and new store growth. Lower compensation costs primarily reflected changes in our incentive comp plan which largely affected the first quarter and will not have a similar impact going forward. Other income of $4.5 million included approximately $0.01 per share related to ARS recovery. Turning to the balance sheet. First quarter ending inventory increased 2% and cost per foot was flat to last year. As Jim and Roger indicated, this fall, we are rolling out our Accessory business which is reflected in our second quarter inventory. Looking at apparel, second quarter average inventory cost is planned to increase in the high-single-digits and units are down in the low-single-digits. First quarter CapEx totaled $38 million compared to $19 million last year. The increase reflects store remodeling activity in the first quarter of this year. For the year, we continue to expect CapEx in the range of $90 million to $100 million, with a little over half related to new and remodeled store. We ended the fourth quarter with cash and investments of $611 million. In terms of our outlook, we currently expect second quarter EPS to be in a range of $0.10 to $0.13 compared to $0.13 last year. With respect to sales, while it is still early in the quarter, we are encouraged by an improvement in sales, reflecting better trends in key items. SG&A dollars are planned flat for the quarter, with investments in new stores and advertising offset by continued expense savings. For the year, we continue to expect EPS to be about flat with 2010 earnings from continuing operations of $1.02 per share. We expect improved performance in the second half of the year providing momentum for 2012. Now I'll turn the call back to Judy.

Thanks, Joan. Now we'll move onto question and answers. So that more participants can ask a question today, please limit yourself to one question. Okay, Rob, we're ready for the first question.

[Operator Instructions] Our first question this morning is from the line of Jeff Black with Citigroup. Jeff Black - Citigroup Inc: So, Joan, it looks like we saw some cost increase, or are seeing some cost increases on the input side related to the inventory in 2Q. Just tell us where you're seeing those, what degree of costs rise we're seeing now? And looking to the back half, what are we looking at there in your opinion? And what kind of merchandise margins is this guidance presuming for second half?

Okay, Jeff, that's accurate. The cost increase, part of the increase in second quarter relates to product cost, which reflects the back-to-school inventories and it's a mix of those receipts and that's up about 8% to 9% in the quarter. And then as we look to the back half, we see a mid-teen product cost increase. We are seeing in the second quarter cost pressure in terms of merch [merchandise] margin guidance, and as you know and as we've stated in our comments, we have flexibility with our inventory position for promotions. So which also gives us flexibility in our markdown performance for the quarter. So cost pressure with opportunity in markdowns and top line opportunity with promotion. On the back half, we expect merch margin pressure as well, but again, we believe we have opportunity in the markdown line to offset some of that cost pressure, as well as we've been testing some price increases, selectively testing price increases to offset some of those costs.

Our next question is from the line of Adrienne Tennant of Janie Montgomery Scott. Adrienne Tennant - Janney Montgomery Scott LLC: Roger, can you talk about some of the products in the spring season where you thought there was perhaps a miss and what is giving you the confidence, what's changing and giving you the confidence that the fall season merchandise, I'm assuming, starting in July, right? The back-to-school merchandise really has some changes in it that can create some momentum?

All right. Well, we have some successes obviously in the spring and those were in the men's area, men's knits, men's underwear, men's sweaters and men's shorts doing quite well. On the women's side, we have the successes in women's tees, in women's sweaters, women's sweats and also the Shorts business looks like it's kicking in pretty nicely for us. On the down side, we went after a Khaki business that didn't work and it kind of lowered our inventories on the denim front, which in hindsight, was an error. We've compensated for that, we made quick adjustments, and if you go into our stores now, you'll start to see the denim starting to come in and our assortment is for back-to-school, by far superior to any other season we had. And with this denim now coming in, we're seeing a change in the business. Adrienne Tennant - Janney Montgomery Scott LLC: Are you taking less fashion risk in the back half? Because it seems like the call out that you had are more the basic categories perhaps?

We're going to have enough fashion, so you have the sprinkles you need in the store, but our intensity is in the key heritage items we know about and a very strong denim impact.

Our next question is from Michelle Tan of Goldman Sachs. Michelle Tan - Goldman Sachs Group Inc.: I have 2 questions. One on the inventory side. I'm just curious, I know you mentioned the investments are behind some key items. Can you help us think about the shelf life of that, those kinds of items versus the average thing you would put in the store? How long can you sit on these things before you have to take a markdown?

