AMERICAN EAGLE OUTFITTERS INC

Macroeconomic Conditions, Inflation and Tariffs

During Fiscal 2025 and the 13 and 26 weeks ended August 1, 2026, our results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior.

In addition, trade policies and continued uncertainty in connection therewith, including with respect to tariffs and other restrictions, relating to countries from which we source our merchandise and raw materials, have created a dynamic and unpredictable trade landscape. This has and may continue to adversely impact our business and operations. On February 20, 2026, the U.S. Supreme Court held that the U.S. administration’s imposition of tariffs pursuant to the International Emergency Economic Powers Act (“IEEPA”) was unlawful, striking down the 10% global baseline tariff, as well as the higher tariffs imposed on certain U.S. trading partners. Shortly after the U.S. Supreme Court's ruling, effective February 24, 2026, the U.S. administration imposed a new 10% global tariff for a period of 150 days pursuant to a balance-of-payments provision in Section 122 of the Trade Act of 1974, which was invalidated by the Court of International Trade ("CIT") on May 7, 2026, though relief was limited to the named plaintiffs, and litigation is ongoing following the government's appeal. The U.S. administration further announced that it would begin additional trade remedy investigations into certain trading partners pursuant to Section 301 of the Trade Act of 1974 and with respect to certain product sectors pursuant to Section 232 of the Trade Expansion Act of 1962. The U.S. Supreme Court decision invalidating the IEEPA tariffs did not address a remedy or refunds, which instead have been addressed in cases in front of the CIT. The CIT ordered U.S. Customs and Border Protection ("CBP") to issue refunds for all IEEPA tariffs, plus interest. Pursuant to this order from CIT, CBP developed and implemented a process to facilitate refunds through its Consolidated Administration and Processing of Entries (“CAPE”) system, the first phase of which went live on April 20, 2026. The Company submitted all refund claims eligible for refund in the first phase of CAPE during the 26 weeks ended August 1, 2026. As of August 1, 2026, the Company received $195.7 million of IEEPA tariff refunds, including interest, which were recognized primarily as a reduction of cost of sales in the Consolidated Statements of Operations.

Additionally, the Company paid $70.8 million related to the Participation Agreement during the 13 weeks ended August 1, 2026, representing substantially all of refund claims purchased by the buyer, plus interest,

The U.S. Supreme Court’s ruling did not affect all of the recently imposed tariffs, including those imposed following trade remedy investigations by the Department of Commerce or the U.S. Trade Representative. Nor does the ruling prohibit the imposition of future tariffs through alternative trade authorities available to the U.S. administration. On July 23, 2026, the U.S. administration announced plans to implement additional tariffs under Section 301 of the Trade Act of 1974, effective July 24, 2026. Accordingly, uncertainty with respect to tariffs remains ongoing.

The imposition of tariffs by the U.S. government, associated geopolitical tensions, including reciprocal tariffs by trading partners, and uncertainties regarding U.S. import tariffs have and may further affect our margins and operations or could lead to further weakened business conditions for our industry. We continue to evaluate the impact of tariffs and other trade policies on our business. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for further information on U.S. tariffs.

For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see "Risk Factors" in Part I, Item 1A of our Fiscal 2025 Form 10-K.