Untitled - American Eagle Outfitters

ae.com

Untitled - American Eagle Outfitters

SO, YOU WANT TO

CHANGE THE WORLD?

GOOD. SO DO WE.

CHECK OUT HOW WE’RE M AKING OUR WORLD

A BET TER PL ACE. WE HOPE YOU’LL JOIN US.

DISCOVER, LE ARN AND SUPPORT NE W WAYS TO

LIVE YOUR LIFE IN A BET TER WORLD.


TABLE OF CONTENTS

AE Better World

About Us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

CEO Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

About This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Our Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Guiding Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Protect, Respect, Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Codes & Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Our Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Our Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Working With Factories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Our Factory Inspection Program . . . . . . . . . . . . . . . . . . . . . 17

Factory Training & Capacity Building . . . . . . . . . . . . . . . . . . 18

How Our Products Are Made . . . . . . . . . . . . . . . . . . . . . . . . 20

Making Smarter Business Decisions . . . . . . . . . . . . . . . . . . . 21

Leveraging Collective Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 22

Our Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Supply Chain Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Supply Chain Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Conserving Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Minimizing Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Product Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Environment Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Our Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Compensation & Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Communication & Retention . . . . . . . . . . . . . . . . . . . . . . . . . 45

Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Diversity Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Hiring & Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2010 Business Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Associate Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

National Charity Partnerships . . . . . . . . . . . . . . . . . . . . . . . . 53

Customer Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Major Community Initiatives . . . . . . . . . . . . . . . . . . . . . . . . 56

International Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Associate Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Community Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Contact Us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

GRI Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66


AE BETTER WORLD ABOUT US

About Us

American Eagle Outfitters, Inc. is built

on more than 30 years of customer focus,

dedication, and innovation. The company was

founded with one store, in Novi, Michigan,

in 1977. Today, you see many iterations of

the number 77 throughout our clothing,

vernacular and imagery - one of the many

threads of respect to our rich heritage.

The Schottenstein family of Columbus, Ohio took over the company in the early

nineties, which is also when we introduced our first line of private-label merchandise.

The Schottensteins were, and remain today, consummate retailers, with generations of

experience and several successful companies. Under this leadership, we set our sights

on creating a brand that offers high-quality, on-trend clothing at affordable prices,

targeted to the college lifestyle. Decades later, that core mission remains.

In 1994, American Eagle Outfitters, Inc. went public on NASDAQ under the “AEOS”

symbol. Over the next decade, the company demonstrated outstanding growth and

profitability, solidifying its position as a leading lifestyle brand. In March of 2007, the

company began trading on the New York Stock Exchange under the symbol “AEO”.

Our shareholders include associates, individuals, large financial institutions, socially

responsible investment funds, and everyone in between.

American Eagle Outfitters, Inc. is now a portfolio of brands, with

American Eagle Outfitters for 15 - 25-year-old girls and guys, Aerie

for the college girl, 77kids for grade-schoolers, and little77 for infants.

AE.COM®, the online home of all of our brands, ships to 76 countries

worldwide.

Over the past few years, we have expanded into the international market.

We launched stores in Canada in 2001 and opened 3 franchise stores

in the Middle East in 2010. Our first franchise stores in Hong Kong,

China, and Russia opened in early 2011, and the company has plans for

expansion into Japan and Israel in the near future.

With corporate offices in three very distinct locations - Pittsburgh, New

York City, and Hong Kong - American Eagle Outfitters, Inc. has built a

distinctive company culture based on our core values that continues to

shape our aspirational yet accessible brand identities. Today, we have more

than 1,000 stores and 30,000 associates worldwide.

For more information on the company, please visit our investor

information site 1 .

NE X T CEO Letter

1 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

2


AE BETTER WORLD ABOUT US CEO LETTER

CEO Letter

Letter from Jim O’Donnell

October 2011

Pittsburgh, PA

Dear AEO, Inc. customers, shareholders, associates

and stakeholders,

At American Eagle Outfitters, Inc. our customers

are at the heart of everything we do. They fuel our

inspiration, our dedication, and our commitment to

create and live in a Better World.

Since the company’s humble beginnings as one store in Novi, Michigan, to a global,

$2.9 billion company with more than 1,000 stores worldwide, there have been

many changes in the apparel retail industry. One of the most significant is the fact

that consumers are more powerful, better informed, and more engaged than ever

before. In fact, some say that our 15- to 25-year old customer demographic is the

most socially conscious generation since the 1960s. At the same time, retailers have

been paying more attention to their environmental impacts, their relationship with

suppliers and the people who make their clothes, their corporate culture, and the

level of diversity in their workplaces.

This convergence brings new urgency, not only for AEO, Inc. and our customers,

but for the industry as a whole, to work together to make our world a better

place in tangible, measurable and meaningful ways. Indeed, this is a magnificent

opportunity, but it is also an obligation that we take very seriously. Here are a few

examples of progress that we’ve made:

• We have established an internal task force focused on environment initiatives at

our corporate headquarters, as well as a recycling and energy reduction program.

• Working with industry partners, we implemented a Sustainable Water Program

that strives to ensure that the water used by contract mills and laundries around

the world is clean and safe when it is discharged back into the environment.

• AEO, Inc. has joined the “Better Work Program,” a partnership between

the International Labour Organization (ILO) and the International Finance

Corporation (IFC) that is committed to improving work conditions and

increasing competitiveness in global apparel supply chains.

While we have made progress, there is still much more work to do. We want

you to know where we stand, and where we are going. With that, I am pleased

to announce American Eagle Outfitters, Inc.’s first comprehensive Corporate

Responsibility Report, available exclusively online. While AEO, Inc. has worked

hard to be a good citizen in the communities where we’ve done business for

decades, this is the first time we have issued a complete communication on human

rights in our supply chain, sustainability and environmental initiatives, our

workplace culture, and our philanthropic efforts.

We all want our grandchildren, their grandchildren, and generations beyond to

experience the beauty and wonder of this planet. We want to be builders of a global

economy where people not only enjoy the protection of basic human rights, but

have the opportunity to achieve a higher quality of life and thrive in self-sustaining

communities. Please join me in taking the small steps every day to help make this

planet a Better World.

Sincerely,

Jim O’Donnell

Chief Executive Officer

NE X T About This Report

3


AE BETTER WORLD ABOUT US ABOUT THIS REPORT

About This Report

This website represents American Eagle Outfitters, Inc.’s first comprehensive

Corporate Responsibility report, available exclusively online. It focuses on four key

areas of our company: Supply Chain, Environment, Associates, and Communities.

Where possible, the report references relevant indicators from the Global

Reporting Initiative (GRI) G3 Guidelines 2 and GRI Apparel & Footwear Sector

Supplement 3 . Unless otherwise specified, all data reflects our Fiscal Year 2010

reporting period.

This report was several years in the making. First, we had to define what corporate

responsibility means to us. We are striving to build a successful, profitable business

that has an enduring positive impact on our people and the communities in

which we live, work, and play. Long before putting words to paper, we took time

to understand the array of human rights, social, and environmental issues that we

face and took steps to strengthen the foundation of our program. We have had the

privilege of learning from peers in our industry and leading companies in other

industries that blazed early trails on human rights and corporate responsibility

issues. By observing their successes and missteps, we are now working to

implement program elements that are most relevant to our business and most

likely to have a positive impact. We have also discovered the value of opening our

doors and listening to the voices of our diverse stakeholders - all of whom continue

to inspire us, challenge us, and encourage our efforts.

The topics covered in this report reflect the core issues raised through this

learning process and by our stakeholders. We define the “materiality” and

relative importance of these issues through our Commitment to Respect Human

Rights 4 , Code of Ethics 5 , and Vendor Code of Conduct 6 , as well as our systematic

participation in multi-stakeholder initiatives and ongoing engagement with

key stakeholders at global, regional, national, and local levels. In the process of

2 http://www.globalreporting.org/reportingframework/g3guidelines/

3 http://www.globalreporting.org/ReportingFramework/SectorSupplements/ApparelFootwear/

4 Page 8

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&t=1

6 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

developing this report, we also sought out specific thoughts and suggestions from

key stakeholders, in particular, Dr. Ruth Rosenbaum of the Center for Reflection,

Education, and Action (CREA) 7 .

We still have work to do. As this report demonstrates, our current programs are

neither perfect nor complete - but we are making progress and we are committed

to continuing to improve.

Many advocates of corporate transparency cite U.S. Supreme Court Justice Louis

Brandeis’s famous observation that “sunlight is the best disinfectant.” We agree.

We believe that reporting publicly on corporate responsibility is one of the most

effective ways to help us remain focused, disciplined, and accountable in our

efforts. We plan to issue a comprehensive report every two years, with more

frequent updates on important issues and quantitative performance indicators as

needed.

NE X T Our Stakeholders

7 http://www.crea-inc.org/

4


AE BETTER WORLD ABOUT US OUR STAKEHOLDERS

Our Stakeholders

Customers

The American Eagle Outfitters customer is between 15 and 25 years old and part of

the most socially conscious generation in modern history. These women and men

are at the center of everything we do. They are our reason for being.

Our customer-focused point-of-view drives our business decision-making. We

were among the first specialty retailers to enable customer reviews on our product

website, whether positive or negative. We invest in technology such as mobile

applications and social media tools that define our customers’ way of life. We strive

to anticipate our customers’ desires and listen to their needs, which they often

express in reviews and honest feedback on ae.com. Consequently, when customers

told us that they wanted us to help make the world better, we listened. From the

streets of New York City to the streets of Kuwait City; from the classrooms of

Louisville to the classrooms of Hong Kong; from the beaches of L.A. to the beaches

of Dubai - we work hard to be a brand that our customers are proud to wear

because we are fun, laid-back, fashionable, adventurous, and striving to live our

lives in a Better World.

Associates

The vitality of our brand resides in our people. We strive to be an employer of

choice - a place where people are excited to come to work because they believe in

what we do, enjoy working with each other, and have fun doing it.

Our employees, known as associates, reflect our diverse customer base with

differing backgrounds, unique talents and eclectic tastes. More than 30,000 people

worldwide work for American Eagle Outfitters, Inc. In addition to the thousands of

people in our stores, we employ engineers, software developers, attorneys, fork lift

operators, marketers, PhDs, store construction specialists, accountants, merchants,

designers, warehouse supervisors, and many other skilled professionals in our

corporate offices and distribution centers. More than half of our associates are

younger than 25, enabling us to stay more closely connected to the demographic

we serve. Not surprisingly, some of the best ideas about how we can make our

world a better place have come from our associates - from how to reduce our

environmental footprint to ways to improve the health and safety conditions in an

apparel factory to how best to serve the communities where we live work, and play.

For more information on what it’s like to work at American Eagle Outfitters, Inc.

please see Live Your Life Love Your Job 8 .

Shareholders

As a publicly traded company on the New York Stock Exchange (NYSE: AEO),

American Eagle Outfitters, Inc. strives to deliver strong returns over the long-term

to its investors. Our shareholders include associates, individuals, large financial

institutions, socially responsible investment funds, and everyone in between.

Our goal is to provide those who have an ownership stake in our company with

timely, transparent communications about business performance, as well as insight

into how we plan to grow. We maintain a healthy balance sheet and strong cash

position, while returning value to shareholders through a combination of share

buybacks and dividends. In early 2011, we announced that AEO, Inc. would no

longer publicly report monthly sales to facilitate a longer-term perspective on

business growth. Retailers face many challenges, including variable consumer

confidence, rising cotton prices, or adverse weather conditions. That said, our

longstanding approach continues to be rooted in operational efficiency and

financial discipline designed to withstand any external event or economic

environment.

Supply Chain Partners & Stakeholders

We partner with apparel manufacturers in more than 20 countries around the

world, including the United States, to produce our products. Although we do not

own or operate any of these factories, we firmly believe that the people who make

our clothes should be treated with dignity and respect. We strive to build business

relationships with apparel suppliers who share our commitment to worker safety

8 http://www.liveyourlifeloveyourjob.com/

5


AE BETTER WORLD ABOUT US OUR STAKEHOLDERS

Our StakeHolders (continued)

and well-being and will work to meet or exceed national and international labor

law standards.

We also work with a diverse array of transportation providers in our supply chain,

including ocean and air freight carriers and freight forwarders and consolidators,

who are critical to the timely and efficient movement of our merchandise.

Many of the social and environmental issues that we face in our global supply

chain are too complex, too widespread, and too deeply embedded for any one

company to resolve working alone. To that end, we also seek to build partnerships

with other stakeholders who share our desire to build a Better World. Some of

our key partners include the International Labor Organization (ILO)’s Better

Work Program 9 , the Fair Labor Association (FLA) 10 , local and global civil society

organizations, non-governmental organizations (NGOs), trade unions, other

brands and retailers, and government officials. Through their own vast networks

of people and expertise, these partners help to keep us informed about issues and

concerns in countries where our clothes are being made. Their diverse perspectives

enrich our thinking, challenge us to examine social and environmental issues in

a new light, and provide opportunities to pool our resources to tackle complex

problems in a more sustainable way.

“We find social inspections beneficial because they help us build our

reputation as a socially responsible business. Our customers tend to

favor suppliers who demonstrate socially responsible policies. We’ve

also discovered that good social and environmental practices help us

reduce unnecessary resource consumption, waste and emissions -

and save money. Reducing our utility bills and waste disposal costs

brings us immediate cash benefits. There are other benefits, too.

A good reputation makes it easier to recruit and keep employees.

Employees are also better motivated and more productive. Investors

recognize this and are more willing to finance our factory.”

- A CHINESE SUPPLIER

9 http://www.betterwork.org/EN/Pages/newhome.aspx

10 http://www.fairlabor.org/fla/

Whether you are a customer, an associate, a shareholder, a supply chain partner, or

another concerned stakeholder, we welcome your constructive ideas, thoughts, and

opinions on how we’re doing. Send us an email at: AEBetterWorld@ae.com.

NE X T Corporate Governance

6


AE BETTER WORLD ABOUT US CORPORATE GOVERNANCE

Corporate Governance

19 American Eagle Outfitters, Inc. is built on integrity, honesty, and trust. These More information on our Corporate Governance practices is available here . We

virtues are our most important assets. Living them is the responsibility of everyone invite anyone who may have governance questions or comments to email the Board

at our company.

at: boardofdirectors@ae.com.

Our Commitment to Respect Human Rights 11 , Code of Ethics 12 , and Vendor Code

of Conduct 13 establish our guiding principles, which apply to every associate,

officer, director and supplier of the company.

Good governance begins with our Board of Directors, which provides the

independence and diversity of perspective necessary to ensure strong leadership

and effective oversight of the company. Effective June 2011, the Board of Directors

of American Eagle Outfitters, Inc. had nine members, seven of whom were

independent, including one lead independent director. The Board’s general policy

is that the positions of Chairperson of the Board and Chief Executive Officer

should be held by separate persons. Our Corporate Governance Guidelines 14

provide a framework for our governing principles.

The Board maintains three operating committees: the Audit Committee 15 ,

Compensation Committee 16 and Nominating and Corporate Governance

Committee 17 . Each Committee is composed entirely of independent directors.

The Nominating and Corporate Governance Committee 18 is responsible for the

oversight of policies and practices related to Corporate Responsibility.

Maintaining high ethical standards and sound corporate governance is a primary

focus of everyone at American Eagle Outfitters, Inc. It’s good for our business, the

marketplace in which we compete, and for those who place their trust in us.

11 Page 8

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13 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

14 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govguidelines

15 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govcommcomp#audit

16 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govcommcomp#compensation

17 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govcommcomp#nominating

18 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govcommcomp#nominating

NE X T Guiding Principles

19 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-govoverview

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AE BETTER WORLD ABOUT US CORPORATE GOVERNANCE GUIDING PRINCIPLES

Corporate Governance (continued)

Guiding Principles

Our Code of Ethics 20 , and Vendor Code of Conduct 21 establish our guiding

principles, which apply to every associate, officer, director, and supplier of

American Eagle Outfitters, Inc.

Our Commitment to Respect Human Rights

We believe that the idea of human rights is as simple as it is powerful - treating

people with dignity. We acknowledge and embrace our role to respect human

rights.

