Dear Fellow Stockholders:

Fiscal 2017 was a year of significant progress. Our achievements included record revenues of approximately $3.8 billion—rising 5% over the previous year—and our third straight year of positive comparable sales. We successfully executed against our long-term strategies and, as a result, our family of American Eagle Outfitters, Inc. (“AEO”) brands continued to gain market share in a competitive retail environment. We are incredibly proud that our financial results in 2017 allowed us to continue to invest in growth areas of our business and improve customer experiences across all channels. Our strong cash position enabled us to give back to our communities in need, invest in our talented associates across the world, and reward our stockholders.

The following are a few key highlights from Fiscal 2017:

AEO ended Fiscal 2017 in an excellent financial position, with $414 million in cash and no debt. Reflecting confidence in our growth prospects and strong cash position, in March 2018, we increased our quarterly cash dividend by 10%. In support of our commitment to our stockholders, we returned over $176 million in the form of share repurchases and dividends in Fiscal 2017.

At AEO, giving back is an important part of our corporate DNA. Last year, we supported youth empowerment, the environment, young women’s health, and equality. We amplified the body positivity movement through our work with the National Eating Disorders Association, helped to protect more than 138,000 acres of land through our partnership with the 21^st Century Conservation Service Corps, and made the single largest donation in its history to the It Gets Better Project. And when five major natural disasters unexpectedly struck, we provided support to our associates in need and donated cash and merchandise to affected communities.

Our most valuable asset at AEO remains our talented people. I want to thank the entire team for the progress we have made over the past few years in the midst of significant industry transformation. We employ approximately 40,000 associates throughout the world and I’m proud of the depth of talent, experience, creativity, and determination that we have across our teams today.

We will continue to focus on the strategies that have fueled our success—exceptional merchandise, innovation, and customer experience—and build on the momentum of two of the best lifestyle brands in the industry, AE and Aerie.

AEO is operating from a position of strength, with significant opportunity ahead. I’m optimistic that we will capitalize on this great organization and its strong brands to make AE a leading denim brand across the globe, take Aerie to $1 billion, and expand our bottom line profitability. We look forward to Fiscal 2018 and continuing to deliver stockholder value as we grow AEO.

Thank you for your continued support.

Jay L. Schottenstein

Executive Chairman of the Board and Chief Executive Officer

Table of Contents

PROXY STATEMENT SUMMARY

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of American Eagle Outfitters, Inc., a Delaware corporation, for use at the Annual Meeting of Stockholders to be held on June 6, 2018, at 11:00 a.m., local time, at Langham Place, New York, located at 400 Fifth Avenue, New York, New York and at any adjournment or postponement thereof. It is first being mailed to the stockholders on April 25, 2018. (“We,” “our,” “AEO,” “us” and the “Company” refer to American Eagle Outfitters, Inc.)

Forward-Looking Statements

This Proxy Statement contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including in our CEO’s letter to our stockholders and our Compensation Discussion and Analysis, which represent our expectations or beliefs concerning future events, including with respect to merchandise innovation and product focused marketing, customer engagement, brand growth, new technologies, and improved customer experience. These forward-looking statements rely on assumptions and involve risks and uncertainties, many of which are beyond our control, including, but not limited to factors detailed herein and under Part I, “Item 1A. Risk Factors” and in other sections of our most recent Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission (“SEC”).

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on our forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and, except as required by law, we undertake no duty to update or revise any forward-looking statement.

Business Highlights from Fiscal 2017

*   Compounded annual growth rate

Corporate Governance Highlights from Fiscal 2017

AC Audit Committee;

CC Compensation Committee;

NC Nominating Committee;

† Committee Chair

* Lead Independent Director

Compensation Highlights from Fiscal 2017

AEO vs. PEER GROUP PAY ALIGNMENT

3-YEAR CEO TOTAL DIRECT COMPENSATION & TSR*

PROPOSAL ONE: ELECTION OF DIRECTORS

General

The Board is divided into three classes. Each class of directors is elected for a three-year term. On the recommendation of the Nominating and Corporate Governance Committee (the “Nominating Committee”), the Board has fixed the size of the board at seven directors and nominated three candidates, each of whom are currently directors of the Company, to be elected as Class II directors at the Annual Meeting. If re-elected, the Class II directors will serve for three-year terms ending at the 2021 annual meeting, or when their successors are duly elected and qualified. The terms of the remaining Class I and Class III directors expire at the annual meetings to be held in 2020 and 2019, respectively.

Biographical information regarding each nominee and each incumbent director is set forth below as of April 1, 2018, together with a brief description of each individual’s business experience and qualifications.

Each of the nominees has consented to be named as a nominee. If any nominee should become unavailable to serve, the Board may decrease the number of directors pursuant to our Amended and Restated Bylaws (the “Bylaws”) or may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board. The Board has no reason to believe that any nominee will be unavailable or, if elected, unable, to serve.

CORPORATE GOVERNANCE

The following section discusses the Company’s corporate governance, including the role of the Board and its Committees. Additional information regarding corporate governance, including our Corporate Governance Guidelines, the charters of our Audit, Compensation and Nominating Committees and our Code of Ethics that applies to all of our directors, officers (including the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) and employees may be found on our Investors website at investors.ae.com. Any amendments or waivers to our Code of Ethics will also be available on our website. A copy of the corporate governance materials is available in print to any stockholder upon request.

The Role of the Board

The Board is responsible for overseeing management, which is, in turn, responsible for the operations of the Company. The Board’s primary areas of focus are strategy, risk management, corporate governance and compliance, as well as evaluating management and making changes as circumstances warrant. In many of these areas, significant responsibilities are delegated to the Board’s Committees, which are responsible for reporting to the Board on their activities and actions. Please refer to “Board Committees” for additional information on our Committees.