Michelle, by the way, thanks for your report, I like reading it very much. I kind of agree with you. So well, the investments we're making are in -- American Eagle is really the number one brand in this space by far, and every once in a while, for some reason, we let go of our key heritage programs and we let people take market share from us. Some of these programs are quite predictable: Fleece, graphic T-shirts, and for us, unlike other people, certain categories within the Denim business. We will protect our turf as we move into back-to-school. Michelle Tan - Goldman Sachs Group Inc.: Great. And on the shelf life of those kind of key items, is it a longer shelf life business?

It depends on the item. When it comes to denim, you pretty much have a shelf life that lasts the entire season. When it comes to graphics, we flow them. When it comes to fleece, some stay for the entire season, and some, we flow. Michelle Tan - Goldman Sachs Group Inc.: Okay. And then on a marketing front, as you mentioned, it does seem like you've gotten a little bit away from your heritage not just with the breadth the assortments, but also with some of the imaging you guys have been using in the spring. How long before you can kind of move back to that more classic, preppie kind of aesthetic? How long does Michael take to be able to roll some of that out?

Michael and Fred and myself, we've worked for 15 years together as a combination, and with Fred for 18 years. We've had already 2 dinners in the 2 weeks that Michael's back. This is a very cohesive team. We are moving on that front real quick. Michelle Tan - Goldman Sachs Group Inc.: So maybe by back-to-school, we should see something materially different in terms of the branding?

I think you'll love what you'll see for back-to-school. But from holiday on, you'll see the input of the combination. Michelle Tan - Goldman Sachs Group Inc.: Okay, great. And then my last one is just to understand how much sales improvement are you guys expecting because of these changes as you give your full year and your second quarter guidance?

Clearly, Michelle, we're not giving comp store guidance for the second quarter. However, we are encouraged, as Roger said, by the trends we're seeing in the key items, the new denim assortment is on the floor in with several styles on the floor not in full force. And so and the testing on that has been good. So we feel encouraged by the traction that we're seeing here in the second quarter, which has led us to feel very encouraged as well for the back half of the year, as Roger mentioned, key item investment, denim, graphics, our core businesses, where we see traction and the third quarter is a very strong quarter for us as a brand and we are comping a holiday of last year that was a subpar performance and we believe there's opportunity there. Michelle Tan - Goldman Sachs Group Inc.: Okay, great.

Our next question is from the line of Liz Dunn of FBR Capital Markets. Lizabeth Dunn - FBR Capital Markets & Co.: Why didn't you buyback any stock in the quarter and what's your ongoing perspective regarding share repurchase?

We did not buy back stock in the quarter and we continue to evaluate that with our board. As you'll recall, we have 14.5 million shares authorized and we continue to evaluate that on an ongoing basis. Recollect that last year, we repurchased several million shares, over 200 million, and are tracking at returning about $1.5 billion to our shareholders over the last couple of years. So we are committed to returning share -- cash to our shareholders and continue to evaluate that. Lizabeth Dunn - FBR Capital Markets & Co.: Joan, how much cash do you like to keep on the balance sheet just for sort of safety purposes?

Yes. Our range and this is our particular low point in terms of -- or high point in terms of what we like to retain just given how the business flows, it's $300 million to $400 million is a rough comfort level given the general cash position that we have between Canada and the U.S. and so forth. So $300 million to $400 million is a general range of cushion. Lizabeth Dunn - FBR Capital Markets & Co.: Great.

Our next question is from Janet Kloppenburg with JJK Research. Janet Kloppenburg - JJK Research: Roger, I interested in your discussion about return to classic preppy styles. Does that mean that this more Bohemian styling that we've been seeing in the stores this spring is something that you're not as much devoted to or are you just talking about preppy styles on the bottom? If you could talk a little bit about how you're thinking about the styling direction of the brand, I'd appreciate it.

Well, obviously I don't want to talk about fashion on the call, but clearly, it's obvious, Bohemian is a trend and it's a good trend that works with our preppy looks. So it's how we mix the 2, we're not going away from Bohemian, but we are introducing classic preppy. Janet Kloppenburg - JJK Research: And do you think that your denim, I know you have new fits and a lot of newness, but do you think that because of the price increases, Roger, that you’ll have a meaningful increase in ticket price in denim this fall or how should we be thinking about that?