American Eagle Outfitters, Inc. supports the universal human rights principles as

outlined in the Universal Declaration of Human Rights (UDHR) 22 and the eight

core conventions of the International Labor Organization (ILO)’s Declaration on

the Fundamental Principles and Rights at Work 23 .

We work to promote respect for human rights throughout our operations. We

seek to avoid practices that infringe upon human rights and will work to address

violations we find, including within our supply chain. We recognize that, in

practice, this may involve complex and difficult decisions in order to balance

competing rights, as well as practical constraints within the business and legal

environments in which we operate.

Our human rights commitment is inspired and informed by the United Nations

‘Protect, Respect & Remedy’ Framework 24 as outlined by the Special Representative

of the UN Secretary-General on human rights and transnational corporations.

This Framework rests on three pillars: the State Duty to Protect human rights

through laws, regulation, and adjudication; the Corporate Responsibility to

Respect human rights, which means to act with due diligence to avoid infringing

20 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjIwODh8Q2hpbGRJRD0tMXxUeXBlPTM=

&t=1

21 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

22 http://www.un.org/rights/HRToday/declar.htm

23 http://www.ilo.org/public/english/standards/

24 http://www.business-humanrights.org/media/documents/ruggie/ruggie-guiding-principles-21-mar-2011.pdf

on the rights of others and to address adverse impacts that occur; and greater

Access to Effective Remedies for victims of human rights abuses.

Our commitment is implemented through our Code of Ethics 25 , and Vendor Code

of Conduct 26 and applies to all associates, officers, directors, and suppliers of the

company.

25 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjIwODh8Q2hpbGRJRD0tMXxUeXBlPTM=

&t=1

26 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

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AE BETTER WORLD ABOUT US CORPORATE GOVERNANCE PROTECT, RESPECT, & REMEDY

Corporate Governance (continued)

Protect, Respect, Remedy

United Nations (UN) ‘Protect, Respect, Remedy’ Framework

At American Eagle Outfitters, Inc.

HUMAN RIGHTS PRINCIPLES

AND POLICY COMMITMENT

SCOPE

ASSESSMENT OF BUSINESS

IMPACT AND ONGOING DUE

DILIGENCE

• Commitment to Respect HUman Rights

• Code of Ethics

• Vendor Code of Conduct

• Applies to all Associates, Officers, Directors, and Suppliers

of the company

• Board of Directors oversight of corporate responsibility and

human resources issues

• Dedicated Human Resources team (Associates, Officers)

• Dedicated Corporate Responsibility team (Suppliers)

• Separate AEO Foundation Board of Directors oversight of

community investment policies and Foundation funds

• Open Door Policy

• Dedicated confidential AEO Hotline and grievance reporting

website

• Supplier inspection and training programs

• Systematic and ongoing engagement with external

stakeholders

INTEGRATION AND TRACKING

PERFORMANCE

COMMUNICATION AND

REPORTING

ACCESS TO REMEDIES/

GRIEVANCE MECHANISMS

• Factory pre-approval process based on Vendor Code of

Conduct compliance

• Factory termination process based on severe or repeated

Vendor Code of Conduct non-compliance

• Supplier & inspection data maintained in Enterprise

database and Corporate Responsibility database

• Defined performance metrics for suppliers

• Formal and informal reporting on performance between and

across functions

• Corporate Responsibility Report / AE Better World public

website

• AEO, Inc. investment and corporate governance public

websites

• CEO-led company-wide meetings

• FLA publication of supplier IEM results

• FLA Annual Report

• SEC and other legal filings

• Company intranet and quarterly newsletter for associates

• Regular engagement through social media (Facebook,

Twitter)

• Participation in national and international conferences and

public presentations

• Formal and informal engagement with external stakeholders

• Dedicated confidential AEO Hotline and grievance reporting

website

• FLA complaints mechanism

• Pilot program with third-party provider in China to

implement local worker grievance hotline

9


AE BETTER WORLD ABOUT US CORPORATE GOVERNANCE CODES & GOVERNANCE

Corporate Governance (continued)

Codes & Governance

Code of Ethics

The AEO, Inc. Code of Ethics outlines Company standards for acting in a legally

and ethically appropriate manner. This Code applies to all associates, officers,

suppliers and the Board of Directors of American Eagle Outfitters, Inc. and its

subsidiaries. The Code sets forth written standards designed to deter wrongdoing

and to promote honest and ethical conduct, legal and regulatory compliance, and

full, fair, accurate, timely, and understandable Company public disclosure.

All associates and directors of the company are required to report any known

or suspected violations of the Code of Ethics. Violations may be reported

anonymously through the AEO Hotline (1-888-587-3582) or online at www.

aehotline.com.

In addition, company policy forbids any company official to take any action in

retaliation against an associate for reporting or threatening to report a violation

of the Code of Ethics in good faith or for cooperating in any investigation of a

violation of the Code. Any such retaliation is itself a violation of the Code.

Vendor Code of Conduct

The AEO, Inc. Vendor Code of Conduct is based on universally-accepted human

rights and labor rights principles and sets forth our minimum expectations for

suppliers. The Code must be posted in every factory that manufactures our clothes

in the local language of the workers. All suppliers must contractually agree to abide

by the terms of our Vendor Code of Conduct before we will place production with

them.

CORPORATE RESPONSIBILITY GOVERNANCE

VP

AEO PRODUCTION

SR. DIRECTOR

CORPORATE RESPONSIBILITY,

TRADE & PRODUCT SAFETY

COMPLIANCE

BOARD OF DIRECTORS

CEO

EVP

CHIEF OPERATING OFFICER

NEW YORK DESIGN CENTER

VP CORPORATE RESPONSIBILITY

CUSTOMS COMPLIANCE OFFICER

(AE, AERIE, AND 77KIDS)

SR. MANAGER

MERCHANDISE COMPLIANCE

VP

AERIE PRODUCTION

The American Eagle Outfitters, Inc. Board of Directors’ Nominating and

Corporate Governance Committee has ultimate oversight of policies and practices

related to Corporate Responsibility.

We also have a dedicated team based in the United States and Asia that is

responsible for implementing and enforcing our Corporate Responsibility policies

on a day-to-day basis. This team reports annually to the Board of Directors,

independently of Production and Sourcing.

Guy Bradford, Vice President of Corporate Responsibility and Customs

Compliance Officer, leads our corporate responsibility and compliance divisions.

He reports to Michael Rempell, Executive Vice President and Chief Operating

Officer of the New York Design Center, who also oversees Production and Sourcing

for the American Eagle Outfitters® and Aerie® brands.

10


AE BETTER WORLD ABOUT US CORPORATE GOVERNANCE CODES & GOVERNANCE

Corporate Governance (continued)

This organizational alignment is new as of July 2009. In the early days of our

social and environmental compliance program, the Vice President of Corporate

Responsibility and Customs Compliance Officer reported to the Chief Supply

Chain Officer, who oversees logistics and is wholly independent of Production

and Sourcing. We believed this independence was critical to establish a clear and

autonomous social and environmental compliance function within our supply chain.

However, over time these policies and procedures became embedded within our dayto-day

operations. Today, for example, each new garment supplier must be inspected

and approved by the Corporate Responsibility team before it can be “switched on” in

our information technology system and receive production orders.

In July 2009, we therefore evolved this reporting structure into its current form

to strengthen alignment between the Corporate Responsibility teams and the

Production and Sourcing teams. The teams are now “seated around the same

table.” This builds stronger internal partnerships, which in turn leads to more

informed sourcing strategies and streamlined purchasing practices. Although the

Corporate Responsibility team still maintains a high degree of independence and

autonomy (including its independent reporting channel to the Board of Directors),

we believe this practical, day-to-day integration is a best practice to ensure greater

alignment between Production and Corporate Responsibility goals.

Another strength of our organization is that the Vice President of Corporate

Responsibility and Customs Compliance Officer oversees other compliance

functions, including trade policy and compliance, regulatory compliance, product

safety, and merchandise payables. This breadth of authority provides deep insight

into import and export processes and controls (such as transparency requirements

for apparel and apparel components mandated by Free Trade Agreements and

other trade preference programs), as well as final control over merchandise

payables. In rare but serious instances where a supplier has committed an

egregious compliance violation, the Vice President of Corporate Responsibility

has the power to delay or withhold payment on purchase orders until the issue is

resolved satisfactorily. This is a powerful tool of leverage, albeit one of last resort.

NE X T Our Products

11


AE BETTER WORLD ABOUT US OUR PRODUCTS

Our Products

American Eagle Outfitters, Inc. is strongly committed to the safety and well being

of our customers.

We require our products to meet U.S. state and federal and Canadian national laws

and regulations. In certain cases, we also voluntarily adopt industry standards

and best practices that may be higher than legally required or where no clear laws

exist. For example, we apply California Proposition 65 consent judgment standards

to our products that are covered by a Proposition 65 consent judgment to which

we are a party, even though not all of the Proposition 65 consent judgments apply

outside of the state of California.

To ensure compliance with our product safety standards, we maintain an extensive

set of testing protocols for each category of products. All of the products we sell

are tested by an independent testing laboratory in accordance with applicable

regulatory requirements.

Product Recalls

In rare cases where a safety issue has been discovered in a product that has reached

our store shelves, we respond with a comprehensive recall process for all of our

brands. We have a system in place to identify the manufacturer(s) and production

date(s) for our branded products. In the event of a product recall, we activate this

system.

We publicly maintain a list of product recalls conducted in conjunction with the

Consumer Product Safety Commission (CPSC) here 27 on our e-commerce website.

NE X T Public Policy

27 http://www.ae.com/web/help/product_recalls.jsp?topic=1

12


AE BETTER WORLD ABOUT US PUBLIC POLICY

Public Policy

As a responsible corporate citizen, we engage in public policy matters that are

consistent with our values, principles, and business interests.

We do not maintain a Political Action Committee (PAC), but we actively advocate

our position on international trade, labor and employment, intellectual property,

and other matters that affect our company, our associates, our customers and

other stakeholders. We are members of and participate actively in several industry

associations, government advisory boards, and multi-stakeholder organizations.

Where necessary and appropriate, we develop relationships with government

officials, elected representatives, and regulatory and administrative bodies, as well

as multilateral institutions, non-governmental organizations (NGOs), industry and

trade associations, and other stakeholders to engage in public policy dialogue.

In addition, we join with non-governmental organizations (NGOs), trade unions,

and/or other companies in bringing issues of serious concern to the attention

of foreign governments. For example, in 2004, we co-signed a letter with other

brands 28 to the President of the Philippines protesting police harassment of labor

activists. In 2005, we co-signed a letter 29 expressing concern about the illegal

incarceration of a Mexican trade union leader. We have also engaged in active

dialogue with government and industry officials on the important issues of factory

fire Safety in Bangladesh 30 and child labor in the cotton fields of Uzbekistan 31 .

28 http://www.ae.com/Images/corpResp/images/about/philippines_company_joint_letter_110706.pdf

29 http://www.ae.com/Images/corpResp/images/about/BrandsBarriosLetter.pdf

30 Page 23

31 Page 23

Our Memberships and Associations

National, Regional, and Local Business Associations

• National Retail Federation (NRF)

http://www.nrf.com

• Retail Industry Leaders Association (RILA)

http://www.rila.org/pages/default.aspx

• United States Association of Importers of Textiles and Apparel (USA-ITA)

http://www.usaita.com

Government Advisory Committees and Boards

• U.S. Department of Agriculture Cotton Board

http://www.cottonboard.org

• U.S. Trade Representative / U.S. Department of Commerce International Trade

Advisory Committee on Textiles & Apparel (ITAC-13)

http://www.trade.gov/itac/committees/ITAC13.TextilesandClothing.asp

Corporate Responsibility Organizations

• ILO/IFC Better Factories Cambodia / Better Work Program

http://www.betterwork.org/EN/Pages/newhome.aspx

• Fair Labor Association (FLA)

http://www.fairlabor.org/fla/

• Multi-Fiber Agreement (MFA) Forum

http://www.mfa-forum.net

• Responsible Cotton Network

• Business for Social Responsibility (BSR)

http://www.bsr.org

NE X T Supply Chain

13


AE BETTER WORLD SUPPLY CHAIN

Supply Chain

Made in Vietnam. Made in India. Made in

Guatemala. Made in China.

From jeans to hoodies, our clothes all have labels that hint at the different journeys

they take in order to reach our store shelves. Our global supply chain is one of the most

important tools we have to deliver the products that our customers love. However, a

global reach brings with it a global responsibility to ensure that the people who make

our clothes are treated with dignity and respect.

Like our clothes, we have come a long way as a company. We conducted our first

factory inspection in 2001. In 2002, we wrote our first Code of Conduct. Today, we

have a Vendor Code of Conduct 32 , a dedicated team of people, and a comprehensive

factory inspection, remediation, and training program focused on improving working

conditions in the global apparel supply chain.

Few factories, if any, are perfect. The root causes of poor working conditions are varied

and complex, and we cannot hope to solve all of the problems alone. Most of the time,

we are just one of several brands working with any given factory and our leverage to

bring about positive change may be limited. However, we continue to learn from and

partner with other companies and stakeholders who share our goals. While there is no

single, one-size-fits-all answer, we are working to identify and implement solutions that

have a positive impact in the lives of the people who make our clothes.

NE X T Our Strategy

32 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

14


AE BETTER WORLD SUPPLY CHAIN OUR STRATEGY

Our Strategy

TRANSPARENCY

PARTNER WITH

STAKEHOLDERS

FACILIT Y TRAINING / IMPROVE

POLICIES, PROCEDURES & SYSTEMS

FACTORY INSPECTIONS

Our strategy to improve apparel factory working conditions starts

with factory inspections based on our Vendor Code of Conduct 33 . We

then focus on remediating the issues we find during those inspections,

which often includes additional factory training and capacity building

programs.

Unfortunately, we can’t solve all of the problems we find by working

alone, so we partner with other brands and retailers, multi-stakeholder

organizations, civil society groups, trade unions, governments, and others

to better understand and address what is happening in the factories and

countries where our clothes are made. Working together, we strive to

collectively develop more sustainable solutions to the problems we find.

Finally, we are committed to being transparent about how we are doing.

We know that reporting publicly on our efforts is one of the most effective

ways to ensure that we remain focused on our goals, disciplined in our

efforts, and accountable for our performance.

NE X T Working With Factories

33 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

15


AE BETTER WORLD SUPPLY CHAIN WORKING WITH FACTORIES

Working With Factories

We do not own or operate any manufacturing facilities. Our branded products are

produced by third-party contract manufacturers located in more than 20 countries

around the world. In most cases, AEO, Inc.’s production comprises only a small

percentage of a supplier’s total production.

Vendor Code of Conduct

Our Vendor Code of Conduct 34 is based on universally-accepted human rights

principles and sets forth our minimum expectations for suppliers. The Code must

be posted in every factory that manufactures our clothes in the local language of

the workers. All suppliers must contractually agree to abide by the terms of our

Vendor Code of Conduct before we place production with them.

In 2010, American Eagle Outfitters, Inc. joined the Fair Labor Association (FLA) 35 .

As part of that commitment, we are working to bring our Vendor Code of Conduct

into full alignment with the FLA’s Code of Conduct.

Our Team

We have a small team of people based in the United States and Asia who are

dedicated to improving the lives of garment workers. They spend much of their

time visiting factories, conducting inspections, meeting with factory management

and speaking with workers.

Every day, our team members gather invaluable real-time information about the

workplaces around the world where our clothes are made.

“There are many reasons why I love my job, but top of the list is that I

am encouraged to be creative, emboldened to be visionary, and paid

to contribute to a fairer, safer and cleaner world.”

- MAY L., CORPORATE RESPONSIBILIT Y

34 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

35 http://www.fairlabor.org/fla

Our Factory Inspection Program

We believe that the workers who make our clothes should be treated with dignity

and respect. To that end, we maintain an extensive factory inspection program to

monitor compliance with our standards. In FY 2010, we conducted 349 inspections

in 329 factories around the world.