Board Oversight of Risk Management

The Board as a whole has the responsibility for risk oversight and management, with a focus on the most significant risks facing the Company, including strategic, competitive, economic, operational, financial, legal, regulatory, compliance, and reputational risks. In addition, Board Committees oversee and review risk areas that are particularly relevant to their respective areas of responsibility and oversight. The risk oversight responsibility of the Board and its Committees is supported by our management reporting processes, which are designed to provide visibility to the Board to those Company personnel responsible for risk assessment (including our management-led Risk Management Committee), and information about management’s identification, assessment and mitigation strategies for critical risks.

Director Selection and Nominations

The Nominating Committee periodically reviews the appropriate size of the Board, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the Board. In evaluating and determining whether to recommend a candidate to the Board, the Nominating Committee reviews the appropriate skills and characteristics required of Board members in the context of the background of existing members and in light of the perceived needs for the future growth of our business. This includes a review of issues of diversity in background and experience in different substantive areas such as retail operations, marketing, technology, distribution, real estate and finance. The Board seeks the best director candidates based on the skills and characteristics required without regard to race, color, national origin, religion, disability, marital status, age, sexual orientation, gender, gender identity and expression, or any other basis protected by federal, state or local law.

Director Skills and Qualifications

The Nominating Committee believes that the current members of the Board collectively have the skills, experience, diversity, and character to execute the Board’s responsibilities. The following is a summary of those qualifications:

Director Tenure

The Nominating Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time balanced against the importance of having directors who have a deep, historical experience and institutional knowledge of the Company, its strategies and market opportunities and challenges. In March 2018, the Board appointed Ms. Chandrasekaran as a Class I director. Ms. Chandrasekaran brings a fresh perspective, significant information and digital technology expertise, and a wealth of leadership experience in the global retail and consumer industries to the Board. The Nominating Committee and the Board also believe that our long-serving directors bring critical skills to the Board. Among other things, such directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as retailing. In addition, the Nominating Committee and the Board believe that long-serving directors have knowledge of the business that tends to make them less dependent upon management for information and perspectives than may be the case with newer directors.

Director Nominations

Candidates may come to the attention of the Nominating Committee from a variety of sources, including current Board members, stockholders and management. All candidates are reviewed in the same manner, regardless of the source of the recommendation. The Nominating Committee has retained the services of a search firm to assist in identifying and evaluating qualified director candidates. Ms. Chandrasekaran, who was added to the Board in March 2018, was identified as a candidate through a search firm. The Nominating Committee will consider the recommendations of stockholders regarding potential director candidates. See “Submission of Nominations and Proposals for the 2019 Annual Meeting” for information regarding the submission of director nominee recommendations.

Director Independence

The Board has affirmatively determined that the following current directors are independent, as defined in the applicable rules of the New York Stock Exchange (“NYSE”):

In particular, the Board determined that none of these directors had relationships that would cause them not to be independent under the specific criteria of Section 303A.02 of the NYSE Listed Company Manual. The Board also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE listing standards and the SEC rules, and considered the additional factors under the NYSE listing standards relating to members of the Compensation Committee before determining that each of them is independent.

In making these determinations, the Board took into account all factors and circumstances that it considered relevant, including the following:

See “Related Party Transactions” for information regarding our policy on related party transactions and transactions with affiliates of Mr. Schottenstein, who is our sole employee director.

Board Leadership Structure

The current leadership structure of our Board consists of a combined Executive Chairman and Chief Executive Officer position held by Mr. Schottenstein and a Lead Independent Director appointed annually by the independent directors. The Board has determined that combining the positions of Executive Chairman and Chief Executive Officer is most appropriate for the Company at this time. Having Mr. Schottenstein in the combined position provides unified leadership and direction to the Company and strengthens his ability to develop and implement strategic initiatives. His duties include presiding over meetings of the Board, setting meeting agendas and schedules of the Board in collaboration with the Lead Independent Director, and providing strategic insight and guidance to the Board. Our Board believes that the current Board composition, along with an emphasis on Board independence, provides effective independent oversight of management. Mr. Spiegel was appointed as our Lead Independent Director for Fiscal 2017. The Lead Independent Director is responsible for:

The Lead Independent Director also has the authority to call meetings of the independent directors, and if requested by major stockholders, is available, if appropriate, for consultation and direct communication. We believe that this leadership structure provides our Board with the greatest depth of leadership and experience, while also providing independent oversight of the Company.

Board Practices

Meetings of Independent Directors

The Board’s policy is to have the independent directors meet separately in executive session in connection with each regularly scheduled Board meeting (at least four times annually). During each meeting of the independent directors, the Lead Independent Director will preside and lead the discussion.

Self-Assessments

We annually evaluate the performance of the Board and its Committees. The Board believes it is important to assess both its overall performance and the performance of its Committees, and to solicit and act upon feedback received, where appropriate. As part of the Board’s self-assessment process, directors consider various topics related to Board composition, structure, effectiveness and responsibilities, as well as the overall mix of director skills, experience and backgrounds.

Director Orientation/Education

Each year, we hold a two-day educational program covering topics such as business developments and strategy, developments in corporate governance, and fiduciary duties. Additionally, all new directors participate in an intensive orientation program. The orientation program is designed to familiarize new directors with the Company’s businesses, strategies and challenges. Directors also attend industry-leading conferences and professional development courses focused on topics that are relevant to their duties as a director, including corporate governance, crisis management, cybersecurity, executive compensation and evolving retail trends.

Board Committees

The Board has a standing Audit Committee, a standing Compensation Committee and a standing Nominating Committee. These Committees are governed by written charters, which were approved by the Board and are available on our Investors website at investors.ae.com.

The following sets forth Committee memberships as of the date of this Proxy Statement.