Well, if I had to give you one category that I have the most confidence in our ability to raise price, I would tell you it's in denim. And of all the tests that we've done, it clearly shows our spread in terms of value, and quality and style is so upfront vis-à-vis the competition, that we have room in pricing in denim. Janet Kloppenburg - JJK Research: Okay. And so when will we start to see those price increases? Will it be back-to-school?

We're very careful, we're very cautious. We've done it on some washes and on some styles and having a no -- having 0 negative impact on the selling. Janet Kloppenburg - JJK Research: Okay. And just last question is on the key items where I think you said you were light, now it's improved. Is it where you want it to be now or where we look to the...

No. You'll see it from back-to-school on. Janet Kloppenburg - JJK Research: Okay.

Our next question is from the line of Brian Tunick with JPMorgan. Brian Tunick - JP Morgan Chase & Co: Two quick ones. Give us an update on the CEO search and just sort of maybe what the board is looking for from that role. And then just on the international trademarks, just sort of what was acquired there and can you just maybe talk about the Go-to-Market strategy on the franchise versus company owned? What are you guys thinking there as we move into 2012 and beyond? James O'Donnell: On the CEO search, Brian, there's no news. It's very early in the process and there's been -- other than preliminary work done by the search firm, we're probably a month or so away from getting into some specific meet and greets with some prospective candidates. As it relates to the trademark acquisition, there is an individual in Europe who held the rights to a number of countries that we wanted to have access to. We were successful in our negotiations with this individual. And we have acquired the trademark rights to some 27 countries that it would have posed somewhat of a problem if we tried to enter at that time. So we no longer have that problem and those markets are now open to us. As it relates to international modeling, we are, right now, in a franchisee mode. That means that all of our international store openings at this particular time are in conjunction with the partner under our franchise arrangement. We are looking at a few countries in the world where we would either do a combination of joint venture or wholly owned. But that's in the very early stages right now. Brian Tunick - JP Morgan Chase & Co: All right, terrific.

Our next question is from the line of Lorraine Hutchinson with Bank of America. Paul Alexander - BofA Merrill Lynch: This is Paul Alexander for Lorraine. Could you guys give us an update on the $20 million to $30 million cost savings initiative? First, is it still $20 million to $30 million? Or now that we're about half a year into your efforts, do you have a sense that you're going to be at one end of that range or the other? And how do you see the timing of that being split?

Paul, the $20 million to $30 million is still the range that we have and it's over the next 24 months, and we have factored in savings as well within the guidance we've given and have offset some of that with the marketing increases that we've talked about. So the $20 million to $30 million is still in our sight, with some of that being offset with investment. Paul Alexander - BofA Merrill Lynch: Great. And then could you talk a little bit about maybe cotton and costing for 2012? With cotton coming back a little bit, how are you seeing -- I know it's a little too early to say exactly, but directionally, what are you thinking for early 2012?

What we -- it is early to talk about cotton for 2012. We recognize that the market is improving. What we can tell you about our back half of this year is, that we were able to, within the guidance that we gave and have reiterated here, that we hit the cotton cost targets that we expected and we're very pleased with the sourcing team and the efforts they put forth to do that. So we're right on the mark there and look to gain some improvement. But how much and where that will be is still a story to be told for '12. Paul Alexander - BofA Merrill Lynch: Great.

Our next question is coming from the line of Stacy Pak of Barclays Capital. Stacy Pak - Prudential: I guess I'm a little confused on the inventory because I thought what I heard was, the merchandise margin increased in this quarter, in part due to tighter inventory. And yet, you're calling for inventory to be low double digits all in at the end of Q2. So I guess where should inventories be in the second half? How much price increase do you have embedded in your dollar increase or your dollar per share number for the year? And then, Roger, you've been around a while. I just would like it if you would comment on the level of promotions that you're seeing in the industry now, and sort of how that looks to you and what you see happening in the second half given everything that's going on in terms of promotion?