“As a compliance auditor, I spend many exhausting hours traveling

to and from factories. But when I see positive change in a factory

manager’s mindset or a better environment for workers, it makes me

proud of my contribution and keeps me passionate about my work.”

- RITA T., CORPORATE RESPONSIBILIT Y

Factory inspections are just the first step towards improving working conditions.

Once compliance issues have been identified, we work with our suppliers to

improve policies, processes, and management systems to correct non-compliance

problems and help to ensure that they won’t recur again in the future.

The Root Causes of Poor Factory Working Conditions

Few factories, if any, are perfect. Working conditions vary dramatically from

country to country, region to region, and factory to factory. Many times, despite

our best inspection efforts, factories are still not as good as we would like them to

be. The reasons for this are varied and complex. Some of the factors that contribute

to poor working conditions in global apparel factories include: unreasonable

expectations by brands and retailers regarding cost and speed to market; poor

management systems and/or inefficient and outdated production processes by

factories; strong industry price competition and uneven enforcement of standards;

outdated national labor and environmental laws and poor law enforcement by host

country governments; and complex international trade rules that place high import

tariffs and/or significant paperwork burdens on imported apparel products.

There are no easy fixes. However, by addressing challenges as they arise and

continuing to partner with our suppliers wherever possible, we are striving to bring

about an environment of continuous improvement in our supply chain.

16


AE BETTER WORLD SUPPLY CHAIN WORKING WITH FACTORIES OUR FACTORY INSPECTION PROGRAM

Working With Factories (continued)

Our Factory Inspection Program

FACTORY APPROVAL PROCESS

New garment factories must pass an initial inspection in order to do business

with us. In FY2010, we evaluated 77 new factories. Of these, 17% were unable or

unwilling to meet the standards required to pass our inspections and were not

approved for AEO, Inc. production.

FACTORY DOES

NOT MEET STANDARDS

CORRECTIVE ACTION

PLAN ISSUED,

CAP FOLLOW UP OCCURS,

RE-INSPECTION OCCURS

NOTE:

MUST EVENTUALLY PASS OR WILL

NOT BE APPROVED FOR PRODUCTION

PRODUCTION TEAM

REQUESTS NEW FACTORY

COMPLIANCE

CONDUCTS INSPECTION

ANNUAL INSPECTION

CYCLE INITIATED

FACTORY MEETS STANDARDS

FACTORY ACTIVATED FOR ORDERS

Ongoing Factory Inspections

Once garment factories are approved, we strive to re-inspect them at least once a

year. While we occasionally are unable to get to a factory in a particular year, we

work with third-party auditors and independent locally-based monitors to make

our best effort to meet this goal.

We review the outcome of these inspections with factory management with the

goal of helping them to continuously improve their performance. We recognize

that compliance may not be achieved immediately, but our strong preference is to

keep working with factories to help them improve over time.

“In recent years, we have noticed that AEO has become more

understanding of compliance realities in the factory. They now look

beyond the “pass” and “fail” of compliance and have been more

supportive in giving advice so that the factories can improve in their

CSR efforts.”

- A KOREAN SUPPLIER

Unfortunately, there are some instances where a factory is unable or unwilling

to meet our standards. In those cases, we will take steps up to and including the

severance of our business relationship. In FY2010, we terminated our business

relationship with 9 factories, approximately 2.7% of our total active supplier base,

for compliance violations. For more information on the types of non-compliance

issues we find during factory inspections, please see Our Performance 36 .

36 Page 25

17


AE BETTER WORLD SUPPLY CHAIN WORKING WITH FACTORIES FACTORY TRAINING & CAPACITY BUILDING

Working With Factories (continued)

Factory Training & Capacity Building

When we conduct factory inspections, the last thing we want to see is a factory that

has the same problem year after year. So, we strive to work with factories to identify

ways to help them address some of the root causes of compliance problems.

Supplier Meetings

We regularly hold on-boarding meetings for new vendors and regional trainings

for existing suppliers on our Vendor Code of Conduct 37 and the policies outlined in

our corporate vendor manual. Our goal is to help suppliers better understand our

requirements when they enter into a business relationship with us.

“[When we compare] our operations today to 5 years ago, we believe

that communication between the factory management and the

workers has improved. Since communication is the key ingredient in a

smooth operation, [we have experienced] many positive effects from

this improvement, including a lower turnover rate and higher worker

satisfaction. In addition, constant management of health & safety

issues has improved the working environment.”

- A KOREAN SUPPLIER

Chinese Labor Law Training

On January 1, 2008, the Chinese government implemented a new series of labor

laws. Many of our suppliers had trouble understanding how to comply with the

new regulations. In October 2008, our global and local team members partnered

with Business for Social Responsibility (BSR) 38 and the China Training Institute

(CTI) 39 to conduct a labor contract law implementation seminar in Shenzhen,

China.

Several experts, including the Chief Officer of China’s Human Resource and Social

Insurance Ministry Labor Law Research Center, provided guidance to many of

our key suppliers in the region. The session sparked an interactive discussion that

37 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

38 http://www.bsr.org/

39 http://ctichina.org/v2/en

proved successful in clarifying many outstanding questions about the new Chinese

labor laws and helped facilitate a new spirit of synergy and partnership.

Transitioning to the Better Factories Cambodia Program

In July 2009, we brought together our suppliers in Cambodia to launch our

membership in the International Labor Organization (ILO)’s Better Factories

Cambodia (BFC) 40 program. Two management representatives from each supplier,

along with key ILO representatives, participated in an interactive discussion that

outlined the benefits of the BFC program.

We outlined our commitment to BFC and had a lively discussion about what

this would mean to suppliers - in particular, that we would be relying on BFC

inspection results instead of our own to help reduce supplier “audit fatigue”.

We also encouraged suppliers to review the suite of advisory and training services

offered by the Better Factories Cambodia team and offered our assistance in

helping them to identify or schedule in-factory training that would have real,

meaningful impact for their workers.

“It is important for brands to set up programs to help factories

continuously improve and to narrow the gap among different brand

requirements and legal requirements. [But] we wish more brands

would reduce the frequency and duplication of their audits when

factories demonstrate that they meet brand requirements.”

- A CHINESE SUPPLIER

Pilot Program on Workers Grievances

Effective grievance mechanisms are one of the most important tools any

organization has to ensure that workers’ voices are heard. Unfortunately, many

garment factories around the world still have only rudimentary channels for

workers to communicate their thoughts and concerns to management. When these

channels are ineffective, workers may need to seek out external mechanisms, such

as a brand or retailer that contracts with the factory.

40 http://www.betterfactories.org/

18


AE BETTER WORLD SUPPLY CHAIN WORKING WITH FACTORIES FACTORY TRAINING & CAPACITY BUILDING

Working With Factories (continued)

In 2011, we launched a pilot project to provide workers in approximately twelve

approved garment factories in China with access to an independent hotline

managed by two external organizations. The organizations will immediately report

to us serious concerns raised by workers, and all concerns on a monthly basis. We

will also partner with these organizations to provide relevant awareness training in

factories based on the issues raised.

Our goal is to encourage the factories in this pilot program to foster an

environment in which workers feel comfortable raising and discussing labor and

social issues in a constructive manner. We will also work with suppliers to redesign

their own internal grievance procedures so that they can ultimately manage

effective internal communication channels independently.

We are still in the early phases of this project. We look forward to updating on our

progress in future reports.

Getting an Accurate Picture of Factory Conditions

One of the most challenging issues we face is obtaining access to accurate factory

records during inspections. Unfortunately, some factories have adapted to Code of

Conduct inspections over the years not by fixing problems but by creating false sets

of documents that show perfect (but fake) overtime and wage records.

We believe that this is one of the worst practices a factory can undertake. Resolving

non-compliances is never easy - but it is impossible to help factories improve when

we can’t get a true picture of what is going on inside the factory. In 2010, we took a

strong stance on this issue. We informed suppliers that failure to show accurate sets

of books would result in a significant penalty - up to and including termination

of our business relationship. To promote disclosure, we assured factories that the

penalty of not showing accurate records would be far worse than any instances of

non-compliance these records might reveal, and that we are committed to working

with them to continuously improve whatever problems are uncovered.

Rita’s Experience with Factory Transparency

The following story from one of our Asia-based team members highlights the

challenges we face in this area.

“When talking about false records, I often say that the problem is easy

to understand but hard to correct. One factory that we have been

working with for two years in China provides a good example of the

challenges we face.”

“From 2009 to January 2011, we visited Factory X in China every four

months. During the first few visits, we always found inconsistencies in

the factory records. We struggled to convince the factory managers

to provide us with accurate payroll information because they didn’t

fully believe that we wanted to work with them to fix the problems -

and that we wouldn’t punish them for the non-compliances that the

records revealed. We spent a lot of time and effort over many months

trying to gain their trust, explain our approach, and help to change

their mindset. Finally, they agreed, and gave us the true payroll

records.”

“As expected, we found some wage and hour problems, but we are

now working together with factory management on a corrective action

plan. We’ve asked the factory to update us monthly on their progress.

In addition, the factory management decided to establish a committee

with direct oversight for workplace health and safety- because health

and safety was another area where they were having repeated noncompliances.

The factory management successfully identified that the

root cause of those problems was that no one had direct responsibility

for health and safety issues in the factory.”

“After two years, we are finally starting to see positive, incremental

improvement on wage, hour, and health and safety issues in Factory

X. There is still more work to be done, but I believe by gaining the trust

of Factory X’s management and working with them to identify the root

causes of issues, we have overcome the hardest part of the problem.”

NE X T How Our Products Are Made

19


AE BETTER WORLD SUPPLY CHAIN HOW OUR PRODUCTS ARE MADE

How Our Products Are Made

Developing an efficient process to bring our design concepts to market is one of

the most critical aspects of our business. If we’re late in deciding which graphic

t-shirt or what denim style to put in our stores next season, we may also make it

more difficult for our suppliers to make those products and deliver them to us on

time. The good news is that improving our product pipeline is a win-win for us

and our suppliers. Learn more about how we’re working to make smarter business

decisions 41 .

NE X T Making Smarter Business Decisions

41 Page 20

20


AE BETTER WORLD SUPPLY CHAIN HOW OUR PRODUCTS ARE MADE MAKING SMARTER BUSINESS DECISIONS

How Our Products Are Made (continued)

Making Smarter Business Decisions

Nothing is more important to the success of our business than getting the right

product in our stores at the right time. In an industry as competitive as ours -

and with cotton prices and fuel prices on the rise - we have to be quick, flexible,

innovative, and smart about how we do our job. We have to make better decisions

faster, build stronger relationships with the best suppliers around the world, and

manage the many moving parts of our supply chain more effectively.

Streamlining Internal Decisions

In 2010, we began taking several steps to streamline our design and product

development process. First, we took a hard look at our product development

calendar. To reduce time to market and get fresh designs into stores faster, we

needed to better align our internal timelines and eliminate unnecessary and

redundant meetings. At the same time, we also found that we needed to hold

people more accountable for making decisions at major milestones. Our design,

merchandising, and production teams had to develop consensus more quickly

on the specific products to be included in our store assortment each season. To

that end, we have introduced opportunities for closer collaboration earlier in the

product development cycle and built in executive review earlier in the calendar. We

even asked some design and production teams to move offices and sit together so

that they could work more closely on a day-to-day basis.

Strengthening Supplier Relationships

We’ve been working hard over the past couple of years to build stronger business

relationships with the right suppliers around the world. We’re reducing the number

of new suppliers that we bring into our sourcing base each year while expanding

our business with key vertical suppliers who have direct access to yarns and

fabrics. We’re also working to provide more consistent production orders and

greater assurance to suppliers that we are in this for a longer-term relationship. We

believe these deeper partnerships offer more speed and flexibility to get our clothes

to market and the opportunity to chase trends, while providing our suppliers

with greater visibility into future order volumes and the ability to better manage

production schedules. As these strategic suppliers get to know our products, we

also collaborate more effectively on design and fabric innovation.

In addition, we’ve expanded our use of supplier performance data in our decisionmaking.

Every quarter - and often on a more frequent basis - our Corporate

Responsibility team sits down with each of our production divisions to discuss

supplier performance in each apparel product category. When major compliance

concerns arise, the teams work together to develop a joint message requiring

supplier corrective action and improvement. The Corporate Responsibility team

also highlights top supplier social performers who may be good candidates to

consider for business expansion.

No relationship can thrive without good, honest communication. To that end, we

are assessing and introducing new ways to facilitate ongoing conversation and

feedback with our suppliers. In August 2011, we held our second biannual Vendor

Summit to share company goals, business trends, and future expectations and

opportunities and asked our suppliers to provide constructive feedback about ways

in which we can improve our business relationships.

Improving Material Management

In today’s world, it is more important than ever that we have ready access to the

materials we need to produce the products that our customers love. So, we’ve had

to become smarter about how we manage the materials and components that are

the building blocks of our clothes, especially fabric. We’ve begun to implement a

more robust fabric platforming process that allows us to react quickly to changing

customer desires without compromising quality or compliance. We’re working to

consolidate core materials across departments and streamline testing procedures.

This active approach to managing materials reduces our exposure to market

fluctuations, promotes more flexible production schedules and helps us to manage

our inventory more efficiently, while at the same time bringing better quality and

consistency and reducing some of the “middlemen” in the supply chain.

21


AE BETTER WORLD SUPPLY CHAIN LEVERAGING COLLECTIVE EFFORTS

Leveraging Collective Efforts

Over the years, we’ve learned that we cannot hope to drive sustainable, positive

change in the world’s garment factories unless we partner with others in our industry,

civil society, and governments to leverage our efforts and address problems together.

To that end, we work with human rights and labor leaders, civil society organizations,

and government officials on issues of mutual concern on an ongoing basis.

ILO Better Factories Cambodia/Better Work Program

In 2009, we signed the International Buyers Principles 42 of the International Labor

Organization (ILO) Better Work program. Today, we are an active participant in

the ILO Better Factories Cambodia (BFC) and Better Work programs in Vietnam,

Haiti, and Indonesia. As of the fall of 2010, we had encouraged more factories to

join the Better Work program than all but one other participating company. We

look forward to the continued expansion of Better Work to additional countries.

Fair Labor Association (FLA)

In 2010, AEO, Inc. became a Participating Company in the Fair Labor Association.

The FLA is a nonprofit organization dedicated to ending poor conditions in

factories worldwide. As a member of the FLA, we are subject to Independent

External Monitoring (IEM) by FLA-accredited monitors, a process that provides an

additional level of public verification and accountability to our program. The FLA

discloses the results of IEMs conducted for participating companies on its website.

We look forward to working with the many stakeholders of the FLA to help protect

workers’ rights and continue to improve working conditions worldwide.

“As a Participating Company in the Fair Labor Association, AEO

has demonstrated a commitment to improving working conditions

worldwide. Involving brands in multi-stakeholder efforts such as

the FLA will drive long-lasting change for the industry as a whole,

strengthening social compliance programs and protecting workers

throughout the global supply chain.”

- AURET VAN HEERDEN, PRESIDENT, FAIR L ABOR ASSOCIATION

42 http://www.betterwork.org/EN/buyers/Pages/BuyersPrinciples.aspx

Multi-Fiber Arrangement (MFA) Forum Americas Working Group

We participate actively in the Multi-Fiber Arrangement (MFA) Forum Americas

Working Group, a group of several brands and retailers as well as trade unions,

including the International Textile Garment and Leather Workers Federation

(ITGLWF) 43 , and civil society organizations such as the Maquila Solidarity

Network (MSN) 44 to address a range of compliance issues in Mexico and Central

America, including workers’ right to freedom of association.

“The Maquila Solidarity Network (MSN) has been engaging with

American Eagle Outfitters (AEO) about worker rights issues since

2006. In a number of cases, AEO has responded to requests from

MSN by joining with other brands in calling on shared suppliers to

respect workers’ associational rights and on governments to put a

stop to violence and repression against workers and labour rights

defenders. AEO has also joined with other companies and labour and

non-governmental organizations, including MSN, in multi-stakeholder

initiatives like the MFA Forum, which promoted responsible

competitiveness strategies in garment producing countries immediately

after the phase out of the Multi-Fibre Arrangement. In Mexico, one

focus of the committee’s work has been on how to address systemic

violations of freedom of association.”