		= Member				= Committee Chair				= Audit Committee Financial Expert

Stockholder Outreach

Throughout Fiscal 2017, we continued to regularly meet and speak with stockholders. On a quarterly basis, we invited significant stockholders to visit with senior management. These discussions were consistently reported to the Board, and management and the Board discussed comments and business insights provided by such stockholders.

Communications with the Board

The Board provides a process for stockholders and all interested parties to send communications to the independent members of the Board. That process is described on our Investors website at investors.ae.com.

Stockholders wishing to communicate with the Board may send an email to boardofdirectors@ae.com or write to: American Eagle Outfitters, Inc., 77 Hot Metal Street, Pittsburgh, PA 15203, c/o the Corporate Secretary. Communications intended for a specific director or directors (such as the Lead Independent Director or non-management directors) should be addressed to his, her or their attention c/o the Corporate Secretary at this address. Communications received from stockholders are provided directly to Board members following receipt of the communications (other than spam, junk mail, mass mailings, solicitations, resumes, job inquiries, or other matters unrelated to the Company).

Director Attendance

During Fiscal 2017, the Board met ten times and each member of the Board attended no fewer than 75% of the total number of meetings of the Board and of the Board Committee(s) on which such director served for the period of such service. It is our expectation that all current directors attend the Annual Meeting of Stockholders. All members of the Board then serving on the Board attended our 2017 Annual Meeting.

Related Party Transactions

We have a Related Party Transaction Policy (the “Policy”) to allow us to identify, document and properly disclose related party transactions. The Policy applies to our directors and executive officers as well as all associates who have authority to enter into commitments on behalf of the Company. Under the Policy, a related party transaction is any transaction to which we or any of our subsidiaries is a participant and in which a related party has a direct or indirect material interest. Examples of transactions include, without limitation, those for the purchase or sale of goods, the provision of services, the rental of property, or the licensing of intellectual property rights. Additionally, if a related party or a member of such related party’s immediate family is a supplier of goods or services or owns or is employed by a business that supplies us; or if a member of such related party’s immediate family is employed by us; or if an applicable related party serves on the board of directors of a business that supplies goods or services to us, that transaction is a related party transaction. Certain related party transactions must be approved in advance by the Audit Committee if they involve a significant stockholder, director or executive officer. All other related party transactions must be disclosed in writing to, and approved in advance by, our General Counsel and our Chief Financial Officer. Each quarter, each individual covered by the Policy is required to provide a certification regarding the existence of any related party transactions which have not been fully and accurately disclosed in our filings with the SEC.

In the ordinary course of business, we have entered into agreements with affiliates of Jay L. Schottenstein, our Executive Chairman of the Board and Chief Executive Officer. We believe that each of these agreements is on terms at least as favorable to us as could be obtained in an arm’s length transaction with an unaffiliated third party. The material terms of these transactions are described below. In each case, the transaction was approved in advance by the Audit Committee in accordance with our Policy.

During Fiscal 2016, we entered into a store lease for an AE flagship store in Las Vegas with SG Island Plaza LLC (“SG Island Plaza”), an entity in which an affiliate of Mr. Schottenstein has a 25% interest. Pursuant to that lease, we expect to pay rent, together with other expenses, of approximately $2.5 million annually (subject to annual adjustments), in addition to an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. The lease expires in September 2027. We incurred rent and other expenses under the lease of approximately $202,300 during Fiscal 2017. In April 2018, we entered into a store lease for an Aerie store in Las Vegas with SG Island Plaza. Pursuant to that lease, we expect to pay rent, together with other expenses, of approximately $1.6 million annually (subject to annual adjustments), in addition to an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. The lease expires in January 2029.

In January 2018, we entered into a six-month extension of our agreement with Retail Entertainment Design, LLC (“R.E.D.”) for in-store music program services. A majority of R.E.D. is owned by Jubilee-RED LLC, which is indirectly owned by trusts for which Mr. Schottenstein serves as trustee. Mr. Schottenstein does not receive any remuneration for serving as trustee of the trusts. Payments by the Company during Fiscal 2017 under the agreements totaled approximately $750,000.

Director Compensation

Directors who are employees of the Company do not receive additional compensation for serving as directors. The table below sets forth the compensation for directors who were not employees of the Company during Fiscal 2017. In addition, we pay attorneys fees related to the preparation and filing of director stock ownership forms with the SEC. We also reimburse travel expenses to attend Board and Committee meetings and director continuing education expenses. The Compensation Committee is charged with reviewing and making recommendations to the Board regarding director compensation. In making its recommendations, the Compensation Committee considers the overall size of the Board, the significant time committed by each of our directors to the performance of their duties, as well as peer data and input from the Compensation Committee’s independent compensation consultant. In the past, the Compensation Committee has engaged FW Cook to conduct comprehensive reviews and competitive assessments of the Company’s non-employee director compensation program. The Board did not make any changes to its director compensation program during Fiscal 2017.

Compensation of Executive Chairman of the Board

Jay L. Schottenstein, our Chief Executive Officer, also serves as our Executive Chairman of the Board and does not receive additional compensation for this role. Mr. Schottenstein’s Fiscal 2017 compensation is set forth under the section entitled “Compensation Tables and Related Information.”

PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the fiscal year ending February 2, 2019. In the event the stockholders do not ratify the appointment of EY, the Audit Committee will reconsider its appointment. In addition, even if the stockholders ratify the appointment of EY, the Audit Committee may in its discretion appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that a change is in the best interest of the Company.

Representatives of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement if such representatives so desire.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee oversees our financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report for the year ended February 3, 2018 with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Audit Committee reviewed with the independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, its judgments as to the quality, not just acceptability, of our accounting principles and such other matters as are required to be discussed relating to the conduct of the audit under the auditing standards of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301 (Communications with Audit Committees). In addition, the Audit Committee has discussed with the independent registered public accounting firm its independence from management and the Company, including the matters in the written disclosures required by Rule 3526 of the PCAOB, Communication with Audit Committees Concerning Independence, and considered the compatibility of nonaudit services with the firm’s independence.