Okay. Stacy, I'll take 2 parts of your question. One, the volume levels for the first quarter was a bit short of where would have liked to come out. And I'm quite certain it was because we couldn't fuel the competitive price promotions taking place out there. What we've done in a very prudent way is, as I said before, invested in denim, in the new accessory part of the business and in the heritage key items. I believe that, that will get market share back that we gave up in a very prudent way and use that inventory very effectively and it should work both from a volume perspective and from a margin perspective. As it relates to the level of promotion taking place out in the environment, I walked obviously before, each month I'm out in the malls, my visit was last week and I won't talk specifically about any individual competitor, but the competitive environment is vicious. The price points, as low as I've, quite frankly, have ever seen them. I don't think we have to get into that fray, but at the same time, we want to have our share of market back. Stacy Pak - Prudential: I guess just as follow-up, Roger, but if it's so vicious now, why is it going to be so much better in the second half and why is everyone, without naming names, going to be able to raise prices altogether in the second half?

Well, I think denim is a separate issue. I think when you pretty much own a share of market in the business and we haven't fueled the inventory to satisfy our customers, I think we, quite frankly, standalone. On the other categories, we just need to have the fuel to be able to be in the game.

Our next question will be coming from the line of Paul Lejuez of Nomura Group. Paul Lejuez - Nomura Securities Co. Ltd.: I was just wondering how did the 46 stores with the expanded accessory offering perform relative to the chain? And also just wondering at aerie, just the transaction first ticket. Just trying to figure out what the composition of that comp was?

I'll take the first question. The Accessory business, as you know, we have 10 stores for holiday and we just added actually another 45, which will make it 55. And those were added for summer to set which was like 2.5, 3 weeks ago. Those stores are running, I don't want to give an exact number, but they're running up nicely to the chain and they're impacting in the comp of those particular stores as well.

And with respect to aerie, Paul, the transactions were down in aerie, and ADS, we did get some lift in ADS.

Our next question is from Dana Telsey of Telsey Advisers. Dana Telsey - Telsey Advisory Group: Can you talk about [indiscernible]

Dana, you're breaking up and we can't hear you. Dana Telsey - Telsey Advisory Group: Can you talk a little about the ancillary concepts like [indiscernible]

Can't hear you again, Dana. Dana Telsey - Telsey Advisory Group: I'm going to call back on my other line.

Our next question is coming from Sean Naughton of Piper Jaffray. Sean Naughton - Piper Jaffray: Just maybe a quick update on the real estate front. Could you give us an idea of the lift you are seeing on any of your remodel program, the cost of the remodel and how many you plan to do this year? And then maybe secondarily, just how should we think about the new store opening and closings in terms of cadence for the balance of the year? James O'Donnell: Well, this year happens to be the most remodels we've ever undertaken in my 11 years here and they number about 200. They are all not full remodels. We have really broken down our whole remodel program into 3 different categories. One is a complete remodel and that would be only for very specific stores you see in very high-profile shopping centers and our highest volume stores are the most profitable. The mid-tier would be ones where we more or less do some lighting and some floor refurbishing and paint. And then the third, it's the lowest and that's where we just do the paint outs and freshen up the stores. Our results on the remodels have been very positive. They, overall, are in the low-single-digits -- mid- to low-single-digits over their previous sales cadence, and so we're encouraged. And in the most cases on the remodel, when we renew a lease, there's some sort of a remodel side into the lease renewal. So it's not just automatic that, on our part, that we were just arbitrarily do or not do a particular remodel. So that's why we put them in 3 different categories. The number of store openings and closings, we have been very frugal in the number of stores we're opening. On the Eagles, primarily the store openings are all in the factory outlet environments that have been extremely prolific for us and we'll continue to look at that channel. We have aerie stores open, about 10 aerie stores. We plan -- and 77kids, we have about 12 stores planned to be open. The aerie stores and the 77kids stores, I'm overall pleased with, but we'll continue to -- Joan and I will continue to look at the financial cadence as it relates to the brands in total and that would be the aerie and 77 brands and we're going to be very prudent about where we're going to open stores and how fast we're going to open. We want to see some improvement -- practice some improvements in overall performance in both aerie. Kids is performing well, but I'm being very, very cautious with that brand. And I believe that back-to-school and especially holiday, will be the seasons that we'll be able to evaluate overall progress in those 2 brands. As it relates to closing stores, we have identified a number of stores over the next 2 years. They number somewhere between 85 and 100 stores that are eligible to close, but not necessarily mean we're going to close them. But we would look at them and contemplate closing. As we are looking at some of the initiatives that we're embarking on currently, as Roger mentioned, in depth and that is the key item pricing with back to our heritage and some of our key categories. And some of these stores should respond very nicely and I would hope they would, and so that number is a number that we're not locked into, but based on the financials as of today, 85 to 100 stores would be considered for potential closing. Sean Naughton - Piper Jaffray: And then just real quick. For this year, the closings, though, are likely weighted towards Q4 area or is it Q3 or do we just need to see back-to-school and then see how many we're going to do this year? James O'Donnell: This year, you're going to see somewhere between 25 and 35 stores that probably will close. Sean Naughton - Piper Jaffray: Okay.