“To build on this good record, AEO must devote sufficient resources to

addressing critical supply chain issues, including issues such poverty

wages, precarious work and the general lack of respect for freedom

of association in global supply chains. We also hope AEO will become

more transparent on the locations of its supplier factories and the

steps it is taking to improve its purchasing practices and to ensure that

its sourcing decisions benefit, rather than victimize, workers and good

suppliers.”

- LYNDA YANZ, COORDINATOR, MAQUIL A SOLIDARIT Y NET WORK

43 http://www.itglwf.org/

44 http://en.maquilasolidarity.org/

22


AE BETTER WORLD SUPPLY CHAIN LEVERAGING COLLECTIVE EFFORTS

Leveraging Collective Efforts (continued)

Responsible Cotton Network

In 2008, a group of socially responsible investors and civil society organizations

brought to our attention the practice of forced child labor in the cotton fields of

Uzbekistan. Deeply disturbed by the images we saw and reports we heard, we

adopted a policy in June 2008 45 banning the use of cotton from Uzbekistan in

all products manufactured for American Eagle Outfitters, Inc. Since that time,

we have been active participants in the multi-stakeholder Responsible Cotton

Network, which is a joint initiative of several brands, investors, non-governmental

organizations, and trade unions. Under this umbrella, we have engaged with

government officials in both the US and Uzbekistan in an effort to convince the

Government of Uzbekistan to put a stop to this unacceptable practice.

Fire Safety in Bangladesh

In December 2010, a tragic factory fire in Dhaka, Bangladesh, resulted in the

deaths of more than two dozen garment workers. Although American Eagle

Outfitters, Inc. had never worked with that particular factory, we recognized

that the tragedy highlighted the ongoing, critical need to ensure adequate worker

protection and fire safety in Bangladesh.

We therefore joined with a large group of other brands and retailers to help

bring together key suppliers, industry association leaders, and representatives

of the Bangladeshi government to urge them to begin taking meaningful action

to help prevent similar tragedies from happening again. Following an initial

meeting in February 2011, we issued a joint statement 46 emphasizing the need for

a collaborative process to ensure the sustainability of long term efforts to improve

fire safety within the Bangladesh garment industry.

When a new president assumed leadership of the powerful Bangladesh Garment

Manufacturers Exporters Association (BGMEA) later in 2011, we also joined with

other brands in co-signing a letter 47 asking him to lead the local industry in taking

45 http://www.ae.com/Images/corpResp/images/supply_chain/Uzbek_CottonLetter.pdf

46 http://www.ae.com/Images/corpResp/images/supply_chain/Bangladesh_Statement.pdf

47 http://www.ae.com/Images/corpResp/images/supply_chain/Joint_Letter_BGMEA_President.pdf

a proactive, collaborative role to strengthen building, systems, and fire safety

within the Bangladeshi garment industry.

Our collaborative work on this critical issue remains ongoing.

Sandblasting

In early 2011, American Eagle Outfitters decided to join other leading companies

in our industry to eliminate sandblasting from our denim manufacturing process.

Sandblasting is a common technique used to create the “worn” look of jeans.

Sandblasting involves high-pressure spraying of abrasive material on denim fabric.

During the sandblasting process, factory workers must wear highly specialized

equipment to protect themselves from potentially serious health effects that

can result from exposure to silica, a component found in sand. Sandblasting

can be done safely, but proper health and safety precautions must be rigorously

maintained. Unfortunately, despite extensive oversight by many companies -

including American Eagle Outfitters, Inc. - to ensure that all workers have access to

and use proper equipment, we have been unable to ensure compliance in all cases.

Every pair of jeans is unique. Like good red wine, jeans age well. One of the

reasons our customers love our denim is because it helps them live their life more

comfortably. The good news is that we can use alternative techniques to create the

same comfortable jeans without sandblasting. We believe our customers not only

want to live their lives comfortably, but also in a better world.

Until we believe that proper controls can be put in place to ensure that sandblasting

is done safely, we are no longer developing new denim styles with sandblasting.

“Sumangali” Schemes

“Sumangali” is a Tamil word that means a married woman who lives a fulfilling

life with her husband. Unfortunately, in parts of India, it has become the name

of schemes used to recruit young women into contractual working arrangements

in fabric mills and yarn spinners in exchange for a promised lump sum payment

at the end of their contracts. This lump sum is marketed by factories as potential

23


AE BETTER WORLD SUPPLY CHAIN LEVERAGING COLLECTIVE EFFORTS

Leveraging Collective Efforts (continued)

dowry - a practice which remains common in parts of India even though it has

been officially prohibited since 1961.

In 2011, several civil society organizations brought to our attention that these

women face poor working conditions that include excessive overtime, low wages,

and restricted freedom of movement.

We care deeply about the welfare of the people in our supply chain. We

immediately initiated an investigation that included on-site assessments of any

factories we contract with in the region who might work with yarn spinners or

fabric mills practicing this scheme. We also began engaging local NGOs, local

governments and industry associations, other brands, and through the Fair Labor

Association (FLA) to better understand ongoing efforts and context in the region.

As of the date of this report, our investigation is ongoing.

NE X T Our Performance

24


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance

Measuring and analyzing supplier performance is a critical part of our Corporate

Responsibility program. We firmly believe that “what gets measured gets

managed.” We use this information not only to assess new manufacturers who

seek to become approved suppliers, but also how existing suppliers are performing

over time. Regular review and analysis of this data not only helps our team identify

regions or issues that may need special attention, but also drives our discussions

with Production and Sourcing and decisions about where to place our business.

Some of the key metrics that we use to assess the performance of our suppliers on

labor standards and working conditions can be found in the drop down box below.

“When I visit factories, I look at workers’ faces and smile at them.

Sometimes they smile back, sometimes they hesitate. I also approach

them and shake hands, which puts them a little more at ease. I think

it is these moments of interaction that keep me fresh and committed

to the work I do. I have been doing this work for many years and

yet I still believe we have the power to change people’s lives here at

American Eagle - a power that, when used wisely, just might change

the world for the better.”

- AYKUT K., CORPORATE RESPONSIBILIT Y

25


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance

Factory Approval Statistics

This chart shows the percentage of factories, by region, that we inspected in FY2010 as part of our New Factory

Approval Process.

REGION NEW FACTORIES APPROVED NOT APPROVED PENDING

China & North Asia 39 67% 23% 10%

Americas 7 86% 14% 0%

South Asia 19 69% 5% 26%

Southeast Asia 12 50% 17% 33%

Europe, Middle East & Africa 0 N/A N/A N/A

TOTAL 77 66% 17% 17%

The data show a below average rate of non-approved factories in the South Asia region. Our team has initiated

a series of focused inspections in India, Bangladesh, and Pakistan to ensure that we are assessing factory

compliance levels accurately.

26


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance (continued)

Ongoing Inspection Coverage

We strive to re-inspect approved garment factories at least once a year. While we occasionally are unable to get

to a factory, our internal inspection team partners with third-party auditors and independent, locally-based

monitors to make our best effort to meet this goal. In FY2010, we inspected 98% of garment factories that were

part of our base for the entire year.

REGION ACTIVE FULL YEAR

# OF FACTORIES

PERCENTAGE

% VISITED

ACTIVE PART YEAR

# OF FACTORIES*

PERCENTAGE

% VISITED

TOTAL

FACTORIES

Americas 8 87.5 14 64.3 2

China & North Asia 83 100 102 68.6 185

Europe, Middle East & Africa 2 100 3 33.3 5

South Asia 21 100 38 60.5 59

Southeast Asia 31 **93.5 27 70.4 58

TOTAL 145 97.9 184 66.3 329

* This column reflects turnover in our supplier base attributed to business needs.

** This percentage includes two factories participating in ILO Better Work programs that had not yet been assessed by Better Work teams.

27


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance (continued)

Non-Compliance Findings

The chart below shows non-compliances identified in our approved supplier base during ongoing annual inspections.

No Non-Compliances

Identified

REGION

Worker Age Verification Documentation

Child Labor / Workers Under the Legal Age Employed

Hours of Work

Minimum Wages

Occupational Health & Safety Emergency System

Management

Occupational Health & Safety Fire Safety

Infrastructure

Occupational Health & Safety Workfloor & Other

Employee Areas

Disciplinary Practices

Discriminatory Hiring and Employment Practices

Dormitories

Environmental Health & Safety

Forced Labor, Mandatory Overtime or Restricted

Liberties

Freedom of Association

Insurance & Benefits

Local law, Code & Labor Contract Violations

Unauthorized Subcontracting

Non-Compliances in

1-24.99% of Factories

CHINA & NORTH

ASIA

AMERICAS

Non-Compliances in

25-50% of Factories

EUROPE,

MIDDLE EAST &

AFRICA

Non-Compliances in More

than 50% of Factories

SOUTH ASIA SOUTHEAST ASIA

28


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance (continued)

Underage Labor

We identified nine instances of underage labor in FY2010, all of which took place in China. In three cases,

the factories fully implemented our remediation policy, which requires that the child be removed from the

workplace immediately, given access to schooling, paid full wages up to the age of legal employment, and

guaranteed a position at the factory once he/she reaches the legal working age. In the other six cases, the

factories were unwilling to take some or all of these steps, forcing us to terminate our business relationship. We

believe these cases stem from the significant labor shortages that have impacted certain regions in China.

Working Hours

Excessive working hours continue to be a significant challenge in our industry. We have been working to better

identify the root causes of this problem, which range from poor production planning and inefficient practices

at the factory level to overbooking, unrealistic timeframes, or last-minute changes to purchase orders by

merchandising and production teams. For more information on what we are doing to streamline our business

practices, please see Making Smarter Business Decisions.

Freedom of Association

We believe that issues related to freedom of association are more widespread in our supply chain than this chart

suggests. In addition, this chart does not identify regions where freedom of association is unlawful. We are

working to revise our inspection protocols to capture concerns related to freedom of association more accurately.

In addition, we are working through multi-stakeholder organizations to tackle challenges in specific countries.

For more information on what we are doing about protection contract issues in Mexico, please click here 48 .

Occupational Health & Safety

Adequate infrastructure and management systems to ensure the safety of workers in the event of a fire remain a

challenge in all regions. The number of occupational health & safety related issues we found in FY2010 tells us

that supplier management systems are inadequate across much of our supplier base. We are working through

training and on-site engagement to help ensure that factories have processes in place for pro-actively addressing

these items. For more information on our efforts to address this problem, particularly in Bangladesh, please see

Leveraging Collective Efforts.

Local Law, Code, and Labor Contract Violations

In FY2010, we identified several cases in which factories were unable to produce acceptable labor contracts or

were lacking complete employee records. We believe this is due in part to improper usage of temporary worker

arrangements. This is an important issue which we are currently working to tackle more effectively in our

inspection process and with our multi-stakeholder partners.

48 http://www.ae.com/Images/corpResp/images/supply_chain/protectioncontracts.pdf

29


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance (continued)

Factory Ratings

One of the most important ways we assess factory performance is through overall ratings that aggregate noncompliances

and best practices identified during inspections. These ratings are an important tool to help us

analyze how individual factories perform from year to year, as well as overall performance levels in our supply

chain.

One notable point is that new factories that have not yet been approved for production rate significantly lower

than factories that are approved and have worked with us for a period of time. We believe this demonstrates

that our new factory inspection process not only helps to weed out the worst factories, but also that approved

factories that work with our Corporate Responsibility team over time do show measurable improvement in

working conditions.

30


AE BETTER WORLD SUPPLY CHAIN OUR PERFORMANCE

Our Performance (continued)

Supplier Regions & Countries

The following table and map illustrate countries and regions where we had at least one active supplier in

FY2010. All data in this report is reported according to these regions.

NE X T Supply Chain Security

31


AE BETTER WORLD SUPPLY CHAIN SUPPLY CHAIN SECURITY

Supply Chain Security

Security concerns are an unfortunate reality in today’s global supply chains.

American Eagle Outfitters, Inc. is committed to ensuring the security of the cargo

and people throughout our supply chain. For us, taking steps to ensure that illegal

weapons and contraband do not enter our country through our nation’s ports is an

important part of being a good corporate citizen.

AEO, Inc. is a Tier 3 member of the U.S. Customs-Trade Partnership Against

Terrorism (C-TPAT) 49 program - the highest ranking awarded by Customs

and Border Protection (CBP), a division of the US Department of Homeland

Security. We work with our suppliers and third-party logistics and transportation

partners to develop and implement programs designed to enhance security

throughout the supply chain in accordance with C-TPAT guidelines and security

recommendations. At a minimum, AEO, Inc. suppliers agree to comply with

C-TPAT minimum security guidelines. Suppliers must also agree to provide us

with details of their in-house security programs and to give us or our designee

(including U.S. Customs & Border Protection officials) access to records and

facilities to verify the implementation of such programs.

We work with our suppliers on an ongoing basis to modify and enhance security

program standards to align with U.S. Customs & Border Protection and/or World

Trade Organization (WTO) requirements.

NE X T Supply Chain Goals

49 http://www.cbp.gov/xp/cgov/trade/cargo_security/ctpat/what_ctpat/ctpat_overview.xml

32


AE BETTER WORLD SUPPLY CHAIN SUPPLY CHAIN GOALS

Supply Chain Goals

2011-12 Supply Chain Goals

• Develop and implement new information technology database system to enhance

collection, analysis, and reporting of factory performance data.

• Strengthen efforts to address social compliance issues in deeper tiers of the supply

chain including, but not limited to, unauthorized subcontractors, laundries,

embroiderers, fabric mills, informal workers, etc.

• Evolve factory inspection and assessment model to enhance identification of root

causes of compliance issues and develop more systematic training and capacity

building programs to improve factory management systems to sustain compliance

over time.

• Enhance integration of corporate responsibility and social compliance issues

into day-to-day business process such as sourcing strategy and decision making;

enhance awareness of decision making impact by designers and merchants on

factory production schedules.

NE X T Environment

33


AE BETTER WORLD ENVIRONMENT

Environment

American Eagle Outfitters, Inc. is committed to

developing better business practices to promote a

cleaner and healthier planet.

We hear repeatedly from associates and customers through social media, focus groups, and internal

surveys that they want us to take meaningful steps to respect our environment. Although we are still

in the early stages of implementing our environmental strategy, we are encouraged by progress from

our initial efforts and continue to explore additional ways to reduce our environmental footprint. Our

associates are our greatest asset in this effort: many of our programs today exist due to the efforts of one or

a few visionary people who had an innovative idea to help make our company “greener.”

Our environmental program is built on three pillars: conserving resources, minimizing waste, and

improving our products and packaging.

“I had been traveling a bunch and started thinking about the environmental implications of

all the jet fuel and ways to off-set my carbon footprint. I got to thinking that there might be

others who felt the same. So I asked if we had a program to offset the footprint of employee

travel.”

- ISOBEL S., ASSOCIATE DESIGN DIRECTOR, WOMEN’S KNITS

At Isobel’s suggestion, we implemented a Carbon Offset program in partnership with the Student Conservation

Association. Associates can now make donations to purchase trees to offset business travel, and AEO, Inc. will

match the donations. The trees are then planted in national parks and forests by SCA interns.

NE X T Conserving Resources

34


AE BETTER WORLD ENVIRONMENT CONSERVING RESOURCES

Conserving Resources outside parking areas. This reduction in wattage and the use of motion sensors also

We’ve introduced measures to reduce the use of energy, water, and other natural

resources in many areas of our company.

Pittsburgh Corporate Office Location

In 2007, we made a landmark decision to move our corporate world headquarters

to the South Side neighborhood of Pittsburgh, Pennsylvania. Once home to many

steel mills, the city of Pittsburgh has undergone a dramatic transformation in

recent years with the revitalization of former industrial sites. As a local company,

we wanted to support this urban renaissance.