The Audit Committee discussed with our internal auditors and our independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee also carried out the additional responsibilities and duties as outlined in its charter.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended February 3, 2018 for filing with the Securities and Exchange Commission.

Noel J. Spiegel (Chair)

Sujatha Chandrasekaran*

Thomas R. Ketteler

Cary D. McMillan

Janice E. Page

David M. Sable

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES

During Fiscal 2017, EY served as our independent registered public accounting firm and, in that capacity, rendered an unqualified opinion on our consolidated financial statements as of and for the year ended February 3, 2018.

The following table sets forth the aggregate fees billed to us by our independent registered public accounting firm in each of the last two fiscal years:

“Audit Fees” include fees billed for professional services rendered in connection with (1) the audit of our consolidated financial statements, including the audit of our internal control over financial reporting, and the review of our interim consolidated financial statements included in quarterly reports; (2) statutory audits of foreign subsidiaries; and (3) services that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, consents, assistance with the review of registration statements filed with the SEC and consultation regarding financial accounting and/or reporting standards. “Audit-Related Fees” include fees billed for internal control reviews and audits of the Company’s employee benefit plan. “Tax Fees” primarily include fees billed related to federal, state and local tax compliance and consulting. “All Other Fees” include fees billed for accounting research software.

The Audit Committee has adopted a policy that requires pre-approval of all auditing services and permitted non-audit services to be performed by the independent registered public accounting firm, subject to the de minimis exceptions for non-audit services as described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate the authority to grant pre-approvals of audit and permitted non-audit services to subcommittees consisting of one or more members when it deems appropriate, provided that decisions of such subcommittee shall be presented to the full Audit Committee at its next scheduled meeting. All audit and non-audit services provided to the Company by EY during Fiscal 2017 were pre-approved by the Audit Committee in accordance with such policy.

PROPOSAL THREE: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

As required by Section 14A of the Exchange Act, we are providing stockholders with an advisory vote on the overall compensation of our named executive officers. In accordance with the results of the stockholder vote at the 2017 Annual Meeting, advisory votes on the overall compensation of our named executive officers are held every year, and there will be another such vote at the 2019 Annual Meeting.

As discussed in the “Compensation Discussion and Analysis” section below, our executive compensation program is based on four core principles: performance, competitiveness, affordability and simplicity. We believe that our program design implements these principles and provides the framework for alignment between executive compensation opportunities and long-term strategic growth. Based on the advisory vote at the 2017 Annual Meeting on our executive compensation program, which was approved by 98% of the votes cast, we are confident that our stockholders agree.

We have an ongoing commitment to ensuring that our executive compensation plans are aligned with our principles and evolve as the industry and business changes. We continue to engage with our stockholders to gain an understanding of their key perspectives on all aspects of the business and the broader industry, including compensation programs. We continue to evaluate and enhance plan design to align with leading practices in executive compensation.

We urge our stockholders to read the following “Compensation Discussion and Analysis” for information on our executive compensation program.

In summary, we believe that our executive compensation program has provided and continues to provide appropriate incentives and remains responsive to our stockholders’ views. Accordingly, the following resolution will be submitted for a stockholder vote at the 2018 Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, as set forth in the Proxy Statement for the Annual Meeting.”

As an advisory vote, your vote will not be binding on the Company or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the compensation paid to our NEOs, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy, objectives, policies, and practices with respect to our NEOs for Fiscal 2017. Our Fiscal 2017 NEOs are comprised of the following officers:

This CD&A is organized as follows: (i) an Executive Summary setting forth our Business & Leadership Overview for Fiscal 2017, our focus for Fiscal 2018, our Compensation Program Objectives and Philosophy, and our Executive Compensation Highlights; (ii) a discussion of our Executive Compensation Program, including our Fiscal 2017 Goal Setting Process and Compensation Considerations, Compensation Benchmarking, and details regarding each element of our annual compensation; and (iii) additional compensation information, including tax considerations and change in control and other arrangements.

EXECUTIVE SUMMARY

Fiscal 2017 Business & Leadership Overview

Fiscal 2017 was a year of significant progress for AEO. Our achievements included record revenues of $3.8 billion – rising 5% over the previous year – and our third straight year of positive comparable sales. We successfully executed against our long-term strategies and, as a result, our brands continued to gain market share.

After a challenging start to the year, our teams took quick action to strengthen the merchandise assortments and elevate the customer experience. These efforts positively impacted our results. We saw sequential quarterly improvement to our adjusted operating income⁽¹⁾ throughout the year and posted year-over-year adjusted earnings per share⁽¹⁾ growth in the fourth quarter. Sales trends also accelerated, building to an 8% comparable sales increase in the fourth quarter, our best of the year. To further demonstrate the improvement, revenue growth accelerated to a 7% increase in the second half, compared to 2% in the first half, and adjusted operating income⁽¹⁾ grew 3% in the second half compared to a 27% decline in the first half. These results were achieved despite on-going challenges in the retail industry, including high levels of promotional activity and weak mall traffic.

Financial highlights of our year are as follows:

To achieve solid financial results in Fiscal 2017 and position the Company for profitable growth in the future, the executive leadership team successfully executed against our strategic initiatives. Specific achievements included making significant improvements to the merchandise assortments, introducing new product categories, creating new marketing campaigns, investing in talent, launching an improved loyalty program, executing a fleet optimization strategy, and fueling our digital sales which rose over 20% for the year.