Our next question is from the line of Howard Tubin of RBC Capital Markets. Howard Tubin - RBC Capital Markets, LLC: Maybe you can talk a little bit more about marketing and what changes, if any, can we expect now that Michael's back on board?

Well, Michael is a very creative marketing guy. He built the brand with us at the very beginning and he’s very, very connected to driving traffic through stores in a very creative way. Remember at the very beginning, we were the first ones when it was real world, we were first in many, many, many initiatives. Michael is very connected to the whole social media network and Fred and his whole team, prior, have done an incredible job. I can't talk about some announcements that’ll be made tomorrow. But as the premier brand, we have a lot of the top social media networks want us to join with them in partnerships and there will be a major release tomorrow.

Our next question is from the line of Dana Telsey with Telsey Advisers. Dana Telsey - Telsey Advisory Group: On aerie, the growth initiatives, aerie and 77kids, you mentioned aerie sales below planned and operating profit similar. Can you give further clarification on that business? What's happening product wise, and also with 77kids, and how do price increases impact those 2 businesses?

Right. aerie, we like the way aerie looks. It's not robust enough yet. As Jim said, the operating line is equal to last year and when you take the Aerie as a brand, it's a combination of it being in the stores and what it does on the Web and its own standalone, it is a profitable business. But the team that we assembled, working incredibly well together. Actually, Jim and I just did a walk-through of back-to-school yesterday. And compared to last year's back-to-school, it is a major improvement. We really like the way it's coming together. Our hope is that it starts to really give us the increases on the volume side. We're seeing margin improvement and we have been running it very lean. James O'Donnell: As it relates to 77kids, as far as price increases, our production teams has done an outstanding job in negotiating cost for the upcoming season of back-to-school and into now into holiday. We don't anticipate seeing major price increases across the board in 77kids. Primarily, I think it would be a very bad signal to send to a consumer who are just trying to attract in a new startup business. And then the other is that I think where we've initially priced our product it’s competitive, it's not the least expensive in the Kids business, but it is very competitive and I think through promotions, throughout back-to-school and holiday, I'm very confident that we're going to hit our top line and our numbers, as well as what we anticipate will be our bottom line results.

Our next question is coming from the line of Jennifer Davis of Lazard Capital Markets. Jennifer Davis - Lazard Capital Markets LLC: Just a quick question, I'm sorry if I missed this, but I know that your previous 2011 guidance was based on a low-single-digit comp, have you updated that?

Well, the low single digit comp is consistent, Jennifer, with previous guidance. It puts pressure, more pressure on the back half of the year. However, remember that the back half of the year was weaker, particularly in the fourth quarter. And based on the traction that we're seeing in key items today, we feel that the low single-digit view is appropriate. Jennifer Davis - Lazard Capital Markets LLC: Okay, great. And then can you comment on your -- I think you said that you had lower product costs in the first quarter that helps merchandise margins. So can you go into little detail on that and do you expect any of that to continue?

It was just, in fact, that, that we had advantageous product costs in the first quarter that we were able to turn into a better margin performance for the quarter. As we look forward to Q2, as I said, we expect the product costs to be up high-single-digit, reflecting the blend of back-to-school, as well as the second quarter product. And then as we move into the back half, it's a mid-teen, reflecting the product cost increase but very consistent with the guidance that we've given for margin. Jennifer Davis - Lazard Capital Markets LLC: All right.