Today, our corporate headquarters sits on a brownfield site on the banks of the

Monongahela River. Once home to a steel mill, the site has been cleared of all

lingering contaminants and is now a lush green landscape dotted with parks,

restaurants, shops, and office buildings. We are proud to call it home.

Energy Audit of Corporate Office

In July 2010, we conducted an energy audit of our main corporate office in

Pittsburgh. The audit assessed our performance on energy, water, and waste, as

well as the use of environmentally-friendly materials and innovation in design.

The audit highlighted several important areas in our operations, in particular,

opportunities to improve energy efficiency. Improving office energy efficiency is

now a key priority for 2012.

Energy Reduction in Distribution Centers

We have introduced several initiatives over the past few years to reduce energy

consumption in our three distribution centers.

Lighting Retrofits

In July 2010, we began a lighting retrofit project at our largest distribution facility

in Kansas. The project included updating lighting fixtures and adding lighting

sensors. We replaced 911 1000-watt fixtures with 480-watt high efficiency

fluorescent fixtures, and we swapped out another 114 480-watt fixtures with 354watt

fixtures. We were also able to replace half of the 1000-watt fixtures located in

reduced our air conditioning needs. Our projected energy savings from the Kansas

lighting retrofit is 7,741,469 kilowatt hours per year - an annual reduction of 38%.

We are planning to implement similar lighting retrofits at our other two

distribution centers in the near future. In the meantime, bulbs that burn out in our

other two facilities are replaced individually with higher efficiency fixtures. We

have also installed motion sensor lighting in less-trafficked areas, such as offices,

restrooms, and parts of the warehouse floors. When the buildings are empty, all

lighting is manually shut off and HVAC settings are adjusted to reduce energy

consumption.

“White” Roofs and HVAC Units

We have reduced our energy usage at our Kansas and Pennsylvania distribution

centers by installing white roofs, which absorb less heat from the sun and lower

cooling needs in the summer months. At our Kansas facility, the entire roof was

replaced with a white surface. In Pennsylvania, one third of the roof was replaced

during the summer of 2010 and we hope to replace another sizeable portion in the

near future. In the Pennsylvania distribution center, we also replaced 12 HVAC

rooftop units with high efficiency SEER-15 units. The energy reduction has been

considerable: our new HVAC units on the white roof portions have run 30% more

efficiently since installation.

Energy Reduction In Stores

In May 2010, we introduced a new lighting policy for store management. All store

lighting panels are now color-coded, with each color representing the time of day

at which certain lights should be turned on. Before stores are open to customers,

minimal lights are used. More lights are gradually turned on throughout the day to

accommodate store and customer needs.

In June 2010, we also introduced a policy instructing our open-air lifestyle center

stores to keep their doors closed year-round so that we don’t waste energy trying to

heat or cool outdoor space.

35


AE BETTER WORLD ENVIRONMENT CONSERVING RESOURCES

Conserving Resources (continued)

Our newest New York flagship store, which opened in November 2010 in

Manhattan’s Soho neighborhood, is a leading example of energy efficient design.

The Soho store was designed to utilize energy-efficient electronic displays. Multiple

seven-foot tall displays are located throughout the three-story, 24,000 square-foot

store. Three columns in the main entrance provide window displays and instore

branding. Four additional columns, located at each escalator, help to guide

customers throughout each level of the store. These innovative displays use up to

75% less power than traditional backlit or projection technology-based products.

This reduction in power usage decreases the amount of heat generated, which in

turn reduced our need for air-conditioning.

Water

Water plays an important role in the manufacturing of textile products. Water is

necessary to wash and dye garments to create the look and feel envisioned by our

designers.

Unfortunately, water usage in textile production has led to negative environmental

impacts, including shortages of fresh water and contamination of water sources

when appropriate wastewater precautions are not taken. The Pearl River Delta in

Guangdong, a province on the southern coast of China, has been particularly hard

hit. Numerous manufacturing facilities in this region have been cited as a major

cause of contamination for that region’s water sources.

In 2007, we joined Business for Social Responsibility (BSR)’s Sustainable Water

Group (SWG) 50 to learn about ways to minimize the potential negative impact of

our own products and explore industry-wide efforts to reduce the negative impact

of manufacturing on global water sources. The SWG is a partnership of five global

apparel companies committed to responsible wastewater practices in global textile

supply chains.

The SWG uses industry-developed Water Quality Guidelines 51 to help companies

mitigate the potential harmful impacts and business risks from global operations.

50 http://www.bsr.org/en/our-work/working-groups/sustainable-water-group

51 http://www.bsr.org/reports/awqwg/BSR_AWQWG_Guidelines-Testing-Standards.pdf

In 2007, we began monitoring water quality test reports submitted by supplier

mills and laundries. After analyzing these reports, we realized that the data we

were receiving was not comparable between facilities because different local

governments test by different standards of sampling, water quality parameters,

and other methodologies. As a result, we implemented a new process in 2010 to

physically extract our own samples to ensure consistent, accurate test results using

BSR standards for our top denim laundries. The results showed that all of the tested

suppliers met their local standards for water quality, but seven out of ten fell short

when it came to the more stringent SWG standards. These seven suppliers were

sent corrective active plans and we are currently working with them to develop

clear, achievable goals for improvement, which may include external advisory

services, on-site consultations and re-testing.

We know that many stakeholders share our desire to ensure that apparel laundries,

mills, and other manufacturing facilities around the world discharge clean water

back into the environment. In June 2011, we were contacted by Greenpeace, which

had concerns about water discharge from Well Dyeing, a fabric mill in southern

China. Although we no longer had any programs in development with Well

Dyeing, we did respond to Greenpeace’s request to engage in their Detox Challenge

campaign. A copy of our response is available here 52 .

Carbon Emissions In Transportation

We don’t own or operate the planes, cargo ships, and trucks that transport our

products from factories around the world to our stores. But we have been working

actively with our transportation partners to monitor and promote greater fuel

efficiency.

We have begun to reduce our usage of fuel-intensive transportation methods

between US ports and distribution centers. In 2010, we converted approximately

90% of our freight from truck to rail between the port of Long Beach, California

- one of the key entry points into the United States for our merchandise - and

our distribution center in Kansas. This initiative not only reduced our reliance

52 http://www.ae.com/Images/corpResp/images/environment/Greenpeace_Letter_110812.pdf

36


AE BETTER WORLD ENVIRONMENT CONSERVING RESOURCES

Conserving Resources (continued)

on expensive fuel associated with trucking, but also helped reduce our emissions

between the port and our distribution center.

We have also begun to track the carbon footprint of our transportation network,

with an initial focus on ocean vessel and domestic truck transportation. We are

still in the beginning stages of this process but hope to provide more data on

carbon emissions in future reports.

Promoting cleaner transportation

We do not own or operate our own transportation fleet. However, meaningful

reduction in the total carbon footprint of our supply chain is important to us.

For years, we have expected our transportation suppliers to deliver quality and

timely service. Now we are asking them where possible to take meaningful steps to

reduce fuel usage and minimize their reliance on the most polluting forms of fuel.

Many of our domestic transportation suppliers participate in the SmartWay

Transport Partnership 53 , a collaboration between the U.S. Environmental

Protection Agency (EPA) and the U.S. freight industry. SmartWay seeks to lower

the environmental impacts of freight operations by providing incentives for

carriers to improve fuel efficiency and reduce carbon emissions, greenhouse gases

and air pollution. All of AEO, Inc.’s domestic truck-load (TL) and less-thantruckload

(LTL) carriers, who move shipments from US ports to our distribution

centers, are SmartWay-certified. In addition, 43% of our Delivery Agents, who

move shipments from consolidation points to our stores, are certified, and another

14% are currently working towards certification.

Recently, we sent a letter 54 to our transportation partners asking them to share

more information with regards to their practices to reduce fuel consumption

and minimize reliance on the most carbon-intensive forms of fuel, including

fuel derived from oil sands. We plan to formalize our request for transportation

partners to prioritize cleaner fuel sources into our contractual process later this

year.

53 http://www.epa.gov/smartwaylogistics/index.htm

54 http://www.ae.com/Images/corpResp/images/environment/usatruck_20110831.pdf

Sustainable Practices in Cafes

Our Pennsylvania corporate office locations and US distribution centers all boast

cafes managed by Guckenheimer 55 , an external catering company. Guckenheimer

is firmly committed to sustainability in restaurant services, emphasizing not only

nutrition and healthy meal choices for our associates, but also utilizing energyconserving

restaurant equipment and offering local and organic produce, organic,

free-range, grass-fed and naturally raised poultry, pork, lamb, and hormone-free

beef, cage-free shell eggs and hormone-free dairy products.

NE X T Minimizing Waste

55 http://www.guckenheimer.com/

37


AE BETTER WORLD ENVIRONMENT MINIMIZING WASTE

Minimizing Waste

Recycling Initiatives

We have comprehensive recycling programs in place at our corporate office and

distribution centers in the U.S. and Canada.

In our corporate offices, recycling bins are located in copy rooms, cafes, kitchens,

and at each associate’s work space. We recycle plastics (including cups, containers

and utensils), metal cans, glass bottles and jars, paper, and cardboard. Every year

in August, we also hold a two-week-long “Clean and Green” event to encourage

associates to dispose of confidential corporate documents that are no longer

needed in an environmentally-friendly manner.

We recycle an even wider array of products in our distribution centers according

to the different materials utilized within these facilities. Commonly recycled items

include cardboard (including empty shipping boxes), batteries, aluminum cans,

toners, paper, and plastic bales and shrink wrap.

While we are not yet able to quantify our recycling efforts in our New York and

Kansas locations, our 2010 efforts in our Pennsylvania and Canada facilities

yielded 183,951 tons of paper and 6,021 tons of cardboard bale recycling that would

have otherwise gone to a landfill.

Donation Of Damaged Goods

When our goods are damaged during manufacturing or transportation, the last

thing we want to do is send them to a landfill. We’ve put considerable effort into

developing partnerships with organizations that can recycle or reuse damaged

goods. In 2010, we donated:

• 33,000 pairs of ripped jeans to Habitat for Humanity to be recycled into housing

insulation. This was enough denim to insulate 66 new homes for victims of

Hurricane Katrina.

• 15,374 new, single shoes to the National Odd Shoe Exchange, a foundation

which caters to people who need single shoes or pairs of different sizes due to

amputation, club feet, leg braces, diabetes, or other disabilities.

• 138,000 pieces of broken jewelry to Materials for the Arts (MFTA). MFTA

provides free materials to charitable and educational organizations for use in arts

programs.

In addition, we collect non-denim ripped garments that we receive from customer

returns and factories. Once we have an entire container load, we send these

items to Leigh Fibers to be shredded and utilized in the manufacturing of car

dashboards, carpet insulation, speaker stuffing, and similar products.

For more information on our partner organizations, please visit the following sites:

• Habitat for Humanity

http://www.habitat.org

• Leigh Fibers

http://www.leighfibers.com

• Materials for the Arts

http://www.mfta.org

• National Odd Shoe Exchange

http://www.oddshoe.org

Paper Reduction in Corporate Offices

Although paper is a fixture in all corporate offices, we’ve been working to reduce

our overall paper consumption.

In 2010, we transitioned our internal newsletter, AE Life, from a printed

publication to an electronic-based version. The magazine, which is approximately

20 pages in length, is published three to four times a year. With our new online

“e-zine,” we have reduced the number of printed copies by 98% from approximately

135,000 copies to just 2000 copies per year. These remaining paper copies will

be printed on paper certified by the Forest Stewardship Council (FSC) and will

contain up to 35% post-consumer recycled material.

38


AE BETTER WORLD ENVIRONMENT MINIMIZING WASTE

Minimizing Waste (continued)

We also recently introduced a “paperless payroll” option for associates. Associates

also have the option to view pay statements online. Today, 96% of corporate

associates, 94% of distribution center associates, and 52% of stores associates

participate in the paperless payroll program. So far, it has proven to be convenient,

cost-effective, and good for the environment.

NE X T Product Innovation

39


AE BETTER WORLD ENVIRONMENT PRODUCT INNOVATION

Product Innovation

Reduced Packaging

In May 2009, we introduced new environmentally-friendly requirements for

suppliers who pack and ship our merchandise. Our new policy requires suppliers to

use single-wall corrugated shipping cartons, which replace the double- or triplewalled

cartons previously used. In addition, we increased our packing density

standards, requiring that more units be packed into each carton. As a result, our

shipping carton density increased 5.1% in the 12 months after the policy change.

Not only did this new policy improve container utilization, but it also reduced the

total amount of packaging needed to transport our goods, reducing paper waste as

well as carbon emissions and fuel usage in our supply chain.

Shopping Bags, Gift Boxes & Shoe Boxes

The vast majority of paper shopping bags used in our American Eagle Outfitters,

Aerie and 77kids stores are made from 100% post-consumer recycled material and

are recyclable. In addition, most American Eagle Outfitters and 77kids gift and

shoe boxes are made from 100% post consumer recycled material. Our Aerie gift

and shoe boxes currently contain about 30% recycled content.

AEO Outlet stores use plastic shopping bags that contain 60% recycled material

and are also recyclable.

Use of Recycled Content in Paper Materials

We avidly use email, text messages, and social media to stay connected to

our customers. However, we have found that direct mail is still an important

way to communicate with our customers, so we have taken steps to make this

communication ‘greener.’ Currently, about 23% of the paper we use in our direct

mail activities is made with some recycled content.

Environmentally-Friendly Products

We took our first step towards introducing environmentally-friendly products with

the launch of an “Eco Shop” in our Holiday 2010 collection. Available exclusively

online, the shop offered men and women’s apparel made from certified organic and

recycled materials. Many styles were made from organic cotton, which is grown

without the use of harmful synthetic pesticides and results in fewer fossil fuel

emissions than conventional cotton. Other styles were made from recycled content,

which gives new life to materials that would have otherwise ended up in landfills.

Policies Against Animal Cruelty

American Eagle Outfitters, Inc. strictly prohibits the use of real animal fur and

Australian mulesed wool in all of our products. We are also against the use of

animal testing on our products.

NE X T Environment Goals

PAPER COMPOSITION POUNDS

30% Recycled Content & Made With Wind Power 265, 278

30% Recycled Content 77,936

10% Recycled Content 433,907

100% Recycled Content & Made With Wind Power 1,422

Direct Mail Printed Materials - Recycled Content Breakdown

TOTAL 778,543

40


AE BETTER WORLD ENVIRONMENT ENVIRONMENT GOALS

Environment Goals

2011-12 Environment Goals

• Improve corporate office energy efficiency based on results of July 2010 energy

audit.

• Measure and expand reporting on recycling efforts in company-owned facilities.

• Conduct company-wide carbon footprint to identify key opportunities for

emission reduction.

• Formalize internal structure to manage Environmental Affairs across

the company. Establish a strong organizational structure, as well as clear

responsibility and accountability for the program.

NE X T Associates

41


AE BETTER WORLD ASSOCIATES

Associates

Be individual. Think broadly. Be real.

Be distinct.

These principles are the inspiration behind Live Your Life, Love Your Job - the theme

that runs through our company, our brand, our culture. We strive to be an employer of

choice - a place where people are excited to come to work because they believe in what

we do, enjoy working with each other, and have fun doing it.

“AEO has a unique culture of accommodating people. In my job, I interact

with everyone from Jim O’Donnell to our cleaning crew. People here have

an ability to cross lines and departments and help out with just about any

project or problem. You never hear people say, “that’s not my job.’ They

usually say, “let me look into it” - and then they go do it without fanfare.

I like the fact that doors are always open and you can talk or ask a favor

of most anyone in the company. In many companies, people don’t interact

with other departments, but here it’s the norm. Everyone knows at least a

few people in each department and almost everyone is friendly and willing

to talk!”

- HERB C., FACILITIES

NE X T Our Values

42


AE BETTER WORLD ASSOCIATES OUR VALUES

Our Values

We believe the best way to live our lives and love our jobs is to live our values.