We believe the executive compensation-related decisions made during a challenging year for the retail industry and the outcomes we achieved by taking quick action to strengthen our business and executing against our initiatives highlight our ongoing commitment to pay our executives for performance and align their interests with those of our stockholders. Specifically:

Our Focus for Fiscal 2018

We have significant momentum going into Fiscal 2018, and our brands are well positioned for future growth. In the coming year we will focus on continuing to gain market share by offering our customers innovation and quality while also delivering an exceptional customer experience across all channels. We intend to continue fueling AE, capitalizing on its leading position in jeans and bottoms and take Aerie to $1 billion in sales by 2020.

Areas of focus include:

We believe that the efforts and initiatives of our talented and experienced leadership team will continue to drive future value for all of our stakeholders in 2018 and going forward.

Compensation Program Objectives and Philosophy

The overall philosophy of our executive compensation program is to attract and retain highly skilled, performance-oriented executives who live our brand and embody its spirit of authenticity and innovation, and to incentivize them to achieve outstanding results for all stakeholders within the framework of a principles-based compensation program.

We focus on the following core principles in structuring an effective compensation program that meets our stated philosophy:

Executive Compensation Highlights

Our compensation program design provides a framework for alignment between executive compensation and our long-term Company objectives and financial performance. We continually review leading practices in corporate governance and executive compensation and consider changes to our program to align with best practices, ensure competitiveness in order to attract and retain experienced executives in our industry, and reinforce the alignment between pay and performance. Effective with the 2017 annual equity award grants and following a comprehensive evaluation of market best practice and peer group prevalence, we enhanced our equity program by incorporating stock options in addition to PSUs and RSUs. This change was made to further align executive compensation opportunities with the delivery of sustained long-term growth and stockholder value creation.

The following table summarizes the Company’s additional best practices relating to the executive compensation program.

OUR EXECUTIVE COMPENSATION PROGRAM

Fiscal 2017 Goal Setting Process and Compensation Considerations

Goal Setting:

We are committed to setting incentive goals that are aligned with delivering strong financial performance and returns to our stockholders, while also enabling the successful execution of our strategy. This includes building a solid foundation for long-term growth while consistently delivering near-term results. During Fiscal 2017, management was focused on improving our merchandise assortment, reducing our reliance on promotions, and managing expenses and inventory. Additionally, capital investments were focused on enhancing growth in under-penetrated new markets, and building strong omni-channel tools and digital capabilities.

Compensation Considerations:

The Compensation Committee considered a variety of factors relating to Fiscal 2017 compensation, including our performance relative to pre-established goals, our strong acceleration in the second half of the year, and our financial and operational performance relative to peers in the context of a highly competitive retail environment.

In early Fiscal 2017, the Compensation Committee set annual incentive plan goals for Fiscal 2017 at levels that represented a significant challenge for the Company. The first half of the fiscal year fell short of our expectations; however, second-half results represented a sharp increase in performance. The Company delivered quarterly sequential improvement, achieving record sales and a year-over-year adjusted EPS⁽¹⁾ increase in the fourth quarter.

In addition to financial and operational performance, the Compensation Committee and management also considered alignment with our compensation program principles as well as corporate governance best practices when making compensation decisions.

Role of Our Compensation Committee:

The Board has delegated authority to the Compensation Committee to develop and approve the overall compensation program for our NEOs, including the authority to establish and award annual base salaries, annual incentive bonuses and long-term incentive awards pursuant to our stockholder-approved incentive plans. Furthermore, the Compensation Committee reviews and approves changes to our compensation peer group, as deemed appropriate. In making its decisions, the Compensation Committee takes into consideration a variety of factors, including suggestions made by the CEO, compensation consultants and external advisory firms. The Compensation Committee acts in accordance with its charter, which can be found on our Investors website at investors.ae.com.

Role of Executive Officers in Compensation Decisions:

Our CEO annually reviews the performance of each NEO and makes recommendations to the Compensation Committee with respect to each element of executive compensation for the NEOs, excluding himself. The CEO considers Company, brand and individual performance and market positioning in his recommendations to the Compensation Committee with regard to total compensation for all NEOs. The Compensation Committee makes the final determination of individual compensation levels and awards, taking into consideration the CEO’s recommendations. CEO compensation is determined with input from the compensation consultant, FW Cook, and is informed by market benchmarking and is ultimately approved by the Compensation Committee.

Role of Compensation Consultants:

The Compensation Committee has the authority under its charter to retain outside consultants or advisors for assistance. In accordance with this authority, during Fiscal 2017, the Compensation Committee continued to retain the services of FW Cook as its outside independent compensation consultant to advise on matters related to CEO and other executive compensation. The services provided by FW Cook are subject to a written agreement with the Compensation Committee. The Compensation Committee has sole authority to terminate the relationship. The Compensation Committee reviewed its relationship with FW Cook and determined that there are no conflicts of interest. FW Cook does not provide any other services to the Company. The Compensation Committee may engage other consultants as needed in order to provide analysis, recommendations or other market data.

Under the direction of the Compensation Committee, FW Cook interacts with members of the senior management team to provide insights into market practices and to ensure that management is aware of emerging best practices and market trends. In 2017, representatives from FW Cook contributed to this CD&A and assisted with a review of incentive plan design, various matters related to executive compensation and an evaluation of compensation implications of the Tax Cuts and Jobs Act of 2017.

Response to 2017 Advisory Vote on Executive Compensation:

At our 2017 Annual Meeting of Stockholders, over 98% of shares present and voting supported, on an advisory basis, the compensation of our NEOs. While this vote demonstrated a very high level of support for our compensation program, our executive team remained engaged with stockholders throughout Fiscal 2017 to obtain an understanding of their views on a variety of issues, including our compensation programs. As a result of this engagement and the high level of support evidenced by our stockholders’ vote at the 2017 Annual Meeting of Stockholders, the Compensation Committee determined that our compensation incentive programs are achieving their respective goals and did not take any specific action in response to the 2017 say-on-pay vote or such engagement.