Our next question is from the line of Richard Jaffe of Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Just following on that same thought. With product costs up in the second half, and your reemphasis on some of the key items, how do you anticipate retail prices on some of these key items? Will you find balance to take advantage of margin opportunity in the denim and be more aggressive in pricing on the key items? Or will you just try and keep margin rates the same and then adjust according to cost?

I think you said it all, Richard. Yes, I think you answered your own question.

Yes and yes.

And if you want to come over here and be a merchant, we'll let you. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: So we should look for competitive pricing on some of these key items? I mean, you'll go toe to toe with the rest [indiscernible]

Obviously, we think these key items that we're building, besides having the eagle logo, which unfortunately, we let go of it which we'll grab back real quick. We think that the design of the product, even though it is what you would call a key heritage item, has some specialness to it that makes ours that much better than the competitor. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: And when you say heritage, it's not going to be 1999 product recycled? You're going to be adjusting it for fit, for style, for colors?

Absolutely. The whole Fleece business in women's changes dramatically, but we call it heritage.

Our next question is from Marni Shapiro of The Retail Tracker. Marni Shapiro - The Retail Tracker: Can you talk a little bit about what is working first of all, in non-apparel? I know you've pumped it up in some of the stores bigger than others, but could you just touch a little bit on -- you have a lot of belts, hats, footwear has expanded in some of the stores and certainly online it's very expanded. Personal care seems to be pulled back in some stores and pumped up in others. Can you talk a little bit about that and could you also just touch on, in the Bohemian, you had a lot of wovens in the store that carried a higher price point, but they were very fashion right and I thought looked great. And I was curious if on items like that, you saw price resistance or if the fashion was right to who was buying it?

No. To answer the second question first, the woven top area as we've gone into the second quarter, very strong. And we do have great items within that assortment on the Bohemian front. And as I said before, I think it was Janet, the Bohemian trend will continue, along with our classic preppy heritage items and we're doing extremely well in that category. In the whole Accessory business, our Underwear business is very strong and parts of the Belt business is strong, parts of the Footwear business is strong, and as you know, sandals has been a bit slow across the country. But we have very good signs on this Accessory business and where we have the shop within the shop, it's doing really nicely as a total. We really don't have more inventory in an average store in accessories just yet. You will see that for back-to-school. Marni Shapiro - The Retail Tracker: And jewelry is still doing well for you guys?

Jewelry?

Jewelry is doing okay. Marni Shapiro - The Retail Tracker: Okay.

Our next question is from the line of Betty Chen of Wedbush. Betty Chen - Wedbush Securities Inc.: I was wondering if you can give us what were the comps for the women's and men's businesses in the first quarter. And then I think earlier, you mentioned that you are also looking at shipping to more countries, on ae.com, in general. Can you give us the timing of that and remind us how many countries you're shipping to now or when we can expect that to happen? And then also, the timing of some of your expanded category and how are we seeing -- and are we seeing any sort of different purchase pattern between your online customer and your in-store shoppers?

Okay, Betty, the men's comp for the quarter was down 5% and women's was down 10%. Betty Chen - Wedbush Securities Inc.: And the Online business, Joan?

The performance on the Online business was up low-single-digit. We saw an improvement in conversion and with a slight decline in traffic. But the Online business continues to be a very strong profit performer for us and very nice inventory turns there and very nice margins.

The brand is very strong online. And it represents, for us, a bit over 12% of our total business. It's a big number and it's growing and continues to grow. And how many countries we ship in, we're working on certain programs in terms of so we can ship more effectively at a better cost. But right now, we're shipping to, I believe, it's around 70 some countries we're shipping.

Over 70.

And that question is coming from the line of Roxanne Meyer of UBS. Roxanne Meyer - UBS Investment Bank: I just wanted to follow-up on your strategy to go after key items. This comes after a few years of shifting your focus to a little bit more. On fashion and I'm just wondering, in the context of your vision to get the older customer in your store a little bit more, give them day to night looks, I mean, does this change who you're going after or is this just about realizing that this is the sweet spot of your business?

I think you hit it on the second note. It's the sweet spot of our business. We've always wanted to be a 15- to 25-year-old customer who's a high school, college customer. We've always been college focused and this just lets us have both, not a singular purpose.

Okay. That concludes our call today. Our second quarter announcement is scheduled for Wednesday, August 24. Thanks for your participation and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.