Our five core company values are:

• People

• Integrity

• Passion

• Innovation

• Teamwork

These values capture our company spirit and drive our organizational vision and

goals. They are prominent in our Associate Performance Evaluations and serve as

key criteria for our recognition programs.

Our Live Your Life Love Your Job campaign is an extension of these values. It

inspires our work. It drives us to treat our fellow associates with respect. It is the

frame of mind that guides our brand and our culture.

“When AEO was getting ready to launch our children’s clothing line,

the company needed to add an extra product safety layer to many

people’s roles and responsibilities. Universally, throughout the

company, these new roles were embraced without objection. It was

clear that, in order to provide the safest possible product to our

customers, this was something we had to do and do well...and it was

done. To me, this reflects the integrity of the people working for the

company.”

- REBECCA G., LEGAL

NE X T Compensation & Benefits

43


AE BETTER WORLD ASSOCIATES COMPENSATION & BENEFITS

Compensation & Benefits

Compensation & Benefits

American Eagle Outfitters, Inc. strives to maintain a competitive compensation

and benefits structure.

We view compensation as a combination of base salary and short- and long-term

incentives. We work to pay our associates fairly based upon market research, data,

and statistics. All associates have the opportunity to earn some form of incentive

pay. We encourage our associates to save for retirement through our matching

401(k) program. Associates also have the option to participate in our Employee

Stock Purchase Plan (ESPP). We will match 15% of each Associate’s bi-weekly

contribution to the ESPP up to $100 per pay period.

We offer an array of benefits to promote the health and wellness of our associates.

Full-time and part-time associates are eligible for comprehensive medical, dental

and vision coverage. To encourage everyone to live a healthier lifestyle, we

maintain state-of-the-art fitness centers at our Corporate Office in Pittsburgh

and in our Kansas and Canadian distribution centers. Corporate and distribution

center associates who are not based in these locations are eligible to receive a gym

reimbursement benefit.

We recognize the importance of balancing work and family life. In addition to

a generous Paid Time Off (PTO) plan, we offer a number of work/life programs,

including paid maternity leave, new dependent leave options, adoption assistance,

tuition reimbursement, and back up child care assistance.

We also have a long-standing tradition of Early Out Fridays every summer to help

our associates spend more quality time with their families. Between Memorial

Day and Labor Day, all corporate associates may leave between 12 and 2 p.m.

Distribution Center associates enjoy Early Outs during non-peak periods of time.

Store district managers and above are eligible for two Free Fridays throughout the

summer.

Finally, at American Eagle Outfitters, Inc., every day is “casual Friday.” We

encourage everyone to be themselves, to wear the brand, and to be creative in their

work and work attire. Our office environments provide collaborative work spaces

to encourage cross-functional teams to gather informally in comfortable, casual

settings. Oversized sofas, chairs, picnic tables and benches adorn the open areas in

our Pittsburgh and New York offices to help promote teamwork and camaraderie.

Hardships

We strive to take care of our associates when they face major hardships. Over the

years, we have provided clothing, gift cards, food, lawn service, and maid service

to associates that have experienced tragedies in their lives. We also encourage

associates to work from home when they need to be with a family member.

NE X T Communication & Retention

44


AE BETTER WORLD ASSOCIATES COMMUNICATION & RETENTION

Communication & Retention

We strive to be an open environment - open to listening, open to new ideas.

At our Corporate Office, New York Design Center, and Distribution Centers in

Pennsylvania, Kansas, and Canada, our CEO and senior leaders hold regular

roundtable discussions with randomly selected groups of associates. These sessions

provide an open forum in an intimate setting for associates to ask questions and

speak directly with senior leadership.

We encourage an open-door culture based on two-way dialogue and feedback, and

we strive to foster open discussion and questions between associates and managers.

We support the right of free association for all associates, and a trade union

represents associates in our Canadian distribution center.

“I am a long time AE associate. Long story short, I filled out a survey

and got called into a meeting with Jim [O’Donnell]. I didn’t even know

what a “round table” meeting was about, but I learned quickly that

it had to do with my feedback on the survey. I was anxious and he

seemed angry, but this meeting ended up being one of my proudest

AE moments. The fact that our CEO took time out of his busy schedule

to hear my feedback and that he genuinely cared about my input was

fantastic. The AE culture has taught me so much about collaboration,

believing in yourself, and embracing new ideas. And by the way, I

received a personal follow up e-mail from Jim.”

- CINDY D., FINANCE

Key highlights of our communication channels include:

• Regular CEO-led meetings for all office and distribution center associates to hear

from senior leadership and ask questions about the company’s past, present, and

future.

• AE Life, our intranet and quarterly e-magazine.

• Monthly Distribution Center Chats.

• Daily Start-Up Meetings held in the Distribution Centers by each department

supervisor to discuss shift goals, safety information and campus events.

• Three Regional Store Management Meetings per year, which are followed by Take

It Back meetings between store managers and store associates.

• Customer First, which defines our approach to communication throughout the

company and strives to ensure that every customer leaves our stores happier than

when they walked in. Customer First reminds us that - like every associate - each

AEO, Inc. customer is an individual with unique needs, and that we should be

real and ready for every person who walks through the door.

• Communication Center for store associates, which provides personalized selling

goals, promotional news and new product knowledge to ensure associates are

adequately equipped to meet each customer’s unique needs.

• AEOTV, a beloved cornerstone of Communication Center, which provides upto-the-minute,

short training videos featuring product knowledge and selling

tips directly from our design team. AEOTV segments are shot in a “behindthe-scenes”

environment which helps store associates understand our design

inspiration and the hottest fashion trends.

• Our confidential Speak Up Program for corporate associates to speak with the

Human Resources team, and an Alert Line which is managed by an independent

third-party and anonymously connects store associates with Human Resources.

• The confidential AE Hotline 56 , which provides a toll-free phone number and

secure website managed by an independent third-party for associates to voice

serious concerns.

NE X T Diversity

56 http://www.aehotline.com/

45


AE BETTER WORLD ASSOCIATES DIVERSITY

Diversity

We are an equal opportunity employer and strive to treat our associates with

respect and dignity. Our diverse workforce provides our business with many

benefits, including enhanced creativity, different approaches to problem solving,

and the ability to work effectively in our diverse markets.

Workplace Culture Policy

We are committed to selecting, developing, and rewarding the best person for

the job, based on the requirements of the work to be performed, and without

regard to race, color, national origin, religion, disability, marital status, age, sexual

orientation, genetic information, gender, gender identity and expression, or any

other basis protected by federal, state, or local law. We forbid discrimination of all

kinds, whether directed at associates, applicants, suppliers, vendors, customers, or

visitors. This policy applies to all terms and conditions of employment, including

recruitment, hiring, promotion, compensation, benefits, training, discipline and

termination.

We believe the work environment should foster respect for one another and

provide a setting for one to work hard, learn, and grow. We do not tolerate

harassment or workplace behavior - whether committed by a fellow associate,

leader, contractor, customer, or supplier - that intimidates, offends, degrades, or

humiliates another person. This prohibition applies whether the harassment is

based on one’s protected status or not.

Workplace Culture Training

Our commitment and values are reflected in our Code of Ethics 57 and our

Workplace Culture Policy 58 . These policies are provided to every new hire and

discussed in orientation. We educate every associate on these policies through a

combination of computer-based and live Workplace Culture Training. Associates

are then required to participate in refresher courses to ensure that they continue to

understand and live by these values in our workplace.

57 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjIwODh8Q2hpbGRJRD0tMXxUeXBlPTM=

&t=1

58 http://www.liveyourlifeloveyourjob.com/document/Workplace_Culture_Policy.pdf

Reporting Concerns

Associates have multiple channels - including the confidential AE Hotline 59 -

through which they can report potential violations of our Code of Ethics 60 and our

Workplace Culture Policy 61 . We take every report seriously and investigate each

claim. If we find that a violation has occurred, we take prompt and effective action

to ensure that the behavior does not occur again. We do not tolerate retaliation

against associates for reporting potential violations - period.

INROADS Partnership

In 2007, we established a new and exciting partnership with INROADS. INROADS

Interns are the best and brightest ethnically diverse high school and undergraduate

students in North America. These outstanding students typically rank in the top

10% of their senior class and aspire to professional and leadership careers. The

INROADS Retail Management Institute (RMI) is designed to develop outstanding

ethnically diverse students for executive careers in retail. To date, our INROADS

interns have worked in Management, Marketing and Store Operations. We are

optimistic about the future of this promising partnership.

Looking Ahead

We recognize that we still have work to do to improve the gender and ethnic

diversity of our company. Nevertheless, we have made progress. Since 2006, the

total percentage of non-Caucasian minorities in our company increased from 19%

to 29%. Women holding Executive roles (Vice President and above) increased from

25% in 2006 to 37% in 2011.

For more detail on our diversity statistics, please click here 62 .

59 http://www.aehotline.com/

60 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjIwODh8Q2hpbGRJRD0tMXxUeXBlPTM=

&t=1

61 http://www.liveyourlifeloveyourjob.com/document/Workplace_Culture_Policy.pdf

62 Page 47

46


AE BETTER WORLD ASSOCIATES DIVERSITY DIVERSITY STATISTICS

Diversity (continued)

Diversity Statistics

GENDER

DIVERSIT Y

AS OF MARCH 2011

FEMALE

MALE

34%

28%

66%

72%

29%

71%

63%

47%

37%

53%

ETHNIC

DIVERSIT Y

AS OF MARCH 2011

MULTIPLE E THNICITIES

NATIVE AMERICAN

NE X T Hiring & Training

ASIAN

AFRICAN AMERICAN

PACIFIC ISL ANDER

L ATINO

CAUCASIAN

2.49% 0.55% 3.41%

70.69%

COMPANY TOTAL COMPANY TOTAL

8.57%

13.65%

CORPORATE EXECUTIVE CORPORATE

EXECUTIVE

FIELD

DISTRIBUTION CENTER

0.08% 2.03%

2%

0.51% 6.67%

2%

0.08%

87.09%

FIELD

14.38%

3.54%

0.56%

2.63% 3.37%

9.04%

0.68%

69.34%

96%

0.64%

0.79% 1.57%

0.34% 0.79%

0.11%

2.58%

93.82%

DISTRIBUTION CENTER

47


AE BETTER WORLD ASSOCIATES HIRING & TRAINING

Hiring & Training

We seek to attract talented people who want to grow and be part of a great team.

Our recruiting philosophy is built on our company’s vision and values. We look

for people who are friendly, respectful of others, open-minded, team-oriented,

innovative, flexible, action-oriented, and passionate about what they do. Our

recruiting website Live Your Life Love Your Job 63 offers a view into our culture and

hiring process.

Associate Orientation

We get one chance to get each associate’s new orientation right. Associates in the

Corporate Office, New York Design Center, Distribution Centers and Field are

welcomed through our AEO New Orientation program. AEO New Orientation

guides the new associate through their first full year, with a special focus on the

first 90 days.

Ongoing Development

We maintain a variety of learning and development avenues to meet the diverse

training needs of our people.

The Associate Experience provides an interactive course curriculum for store

associates on defined success factors and core values. The curriculum begins

with an industry-leading, interactive onboarding program about our brand and

products led by a designated store trainer. Store associates are then introduced to

Customer First, which defines AEO, Inc.’s approach to communication and strives

to ensure that every customer leaves our stores happier than when they walked

in. Finally, store associates continue their development through Communication

Center, which provides personalized selling goals, promotional news and new

product knowledge, and AEOTV, which provides up-to-the-minute, short training

videos featuring product knowledge and selling tips directly from our design team.

Achieving Excellence is our 16-week entry level training program for

merchandising and planning & allocation. Every year, we recruit approximately

30 college students from major universities across the country and associates from

63 http://www.liveyourlifeloveyourjob.com/

our stores. Achieving Excellence provides a combination of classroom training,

field experience, interoffice exposure and on-the-job training. Upon successful

completion, associates are placed into areas that best suit their skill sets.

The AEO Internship Program 64 is an important way that we discover and recruit

future company leaders. The program is designed for college students who have

finished their junior year of study. AEO, Inc. internships offer talented individuals

the opportunity to experience a fast paced retail environment with the potential

of a full-time offer after graduation. Internships are available in a variety of

divisions, including Merchandising and Planning & Allocation. Furnished

housing, including rent and utilities, is provided for students that do not live in the

Pittsburgh area.

In 2007, the New York Design Center also launched our Design Assistant Trainee

Program, offering full-time permanent placement for fashion design graduates.

This program helps us to hire top talent and build bench strength for future

growth.

Finally, our Mentoring Program pairs senior executives (Mentors) with high

performing associates (Proteges) in a nine month one-on-one mentoring

relationship to foster stronger partnerships between current and future leaders of

the business. Promotion rates of Proteges over the past four years have exceeded

80%.

Recognition

Our company is successful when our people are successful. In 2010, we celebrated

our associates’ achievements at all levels, ranging from awards to sales associates

for building customer connections and driving sales performance to excellence

awards for distribution center associates to our Eagle of the Year, our top annual

award which recognizes an associate who has made an outstanding contribution to

the company.

64 http://www.liveyourlifeloveyourjob.com/college_internships.aspx

48


AE BETTER WORLD ASSOCIATES HIRING & TRAINING

Hiring & Training (continued)

In 2010-11, our Eagle of the Year was Stan D., Senior Maintenance and Facilities

Manager at our Kansas Distribution Center. Stan spearheaded an energy- efficient

lighting and HVAC overhaul project at the distribution center, which resulted in

significant environmental and financial savings.

“The lighting retrofit for the Kansas DC was a conscious effort to

conserve energy and reduce the carbon footprint of the DC. Just

a few short years ago, to get adequate lighting in the DC, we had

to add an additional fixture for every existing two, which increased

the cost immensely. With new technology, we were able to swap

fixture for fixture. That alone justified the project with a two year

return on investment (ROI). But adding strategically-placed automatic

lighting brought an expected one year ROI and it now looks like our

investment will be recovered in nine to ten months. To be successful

in today’s business atmosphere you have to make smart decisions. I’m

thankful that American Eagle looked at this project as a win for the

environment, as well as a cost-savings opportunity”

- STAN D., FACILITIES

Every quarter, we also recognize associates who have gone “above and beyond” in

their jobs as Eagle’s Elite. A panel of Vice Presidents and above selects recipients

who demonstrate excellence and have gone beyond the scope of normal job

responsibilities. Winning individuals and teams come from many different

divisions of the company.

We also encourage associates to recognize each other in real time through our

High Five program. Winners receive a choice of gift cards and a High Five

certificate to display in their work areas. In early 2011, we also began profiling

High Five winners on our company-wide intranet. In FY2010 and through the

first quarter of 2011, associates in our corporate offices and distribution centers

recognized fellow teammates with more than 660 High Five awards.

Sports and Events Tickets

With Pittsburgh, PA, New York, NY, Kansas, and Canadian-based based corporate

office and distribution center locations, we are a sports-minded culture. We

offer many opportunities for corporate and distribution center associates to take

advantage of company-sponsored tickets to sporting events.

Every year, associates have opportunities to attend a variety of events, including

the Pittsburgh Steelers and University of Pittsburgh Panthers at Heinz Field, the

Pittsburgh Penguins at Consol Energy Center, the Pittsburgh Pirates at PNC Park,

the New York Yankees at Yankee Stadium and the New York Mets at Citi Field, the

Kansas City Chiefs at Arrowhead Stadium and Kansas City Royals at Kauffman

Stadium, and University of Kansas football and basketball.

Pittsburgh-based associates may also attend concerts at Stage AE®, where some of

the coolest new bands perform.

In early 2011, American Eagle Outfitters, Inc. was also the presenting sponsor of

the Big East basketball tournament, which provided our New York-based associates

with the opportunity to attend some of the season’s most sought-after college

basketball games.

NE X T 2010 Business Challenges

49


AE BETTER WORLD ASSOCIATES 2010 BUSINESS CHALLENGES

2010 Business Challenges

The retail business has gone through an enormous change over the past few years.