Compensation Benchmarking

In determining NEO compensation, the Compensation Committee reviews and takes into account the compensation practices of comparable companies. The Compensation Committee considers three key factors in choosing the companies that comprise our peer group:

Other selection criteria include an international presence and omni-channel retailing. We evaluate our peer group on an annual basis and propose changes when appropriate. For Fiscal 2017, our peer group consisted of 19 companies. In terms of size, our revenue and market capitalization approximate the median of the peer group. Peer group data also is supplemented as needed with additional data from various retail and general industry market surveys, adjusted to reflect our revenue scope. There were no changes made to the peer group in Fiscal 2017.

How We Pay Our Executives and Why: Elements of Annual Compensation

Our executive annual compensation program includes fixed components (base salary, benefits and limited executive perquisites) and variable components (annual bonus and long-term equity-based awards), with the heaviest weight generally placed on the variable, or “at-risk” components. For Fiscal 2017, the majority of our NEO’s compensation was weighted towards at-risk compensation, as shown by the charts below.

Standard Elements of Compensation:

The compensation for our NEOs is balanced to provide a mix of cash and long-term incentive awards and focused on both annual and long-term performance to ensure that executives are held accountable for, and rewarded for, achievement of both annual and long-term financial and strategic objectives.

Fiscal 2017 Compensation

The following provides additional details around our compensation components and related decisions for Fiscal 2017. Our executive compensation program is designed to place a considerable amount of compensation at risk for all executives. This philosophy is intended to cultivate a pay-for-performance environment.

Base Salary

Base salaries typically represent approximately 19%-33% of the NEO’s total compensation package and are reviewed annually after considering the following factors:

Base salary increases, where applicable, are typically effective in the first quarter of the new fiscal year. For Fiscal 2017, none of the NEOs received a base salary increase due primarily to the challenges experienced by the retail industry and trends facing the Company in the first quarter of Fiscal 2017.

Fiscal 2017 Annual Incentive Bonus

Our NEOs are eligible for annual cash incentive awards, achievement of which is based upon the Company meeting pre-established performance goals that focus the executive team on key annual objectives and business drivers that support a disciplined growth in revenue and profits and annual increases in stockholder value. The Compensation Committee establishes a NEO’s annual incentive bonus opportunity as a percentage of his or her base salary.

The resulting target bonus award opportunities constitute about 24%-35% of the NEO’s total compensation package. During Fiscal 2017, the target bonus award opportunities for the NEOs were as follows:

Based upon pre-established goals and achievement of the same, actual annual incentive bonus payments each year are calculated as follows (with straight-line interpolation between points):

For Fiscal 2017, the Compensation Committee established a performance goal for the annual incentive bonus payouts based upon the financial metric of the Company’s achievement of a minimum Adjusted EBIT (as defined on page 36) of $357M for a threshold payout, $394M (10% growth from prior year) for a target payout, and $455M (27% growth from prior year) for a stretch payout. Adjusted EBIT was used because it is a performance measure over which executives can have significant impact, reflects both sales growth and expense management initiatives, and is also directly linked to the Company’s long-term growth and stockholder value.

As is our practice, Fiscal 2017 annual incentive bonus goals were set early in the year at relatively aggressive levels. However, internal challenges combined with pressures faced by the retail industry in the first half of Fiscal 2017, including declining mall traffic and decreased consumer spending on discretionary items such as apparel, led to an unexpectedly difficult first half of the fiscal year for the Company. Accordingly, Fiscal 2017 Adjusted EBIT performance fell short of the threshold level established in the annual incentive bonus plan and bonus payouts were not earned under this program.

Fiscal 2017 Long-Term Incentive Awards

We utilize a combination of at-risk, time- and performance-based long-term incentive awards, granted on an annual basis, to focus management on long-term corporate performance and sustainable earnings growth. Long-term incentive awards generally comprise approximately 38%-57% of a NEO’s total compensation package. In Fiscal 2017 we awarded a combination of PSUs (50%), RSUs (25%), and stock options (25%). We believe this mix maintains a heavy emphasis on equity tied to performance, as the NEO’s PSU and stock option awards comprise, in the aggregate, 75% of the overall equity grant value.

For Fiscal 2017, the NEOs received the following target regular-cycle long-term incentive award grant values.

PSUs: PSUs represented approximately 50% of the value of a NEO’s overall annual long-term incentive award for Fiscal 2017. We determine the number of target PSUs based on the overall dollar grant value of the award divided by the closing price per share of our common stock on the grant date. Dividend equivalents on the PSUs are reinvested in additional units and paid out only to the extent the associated PSUs vest.

Annual PSU grants cliff vest at the end of a three-year performance period. Fiscal 2017 PSUs vest upon achievement of pre-established three-year net income⁽¹⁾ growth goals. Performance goals are expressed as a percent of net income growth per year for threshold, target and stretch vesting levels, with the growth rate for each vesting level established at the outset of the three-year period. The selection of net income growth provides for diversification of metrics between the annual incentive bonus and the PSU plan.

If threshold performance is not met, PSUs do not vest and all shares are forfeited. Vesting based on the three-year goal ranges from 0% of the target amount for below threshold performance, to 25% of the target amount at threshold performance, to 100% of the target amount at target performance, to 150% of the target amount if we achieve goals that are substantially above our long- range business plan for the performance period.

Additional detail regarding the 2017 performance metrics for the PSU awards will not be disclosed until the end of the performance period given that the goals are confidential information and competitive in nature. The Compensation Committee deemed the goals to be challenging but achievable.

RSUs: RSU awards represent approximately 25% of the value of a NEO’s annual long-term incentive award. Annual RSU grants vest ratably over three years from the grant date assuming continued employment.

We determine the number of RSUs in each grant based on the overall dollar grant value of the award divided by the closing price per share of our common stock on the grant date. Dividend equivalents on RSUs are reinvested in additional RSUs and paid only to the extent the associated RSUs vest.