In 2008, the economy suffered major upheaval. While recovery has begun, the

challenging times are not yet over. The result of this turmoil has brought about a

dramatic change in the consumer mindset toward shopping and value. Our 15- to

25-year-old customer has been particularly affected.

While 2009 and 2010 were difficult in many ways, we also learned valuable

lessons that might not have been so clear in better times. For example, we have a

deeper understanding of our customers, their perception of our brand, and their

expectations in terms of fashion and value pricing. Additionally, we’ve made

pivotal changes in our leadership teams, especially in merchandising and design.

In 2010, we launched a company-wide initiative designed to resurrect the

fundamental principles that brought about past success and create new success

and growth through innovation. The goal is to work together to simplify and

streamline our organization and maintain a laser-like focus on the elements that

drive our business forward. We invited every associate to submit his or her ideas

about ways the company can become more efficient and effective. As of summer

2011, we had received more than 250 ideas from nearly 200 associates representing

every office, distribution center location and store region - and ideas continue to

pour in. Every idea is responded to, evaluated and tracked to completion - and

many have already been implemented.

Unfortunately, this project did include some reductions in staff in 2010. However,

in each area, we have worked hard to minimize the number of people affected and

treat those who left the company as fairly as possible.

We believe that, at the end of these business challenges, American Eagle Outfitters,

Inc. will emerge an even better company, with an even brighter future. That future

will create more career and growth opportunities for everyone involved.

NE X T Associate Goals

50


AE BETTER WORLD ASSOCIATES ASSOCIATE GOALS

Associate Goals

2011-12 Associate Goals

• Strengthen focus on associate development, including pilot of new performance

management system that places greater emphasis on career development.

• Increase focus on leadership training for senior managers.

• Simplify work-life experience; identify additional opportunities to provide the

“gift of time.”

• Implement Customer First initiative and continue implementing opportunities

identified through Back to the Future strategy.

NE X T Community

51


AE BETTER WORLD COMMUNITY

Community

American Eagle Outfitters, Inc. is committed

to investing in and giving back to the

communities that contribute to our success.

In 1999, we established the American Eagle Outfitters Foundation to maximize the

impact of our efforts and formalize our commitment. Through the AEO Foundation,

we strive to create positive change in areas that are important to both our customers

and associates, including youth development and environmental conservation. Our

giving takes many forms, ranging from national charity partnerships to customer

engagement initiatives to major community initiatives, international giving and

associate activities.

In 2010, charitable giving for the company and the AEO Foundation surpassed $3

million. For more information on how your organization can request a gift card

donation or a grant from the AEO Foundation, click here 65 .

NE X T National Charity Partnerships

65 http://www.ae.com/Images/corpResp/images/community/gift_cards_and_financial_grants.pdf

52


AE BETTER WORLD COMMUNITY NATIONAL CHARITY PARTNERSHIPS

National Charity Partnerships

One of the key ways we strive to bring about positive social change is through

strong, long-standing partnerships with charities that make a difference.

Jumpstart

Since 1997, AEO, Inc. and the AEO Foundation have supported Jumpstart 66 , a

national early education organization headquartered in Boston that works toward

the day every child in America enters school prepared to succeed. Through

extraordinary attention in yearlong relationships, Jumpstart inspires children

to learn, adults to teach, families to get involved, and communities to progress

together. Each year, Jumpstart pairs over 3,500 trained college students in one-tothree

ratios with preschool children in need of assistance. Since 1993, Jumpstart

has trained more than 20,000 college students and community volunteers to

deliver its program to more than 90,000 preschool children nationwide.

When we joined forces with Jumpstart, we became its first national sponsor. We

were also the founding sponsor of Jumpstart Pittsburgh and Jumpstart’s official

clothing provider, supplying the organization’s college student mentors - known

as Corps members - with their Jumpstart uniform of hats, t-shirts, and hoodies.

American Eagle Outfitters, Inc. also provided t-shirts for children enrolled in the

program.

Since then, we have developed several campaigns to celebrate Jumpstart Corps

members, including the annual AE Spirit of Service Awards, which pay tribute to

outstanding leadership and recognizes select students with a college scholarship.

By showcasing young people who make a difference in their community, we honor

Corps members, inform our customers about Jumpstart, and inspire young people

to be active and responsible citizens.

American Eagle Outfitters, Inc. is also a founding national sponsor of Jumpstart’s

Read for the Record, a campaign to raise awareness about the importance of early

education - and also set a world record for the largest shared reading experience

ever. During the fifth annual campaign in 2010, our associates participated along

66 http://www.jstart.org/

with thousands of others across the U.S. and Canada to read to more than 2

million children.

Student Conservation Association

The Student Conservation Association (SCA) 67 is a national conservation force

of high school and college students who protect America’s natural resources

and restore our environment. SCA members serve every day, in every state, as

environmental stewards, rangers, researchers, educators and in other critically

needed capacities. Rendering two million hours of service annually, SCA

volunteers make substantial contributions to the improvement and preservation of

America’s public lands while developing a powerful ethic of conservation service.

Since 1957, SCA’s hands-on programs have helped to build new generations of

conservation leaders, inspire a lifetime of stewardship, and help save the planet.

AEO is currently the presenting sponsor of SCA’s Alternative Spring Break

program. This distinctive program sends dozens of college students from across the

United States to national parks, such as the Grand Canyon, to complete two weeks

of conservation service.

AEO is also the major sponsor of SCA’s recruiting activities on approximately

300 college campuses and high schools nationwide. As part of our 2010 holiday

marketing theme, “Reclaim the Outdoors,” we partnered with SCA to underwrite

five unique environmental preservation projects in Pittsburgh, Washington, D.C.,

Houston, Seattle and Detroit.

Big Brothers Big Sisters

Big Brothers Big Sisters (BBBS) 68 is justly renowned for success in youth

mentoring. BBBS’s mission is to help children reach their potential through

professionally supported one-to-one relationships with measurable impact. The

organization serves 5,000 communities across America with a quarter of a million

active matches. In Canada, BBBS works in 1,000 communities supporting more

67 http://www.thesca.org/

68 http://www.bbbs.org/

53


AE BETTER WORLD COMMUNITY NATIONAL CHARITY PARTNERSHIPS

National Charity Partnerships (continued)

than 30,500 matches. BBBS also works with major companies who understand the

value of successful mentoring. In 2006, American Eagle Outfitters, Inc. launched

a partnership with BBBS through a signature fund raising event, Bowl For Kids’

Sake. In 2010, associates from our stores, distribution centers and Corporate

Office all took part in Bowl For Kids’ Sake events, and the AEO Foundation

donated $150,000 to help BBBS achieve sustainable growth to serve more children

throughout the U.S. and Canada.

Many associates in our Corporate Office, New York Design Center and

Distribution Centers participate in BBBS’s workplace mentoring programs. Our

volunteers are actively engaged with their Littles and speak enthusiastically about

their experiences, both with the BBBS program and with the Littles themselves.

NE X T Customer Engagement

54


AE BETTER WORLD COMMUNITY CUSTOMER ENGAGEMENT

Customer Engagement

American Eagle Outfitters, Inc. is proud to create innovative opportunities for

our customers to support their local communities, and help people in need when

disaster strikes around the world.

Earth Day

To help commemorate the 40th anniversary of Earth Day in the U.S., we invited

our customers to donate to the Student Conservation Association’s 69 programs that

empower young people to conserve the environment. American Eagle Outfitters

matched all customer contributions and made an additional donation to SCA in

honor of the AEO store that raised the most funds. Additionally, we partnered with

SCA on an Earth Day sweepstakes, featuring a shopping spree at American Eagle

Outfitters and other prizes.

77kids also took part in Earth Day by partnering with Plant-It 2020 70 . For every

sales transaction that took place on Earth Day, 77kids donated $1 to Plant-It 2020

to plant a tree. In all, 1,287 trees were planted.

Breast Cancer Awareness Month

In support of Breast Cancer Awareness month, Aerie donated $1 for every bra sold

to Bright Pink 71 , ultimately raising $50,000. Bright Pink is a national non-profit

organization that provides education and support to young women who are at

high risk for breast and ovarian cancer. They arm young women with knowledge,

options and a positive attitude, and offer companionship and empathy during their

journey. Bright Pink empowers women to take control of their breast and ovarian

health, and in turn, realize the freedom and peace of mind to live a beautiful and

fulfilling life.

AEO Friends And Family

American Eagle Outfitters added a charity component to our annual Friends and

Family festivities in 2010. Customers were invited to donate a dollar to Big Brothers

69 http://www.thesca.org/

70 http://www.plantit2020.org/

71 http://www.bebrightpink.org/

Big Sisters of America 72 and Big Brothers Big Sisters of Canada 73 - one of our key

charity partners. All customer donations were matched by the company.

WISH 4 SNOW

77kids hosted a holiday program in 2010 called WISH4SNOW to benefit eight

children’s hospitals across the country. 77kids customers were invited to make a

77-cent donation to children’s hospitals with each in-store purchase. Customers

who donated were rewarded with a 77kids “Ya Done Good, Kid” badge sticker and

bumper sticker. Additionally, customers visited www.77kids.com to make “virtual

snowflakes” stating their holiday wish. Once 100,000 snowflakes were designed,

77kids by american eagle donated an additional $25,000 which was split evenly

among the eight hospitals.

Villanova T-Shirts

American Eagle Outfitters hosts activities on a variety of college campuses.

In 2010, we donated T-shirts to Villanova University’s 74 “The Saint Thomas of

Villanova Volunteer Day.” On that day, 6,000 students, faculty, administration and

alumni banded together and committed to perform a full day of volunteer service

in the Philadelphia community.

NE X T Major Community Initiatives

72 http://www.bbbs.org/

73 http://www.bbbsc.ca/

74 http://www.villanova.edu/

55


AE BETTER WORLD COMMUNITY MAJOR COMMUNITY INITIATIVES

Major Community Initiatives

AEO, Inc. makes large contributions to causes in the communities in which we

live, work and play.

AEO Foundation Grants

In 2010, the AEO Foundation made 40 grants totaling $126,500 to non-profit

organizations in Pittsburgh, New York City, Kansas, and in Canada. The grants

supported a variety of youth development and student-related environmental

conservation programs.

In Pittsburgh, one grant was awarded to Womansplace and The Consortium

for Public Education to expand their Expect Respect teen dating violence

prevention program in area high schools. In New York City, we supported New

York Cares’ Youth Service Environmental Program which teaches students about

environmental conservation efforts and practices. In Canada, a grant to MADD

enabled the organization to present its Assembly Program, “Shattered,” to high

school students to raise awareness about the dangers of driving under the influence

of alcohol or drugs. In Kansas, a grant to Headquarters Counseling Center, the

leading suicide prevention organization in the state, helped upgrade its current

crisis hotline system and allow more people to reach the calling center.

Pittsburgh Promise

In our Corporate Office community in Pittsburgh, American Eagle Outfitters

hosted an essay contest for graduating high school seniors and made a $100,000

donation to The Pittsburgh Promise 75 . The Pittsburgh Promise is a transformative

program designed to help students in Pittsburgh Public Schools plan, prepare, and

pay for education at an accredited post-secondary institution within the state of

Pennsylvania.

We invited eligible students to describe their personal vision for the city of

Pittsburgh, and what they would do to help realize that vision. The winners were

selected by a panel of American Eagle Outfitters associates, based on vision,

commitment to action, creativity, plausibility, grammar, spelling, and punctuation.

75 http://www.pittsburghpromise.org/

The panel selected 23 winners from high schools in the Pittsburgh Public Schools

system as well as Pittsburgh charter high schools.

The winners received a new laptop computer, and a gift card from American Eagle

Outfitters for a new back-to-school wardrobe. They were also treated to lunch at

our corporate headquarters hosted by our CEO, Jim O’Donnell.

Riverlife

Since 2000, Riverlife 76 has been connecting the people of Pittsburgh with one of

the city’s most valuable natural resources - its rivers. In 2010, we made a $50,000

contribution to Riverlife to help complete the South Shore Riverfront Park, a

28-acre facility on the banks of the Monongahela River. The park is adjacent to

our corporate campus and will provide the residents of Pittsburgh with another

wonderful outdoor space.

Ottawa Community Partnership

In November 2010, American Eagle Outfitters, Inc. made a $100,000 donation to

the Ottawa Community Partnership in Kansas, the home of one of our distribution

centers, to help build a YMCA. Ottawa is a small town with a population of 12,887.

Our contribution will help to build the community’s first community wellness,

recreation and gathering center. In addition, the YMCA will provide programming

to make the region’s young people better students and citizens, foster healthy

diversity and provide wellness opportunities for all ages.

NE X T International Initiatives

76 http://www.riverlifepgh.org/

56


AE BETTER WORLD COMMUNITY INTERNATIONAL INITIATIVES

International Initiatives

World Vision

In 2010, American Eagle Outfitters, Inc. donated more than 107,000 T-shirts,

shorts, pants, skirts, shoes and personal care items were donated to World

Vision 77 , a humanitarian organization dedicated to tackling the causes of poverty

and injustice by working with children, families, and their communities. World

Vision serves close to 100 million people in nearly 100 countries around the world

regardless of religion, race, ethnicity, or gender.

Haiti & “Hear To Help” CD

When the devastating earthquake rocked Haiti at the beginning of 2010, American

Eagle Outfitters responded by making a $50,000 donation to Mercy Corps 78 to aid

in relief efforts. In partnership with Filter Magazine, we also offered our customers

an exclusive compilation CD to benefit relief and recovery efforts in Haiti. The CD,

entitled “Hear to Help,” was sold in all AEO stores across the U.S. and Canada and

on-line at ae.com. 100% of the $10 retail price was donated to Oxfam America 79 .

The effort raised nearly $100,000 to provide water, latrines, plastic sheeting, and

relief materials to Haitians in need after the earthquake.

Haiti & International Medical Corps

When the cholera epidemic hit Haiti in October 2010, American Eagle Outfitters,

Inc. responded by making a $2,500 donation to International Medical Corps.

International Medical Corps 80 prioritizes health care for vulnerable groups in

Haiti. Their primary health care clinics target the displaced, those under the

highest risk, and those with little or no access to affordable health care. They

have provided more than 160,000 patient consultations through a network of 13

primary health care clinics serving the city of Port-au-Prince as well as rural areas

throughout Haiti.

77 http://www.worldvision.org/

78 http://www.mercycorps.org/

79 http://www.oxfamamerica.org/

80 http://www.internationalmedicalcorps.org/

“Help Haiti Heal” Graphic T-Shirt

To mark the first anniversary of the 2010 earthquake in Haiti, Concern Worldwide

U.S. 81 and American Eagle Outfitters partnered to raise funds to rebuild and

support schools in the country. Limited-edition, AE-designed “Help Haiti Heal”

T-shirts were sold in American Eagle Outfitters stores throughout the U.S. and

at ae.com. The T-shirts were made in Haiti, by Haitians, to raise awareness about

the continuing need to help Haiti heal. Thanks to the support of a Concern

Worldwide donor, 100% of all sales were donated, raising more than $414,000 for

the continuing Haitian recovery.

Pakistan Flood Relief

In July 2010, monsoon rains led to massive flooding and mudslides that devastated

many regions of Pakistan and affected more than 20 million people. American

Eagle Outfitters, Inc. supported flood relief efforts by making a $50,000 donation

to Oxfam America 82 and matched all associate donations to Oxfam. Oxfam helped

provide nearly 1.9 million people with water, sanitation, shelter, and livelihood

support.

Business Council For Peace

The Business Council for Peace 83 , better known as Bpeace, believes the path to

peace is lined with jobs. Put simply: Bpeace believes that more jobs mean less

violence. Bpeace is a non-profit network of business professionals who assist

entrepreneurs in conflict-affected countries to help create significant employment

and expand the economic power of women. The organization’s goal is to create one

million jobs across 1,000 communities. In 2010, American Eagle Outfitters, Inc.

made a $2,500 donation to Bpeace to help launch their program in El Salvador.

81 http://www.concernusa.org/

82 http://www.oxfamamerica.org/

83 http://www.bpeace.org/

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AE BETTER WORLD COMMUNITY INTERNATIONAL INITIATIVES

International Initiatives (continued)

Vietnam Children’s Fund

In 2007, American Eagle Outfitters, Inc. donated $62,500 to the Vietnam

Children’s Fund 84 to help build a school in the Long An province near Ho Chi

Minh City, Vietnam. The goal of the Fund is to move beyond the past tragedies

of Vietnam’s many wars and look to the future by building schools. In December

2009, one of our senior executives met with local students and teachers in the Long

An province and helped dedicate the new school building.

NE X T Associate Activities

84 http://www.vietnamchildren.org/

58


AE BETTER WORLD COMMUNITY ASSOCIATE ACTIVITIES

Associate Activities Live In These

Our associates love to be part of and give back to their local communities. We host

a variety of activities throughout the year to make it easier for all of us to make a

difference.

Eagles in the Region

Through our Eagles in the Region program, our U.S. and Canadian community

captains help locate local non-profit organizations that support the American Eagle

Outfitters Foundation mission of encouraging youth development and conserving

the environment. They also seek out opportunities where associates can come

together to volunteer as a team.

For example, in 2010, several Eagles in the Region advocates combined their

quarterly donations to support Operation Warm 85 . This charity provides winter

coats to children in need in several U.S. markets. Our donation of $9,500 provided

much needed coats to nearly 650 children.

Eagles Team of Ten

Our Eagles Team of Ten program is a global initiative designed to support

our associates’ volunteer efforts by providing a $500 donation to charitable

organizations where at least 10 associates participate together in a community

service or fundraising project. In 2010, our associates took part in 42 Team of Ten

projects throughout the U.S. and Canada, leading to donations of $21,000.

Matching Gifts

We encourage our associates to contribute to their favorite non-profit organizations

and matches donations on a dollar-for-dollar basis to eligible institutions

throughout the United States and Canada. We also host special matching gift

opportunities throughout the year. For example, in August 2010 after the oil spill

in the Gulf of Mexico, we matched donations made to the Student Conservation

Association, which was actively engaged with the U.S. Fish & Wildlife Service and

other local organizations in the rescue of pelicans, sea turtles and other species

that were harmed by the tragedy.

85 http://www.operationwarm.org/

In conjunction with our 2010 Back To School “Live In These” marketing campaign,

we encouraged associates to donate gently used jeans to teens in need in their local

communities. Associates in our stores, distribution centers and corporate offices

took part and donated more than 5,000 pairs to local homeless shelters.

The Mission Continues

In honor of our associates who serve our country, we made a $2,500 donation to

The Mission Continues 86 on Veterans Day 2010. The Mission Continues offers

service fellowships to wounded and disabled veterans and organizes volunteer

projects aimed at engaging veterans, as well as the public, in volunteer service. The

organization’s vision is to build an America where every returning veteran can

serve again as a citizen leader, and where together we honor the fallen by living

their values through service.

Holiday Drive

Every holiday season, we strive to go the extra mile to serve in our local

communities. Some of our associates provide holiday gifts to local foster children,

while others donate to their local food banks or adopt a family to provide gifts. In

2010, our Pittsburgh-based corporate office associates provided holiday gifts for

more than 200 local children and teens in need.

NE X T Community Goals

86 http://www.missioncontinues.org/

59


AE BETTER WORLD COMMUNITY COMMUNITY GOALS

Community Goals

2011-12 Community Goals

• Provide more opportunities for our customers to participate in our community

endeavors and serve in their local communities.

• Develop a strategy for international giving which aligns with our corporate values

and supply chain footprint and improves the quality of life in less developed

regions of the world.

• Establish a philanthropy task force to examine our current national charity

partners and explore opportunities to align further with our company and

associate values and priorities.

60


AE BETTER WORLD FREQUENTLY ASKED QUESTIONS

FAQs

Q: How long have you been committed to Corporate Responsibility?

A: AEO, Inc. has been committed to being a responsible company for years. This

is our first comprehensive report documenting the details of human rights in

our supply chain, sustainability and environmental initiatives, our workplace

culture, and our philanthropic efforts.

Q: I want to work for American Eagle Outfitters, Inc. How do I apply?

A: American Eagle Outfitters, Inc. strives to be an employer of choice - a place

where people are excited to come to work because they believe in what

we do, enjoy working with each other, and have fun doing it. Visit www.

liveyourlifeloveyourjob.com to learn more and browse current employment

opportunities.

Q: How can I get involved and help you build a Better World?

A: There are many ways to help build a Better World. Here are a few examples:

• Pay attention to the clothes you buy, including information about the people who

helped make them. If you can’t find information from a company, ask questions.

• Pay attention to the products you use, and how you dispose of them. Reduce, reuse

and recycle whenever possible!

• Mind your energy consumption-car pooling, biking and turning out lights when

not in use are easy ways to start.

• Look for volunteer opportunities in your community and beyond.

• Explore the AE Better World website to learn more about AEO, Inc.’s efforts and

the organizations we participate in and support around the world.

• Follow AEO on Facebook and Twitter!

Q: Do you use sweatshops?

A: American Eagle Outfitters, Inc. is committed to ensuring that the people who

make our clothes are treated with dignity and respect. For more information

on how we’re working to promote good working conditions in apparel factories

around the world, please click here 87 .

Q: Do you use child labor?

A: American Eagle Outfitters, Inc. has a zero tolerance policy when it comes to

child labor and sweatshops. Any factory that is found to be in violation of this

principle must adhere to our strict remediation policy or face termination of our

business relationship. For more details, visit our Code of Ethics 88 and Vendor

Code of Conduct 89 .

Q: What do you do if you find a child working in one of your factories?

A: If a child is found in a factory producing for American Eagle Outfitters, Inc.,

our first priority is to take action that serves the best interests of that child. We

require that the child be immediately removed from the workplace and that the

supplier pay for the child’s continued schooling, as well as an ongoing salary.

Once the child has reached legal working age, the factory is also required to

provide him or her with employment, if desired. This child labor policy was

informed by “best practice” guidelines outlined by well-regarded civil society

organizations, trade unions, and multi-stakeholder organizations in the apparel

industry. For more information about our efforts to improve factory working

conditions, click here 90 .

87 Page 16

88 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjIwODh8Q2hpbGRJRD0tMXxUeXBlPTM=

&t=1

89 http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-VendorConduct

90 Page 25

61


AE BETTER WORLD FREQUENTLY ASKED QUESTIONS

FAQs (continued)

Q: How many factories does American Eagle Outfitters, Inc. work with and in

what countries around the world, etc.?

A: American Eagle Outfitters, Inc. works with approximately 330 factories in more

than 20 countries around the world. We strive to seek out apparel suppliers who

share our commitment to worker safety and well-being and will work to meet or

exceed national and international labor standards.

Q: Why aren’t American Eagle Outfitters, Inc. products made in America?

A: As a global company, we work with manufacturers worldwide, including in

the United States, to make our products. We also partner with a number of

organizations overseas to run our franchise stores. We have stores in Canada,

the Middle East, Hong Kong, China, Russia, and plans to expand to Israel and

Japan, among others.

Q: How do you know the workers in the factories that make your products are

being treated humanely?

A: American Eagle Outfitters, Inc. has a Vendor Code of Conduct, which is based

on universally accepted human rights principles and sets forth our expectations

for suppliers, who must agree to comply before we do business with them. The

Code must be posted in every factory that manufactures our clothes in the local

language of the workers.

AEO, Inc. also has a dedicated team of people, and a comprehensive factory

inspection, remediation, and training program focused on improving working

conditions in the global apparel supply chain. To read more about efforts to

improve global factory working conditions, click here 91 .

Q: Does American Eagle Outfitters, Inc. use sandblasting on its jeans?

A: Our AE, Aerie, and 77kids brands are no longer developing new styles with

sandblasting. By Spring 2012, we will no longer have any sandblasted styles on

our store shelves. For more information, please click here 92 .

91 Page 16

92 Page 23

Q: How is American Eagle Outfitters, Inc. trying to reduce its carbon footprint

and support the environment?

A: American Eagle Outfitters, Inc. is committed to developing better business

practices to promote a cleaner and healthier planet. Although we are still in the

early stages of implementing our environmental strategy, we are encouraged

by progress from our initial efforts and continue to explore additional

ways to reduce our environmental footprint. For additional details on our

environmental program, click here 93 .

Q: Can the shopping bags in American Eagle Outfitters, Inc. stores be recycled?

A: The vast majority of paper shopping bags used in our American Eagle

Outfitters, Aerie and 77kids stores are made from 100% post-consumer recycled

material and are recyclable. In addition, most American Eagle Outfitters

and 77kids gift and shoe boxes are made from 100% post consumer recycled

material. Our Aerie gift and shoe boxes currently contain about 30% recycled

content. AEO Outlet stores use plastic shopping bags that contain 60% recycled

material and are also recyclable.

Q: Do you sell fur products? Do you have any policies to prevent cruelty to

animals?

A: American Eagle Outfitters, Inc. strictly prohibits the use of real animal fur and

Australian mulesed wool in all of our products. We are also against the use of

animal testing on our products.

Q: Does American Eagle Outfitters use organic materials in its products?

A: We took our first step towards introducing environmentally-friendly products

with the launch of an “Eco Shop” in our Holiday 2010 collection. Available

exclusively online, the shop offered men and women’s apparel made from

certified organic and recycled materials. Many styles were made from organic

cotton, which is grown without the use of harmful synthetic pesticides and

results in fewer fossil fuel emissions than conventional cotton. Other styles

93 Page 34

62


AE BETTER WORLD FREQUENTLY ASKED QUESTIONS

FAQs (continued)

were made from recycled content, which gives new life to materials that would

have otherwise ended up in landfills. For more information about our Product

Innovation efforts, click here 94 .

Q: Why doesn’t American Eagle Outfitters offer non-treated denim to customers?

A: Denim is a cornerstone of the American Eagle Outfitters brand, and we offer a

wide range of fits and washes to customers. At this point, our customers have

not shown a significant interest in un-treated denim. That said, we are always

evaluating new product ideas and might decide to offer some form of un-treated

denim in the future.

Q: What percentage of your employees are minorities? What programs do you

have in place to ensure diversity?

A: We believe in an inclusive work environment that reflects our core values.

Since 2006, the total percentage of non-Caucasian minorities in our company

increased from 19% to 29%. Women holding Executive roles (Vice President

and above) increased from 25% in 2006 to 37% in 2011. We have a Workplace

Culture Training program that promotes the philosophy of identifying elements

within ourselves and others that make each of us unique. For more information

about diversity at AEO, Inc., please click here 95 .

Q: Are your products safe? Have you ever had any product recalls?

A: AEO, Inc. is strongly committed to the safety and well being of our customers.

We require our products to meet all applicable U.S. state and federal and

Canadian national laws and regulations. To ensure compliance, we maintain an

extensive set of safety testing protocols for our products.

In rare cases where a safety issue has been discovered in a product that has

reached our store shelves, we respond with a comprehensive recall process.

We publicly maintain a list of product recalls conducted in conjunction with

94 Page 40

95 Page 46

the Consumer Product Safety Commission (CPSC) here 96 on our e-commerce

website. For more information on how we work to ensure the safety of our

products, please click here 97 .

Q: How do you decide what music to play in the stores and how loud it should be?

A: Creating a fun and dynamic shopping environment for customers and work

environment for associates is among AEO’s top priorities. The music in our

stores is played at levels fully in compliance with industry standards. We also

have a policy of turning the music down upon customer request.

Q: How do you develop your marketing programs?

A: Marketing programs for each brand are developed by the company’s internal

department, and strive to reflect the unique brand DNA for each concept.

Each aspect of a campaign, from the models to the location to the photography

style is designed to showcase the product, but also to inspire customers and

encourage them to express their own personal style through our brands.

Q: How does American Eagle Outfitters, Inc. decide what non-profit organizations

to support?

A: American Eagle Outfitters, Inc. created its overall giving philosophy based on

input from customers, associates and other stakeholders. Currently, the AEO

Foundation focuses on causes related to youth development and environmental

conservation. Our corporate giving takes many forms, ranging from national

charity partnerships, to customer engagement initiatives, major community

initiatives, international giving and associate activities.

Q: How much money does American Eagle Outfitters, Inc. donate each year?

A: It varies from year to year. However, the company’s total annual contribution

ranges in the hundreds of thousands to millions of dollars in cash and in-kind

support, plus thousands of hours of volunteer time from AEO, Inc. associates

worldwide.

96 http://www.ae.com/web/help/product_recalls.jsp?topic=1

97 Page 12

63


AE BETTER WORLD FREQUENTLY ASKED QUESTIONS

FAQs (continued)

Q: I want to request a gift card or grant from the AEO Foundation. How do I do

this?

A: AEO, Inc. donates a limited number of $25 gift cards to college and high school

sponsored drug-free volunteer events that strive to keep teens and college

students safe.

Each year, the AEO Foundation also allocates a limited number of grants to

non-profit, public charities in Pittsburgh, New York City, Ottawa, Kansas,

and Mississauga, Ontario with tax exempt status under Section 501(c) (3) of

the Internal Revenue Code which fall within the scope of its mission. Before

an organization is considered for a donation, it must fulfill several criteria.

For specific information on requesting gift cards or grants from the AEO

Foundation, please click here 98 .

98 http://www.ae.com/Images/corpResp/images/community/gift_cards_and_financial_grants.pdf

64


AE BETTER WORLD CONTACT US

Contact Us

Like what you see here? Have an idea about how to Live Your Life in a Better

World?

We’d love to hear from you.

Send us a note at: AEBetterWorld@ae.com.

65


AE BETTER WORLD GRI INDEX

GRI Index

Global Reporting Initiative (GRI) Index

This report conforms to the Global Reporting Initiative (GRI) G3.1 guidelines for

Application Level C. The report also includes many indicators from Application

Level B and the industry-specific Apparel and Footwear Sector Supplement.

ABOUT US

About Us 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 3.5, 3.6, 4.8

CEO Letter 1.1

About This Report 3.1, 3.2, 3.3, 3.5, 3.6, 3.7

Our Stakeholders 2.2, 2.5, 3.4, 3.5, 4.12, 4.13, 4.14, 4.15, 4.16

Corporate Governance 2.3, 4.1, 4.2, 4.3, 4.4, 4.9

Guiding Principles 3.5, 4.8, 4.9, AF1

Protect, Respect, Remedy 3.5, 4.12, AF4

Codes & Governance 3.5, 4.8, 4.9, AF1, AF2, AF26, HR6, HR7

Our Products PR1, PR2, PR4, 4.12

Public Policy 4.13, 4.14, S05

SUPPLY CHAIN

Supply Chain AF1, AF2

Our Strategy

Working With Factories 2.5, HR6, HR7, AF2, AF3, AF6, AF8

Our Factory Inspection

Program

Factory Training &

Capacity Building Efforts

How Our Products Are Made

Making Smarter Business

Decisions

AF2, AF3, AF6, AF16

2.5, AF4, AF5, AF6, AF16

AF5, AF6, AF17

Leveraging Collective Efforts 2.5, 4.12, 4.13, 4.14, 4.15, 4.17, HR6, HR7, AF6

Our Performance 2.5, 3.6, 3.9, HR6, HR7, AF6, AF7, AF8, AF9, AF10, AF11,

AF12, AF13, AF14, AF15, AF16, AF25

Supply Chain Security

Supply Chain Goals

ENVIRONMENT

Environment 4.17

Minimizing Waste EN26

Conserving Resources EN5, EN18, EN26

Product Innovation EN26

Environmental Goals

ASSOCIATES

Our Values 4.8

Compensation & Benefits EC3

Communication & Retention 4.14, 4.16

Diversity LA13

Diversity Statistics LA13

Hiring + Training LA11

2010 Business Goals

Associate Goals

COMMUNITY

National Charity Partnerships

Customer Engagement

Major Community Initiatives AF33

International Initiatives AF33

Associate Activities LA13

Community Goals LA11

2010 Business Goals

Associate Goals

66

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