Stock Options: Stock options represent approximately 25% of the value of a NEO’s annual long-term incentive award. We determine the number of stock options for each grant based on the overall dollar grant value of the award divided by the estimated fair value of our common stock, utilizing the Black Scholes option pricing model on the grant date.

Annual stock option grants vest proportionally over three years from the grant date assuming continued employment and provide compensation only to the extent that our share price appreciates in value.

Fiscal 2015 PSU Payout

In 2015, the Compensation Committee granted Messrs. Schottenstein, Kessler, and Rempell and Ms. Foyle PSUs that cliff-vested over a three-year performance period ending February 3, 2018. Payout of the 2015 PSUs was subject to the achievement of adjusted cumulative EBIT⁽¹⁾ (weighted 50%) and cumulative return on invested capital⁽²⁾ (“ROIC”). The charts and detail set forth below represent the goal detail, realized performance and resulting payout for the Fiscal 2015 PSU award.

Fiscal 2015 PSUs

(Three-year performance period ended February 3, 2018)

Based upon the performance achieved as shown in the above chart which culminated at above stretch-level goals, resulting in a 150% payout, Messrs. Schottenstein, Kessler, Rempell and Ms. Foyle received the following payouts of their 2015 PSU awards:

Additionally, in Fiscal 2015 the Compensation Committee granted a PSU award to Mr. Kessler, the vesting of which was based upon a three-year performance period ending February 3, 2018. The award was granted in recognition of Mr. Kessler’s elevated role in preparation for the retirement of the Company’s Vice Chairman and Executive Creative Director. The performance goal associated with this award was 100% based upon an Adjusted Cumulative EBIT hurdle, as defined on page 36, measured over the three-year performance period. Vesting of the award was tied to the delivery of $600M in Adjusted Cumulative EBIT, which was achieved. As such, the grant vested at 100%, and paid out in the amount of 37,135 shares.

Recognition Awards

Our business consists of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters). Fall, including back-to-school and the holiday season, is critical to our annual success and typically represents over 65% of our profitability. In light of continued macro-economic uncertainty during 2017, which negatively impacted consumer spending in items such as apparel, it was apparent by the beginning of the second quarter of Fiscal 2017 that it would be difficult for the Company to achieve the Fiscal 2017 annual incentive Adjusted EBIT goal, despite the fact that the important Fall selling season was still in front of the Company. Accordingly, management created new strategies to drive performance and worked with the Compensation Committee to develop a Fiscal 2017 Fall Season Bonus Plan to incentivize all associates below the NEO level.

The Fall Season Bonus Plan motivated performance and resulted in the payout of special recognition awards to our associates based upon the strong results that the Company experienced during the second half of Fiscal 2017. For the associates, this result was approximately 70% of their target annual incentive opportunity.

Our NEOs did not participate in the Fiscal 2017 Fall Season Bonus Plan. However, with a view toward the Company’s overall compensation philosophy and focus on pay-for-performance, the Compensation Committee approved the grant of special recognition awards in March 2018 to our then-serving NEOs. The determination to grant these awards was made in light of the following:

The recognition bonuses were granted in the following amounts, which represented 50% of each NEO’s annual target bonus opportunity:

In light of Messrs. Schottenstein’s, Madore’s, Kessler’s, and Rempell’s and Ms. Foyle’s significant responsibilities and leadership during Fiscal 2017, the Compensation Committee believes that these awards further the Company’s goal of maintaining an executive compensation program that is designed to reward, motivate and retain key executives who will continue to promote the Company’s growth and create sustained stockholder value.

Annual Award Pool for Section 162(m) Compliance

For Fiscal 2017, the Compensation Committee utilized a performance-based award pool (the “Award Pool”) to determine maximum amounts payable to NEOs who were subject to Section 162(m) of the Internal Revenue Code (the “Code”) (which, for Fiscal 2017, did not include the CFO). At the beginning of Fiscal 2017, the Compensation Committee established an annual performance goal for the Award Pool based on our earnings before interest, taxes, depreciation and amortization (“EBITDA”) achievement which determined the maximum amount payable as (i) cash awards and/or (ii) grants of time-based RSUs to the NEOs for Fiscal 2018. The following maximum award levels were established for Fiscal 2017 as a percent of EBITDA, in each case, subject to a maximum of $5 million per person:

We achieved positive Fiscal 2017 EBITDA, which funded the Award Pool for these awards. We granted recognition awards and time-based RSUs to our NEOs that were below these EBITDA caps under the Award Pool.

Although the Award Pool for Fiscal 2017 was designed to be fully deductible for federal income tax purposes under Section 162(m) of the Code, the applicable qualified performance-based tax-deductibility exception to Section 162(m) has been

repealed for tax years beginning in 2018 under the Tax Cuts and Jobs Act of 2017, such that compensation paid to our covered officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable for compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. Despite the Compensation Committee originally structuring these annual incentives for Section 162(m) covered officers in a manner that was exempt from Section 162(m) and therefore not subject to its deduction limits, because of the ambiguities as to the interpretation of the scope of the application of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction limit, no assurance can be given that compensation originally intended to satisfy the requirement for exemption from Section 162(m) will, in fact, be fully deductible.

Other Practices and Policies

Clawback Policy: Recovery and Adjustments to Award

The Compensation Committee believes that it is appropriate that our cash and long-term incentive awards be subject to financial penalties or clawbacks in the event of misconduct. Pursuant to our incentive plans, equity and cash awards are subject to additional forfeiture conditions. Forfeiture and recovery will be determined by the Compensation Committee and triggered in the event of misconduct related to: (a) acts in competition with the Company; (b) disclosure of confidential or proprietary information; (c) failure to cooperate with the Company in regard to a legal suit; or (d) restatement of financial statements. The forfeiture will be triggered upon the occurrence of any of the aforementioned events at any time during active employment and resulting in termination of employment, or during the one-year period following termination. If any of the above events occur, the unexercised portion (vested or unvested) of an option, and any other award not settled, will immediately cancel and forfeit. Additionally, the NEO will be required to repay to the Company the total amount of the award gain realized upon each exercise of an option or award settlement that occurred on or after the date which is one-year prior to either (a) the forfeiture event or (b) the termination date.

Prohibition Against Hedging Transactions and Pledging

Employees and the Board are prohibited from engaging in transactions in financial instruments designed to hedge or offset any decrease in the market value of our stock. Our policy prohibits transactions in such instruments as prepaid variable forward contracts, equity swaps, collars or exchange funds, as well as any other hedging instrument. Employees and the Board are also prohibited from holding our stock in a margin account as collateral for a margin loan or otherwise pledging our stock as collateral.

Benefits and Perquisites

Executives generally are eligible for the same health and welfare plans as other full-time Company employees, including medical, dental, life and disability insurance, and retirement plans. We provide relocation benefits to our officers and a security benefit to our CEO as set forth in the Summary Compensation Table.

Change in Control and Other Agreements

Our NEOs are entitled to receive consideration upon the termination of the executive’s employment with us under specified circumstances; including a change in control (“CIC”) related termination. These arrangements provide essential protections to the NEO to assist us in attracting and retaining qualified executives in a competitive environment. At the same time, we obtain certain agreements that preserve our valuable assets by imposing non-competition and non-solicitation restrictions, confidentiality obligations, and cooperation covenants on our NEOs.

Change in Control Provisions

The Company has entered into change in control agreements (each, a “CIC Agreement”) with all of our NEOs, with the exception of Mr. Schottenstein, that are designed to motivate executives to continue to work for the best interests of the Company and our stockholders in a potential CIC situation. The CIC Agreements contain “double-trigger” provisions for severance and other benefits. In the event of a CIC, and within 18 months of such event, if an NEO’s employment is terminated by the Company other than for Cause, Disability, or as a result of the NEO’s death, or if the executive terminates his or her employment for Good Reason (each capitalized term as defined in the applicable CIC Agreement), the NEO is entitled to receive:

The CIC Agreements also provide that any unvested or restricted awards, including Stock Options, RSUs, and PSUs, will vest and become exercisable to the extent set forth in the applicable award agreement.

Severance Payments

Mr. Madore and Ms. Foyle are eligible to receive post-employment payments as a result of employment agreements that we have entered into with them. For a description and quantification of these severance benefits, please refer to the “Post-Employment Compensation” section. Generally, if the executive’s employment is involuntarily terminated without “cause” by the Company and not due to death or disability, in exchange for the executive’s execution and non-revocation of a general release of claims in a form provided by the Company, the executive will be entitled to a severance payment.

Additionally, in the event of termination of employment, Messrs. Schottenstein, Kessler, Rempell and Ms. Foyle who have executed non-competition agreements with the Company (each, a “Non-Compete Agreement”) may be eligible to receive a prorata portion of their PSUs following termination of employment, based on actual days worked and performance goals being met for the full performance period, but not at an amount above the “target” award level.

The NEOs also agreed to certain provisions under the Non-Compete Agreement, including the following: (i) agreement not to use trade secrets, intellectual property, and other confidential or proprietary information of the Company for his or her own benefit, or for the benefit of any third party, including a competitor; (ii) agreement to provide the Company with at least 30 days written notice of any resignation; (iii) an 18-month non-solicit provision following any termination of employment; (iv) a waiver relating to the development of intellectual property during the executive’s tenure with the Company; and (v) a non-compete provision following any termination of employment (12 months for Messrs. Schottenstein and Madore and 24 months for Messrs. Kessler and Rempell and Ms. Foyle). The breach of any of the foregoing provisions may result in the executive forfeiting unvested equity awards.

A description of amounts paid to Mr. Horvath in connection with his separation during Fiscal 2017 is set forth below in the “Post-Employment Compensation” section.

Tax Matters

Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid in any fiscal year to a corporation’s CEO, CFO and the three other most highly compensated NEOs employed at the end of the year. The $1,000,000 deduction limit does not apply to compensation that qualified as being performance-based under Section 162(m) pursuant to a written binding contract that was in effect on November 2, 2017 and not materially modified on or after such date. We believe that the Section 162(m)-related tax deduction is only one of several relevant considerations in setting compensation. The Compensation Committee also believes that the Section 162(m) tax deduction limitation should not be permitted to compromise its ability to design and maintain executive compensation arrangements that, among other things, are intended to attract, retain and motivate talented, high-performing people. As a result, the Compensation Committee retains the flexibility to provide compensation it determines to be in the best interests of the Company and its stockholders even if that compensation is ultimately not deductible for tax purposes. Moreover, even if we granted compensation that qualified as performance-based compensation for purposes of Section 162(m) prior to the repeal of the qualified performance-based compensation exception under the Tax Cuts and Jobs Act of 2017, we cannot guarantee that such compensation will so qualify or will ultimately be deductible by us.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has adopted and implemented core principles that form the basis for our executive compensation program: performance, competitiveness, affordability and simplicity. We believe that our executive compensation program supports our financial and strategic goals, aligns executive pay with stockholder value creation, and appropriately discourages unnecessary or excessive risk taking.

The Committee has reviewed and discussed the Compensation Discussion and Analysis with management, which describes the Committee’s decisions regarding our named executives’ compensation for Fiscal 2017 and how those decisions support and implement our principles. Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Cary D. McMillan (Chair)

Thomas R. Ketteler

Janice E. Page

Noel J. Spiegel

COMPENSATION TABLES AND RELATED INFORMATION

General

The following table sets forth information concerning the compensation awarded to, earned by, or paid to our NEOs for the years indicated below: