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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


☑		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended January 31, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-33338

American Eagle Outfitters, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		No. 13-2721761 (I.R.S. Employer Identification No.)

77 Hot Metal Street, Pittsburgh, PA (Address of principal executive offices)		15203-2329 (Zip Code)

Registrant's telephone number, including area code:

(412) 432-3300

Securities registered pursuant to Section 12(b) of the Act:


Common Shares, $0.01 par value (Title of class)		New York Stock Exchange (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☑ NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Sections 15(d) of the Act. YES o NO ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at the past 90 days. YES ☑ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ☑	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO ☑

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of August 2, 2008 was $2,443,983,683.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 206,380,486 Common Shares were outstanding at March 13, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Part III - Proxy Statement for 2009 Annual Meeting of Stockholders, in part, as indicated.

AMERICAN EAGLE OUTFITTERS, INC.

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			Page
			Number

PART I
	Item 1.	Business		2
	Item 1A.	Risk Factors		9
	Item 1B.	Unresolved Staff Comments		12
	Item 2.	Properties		13
	Item 3.	Legal Proceedings		13
	Item 4.	Submission of Matters to a Vote of Security Holders		13

PART II
	Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		14
	Item 6.	Selected Consolidated Financial Data		17
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		19
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		32
	Item 8.	Financial Statements and Supplementary Data		34
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		67
	Item 9A.	Controls and Procedures		67
	Item 9B.	Other Information		69

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		69
	Item 11.	Executive Compensation		69
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		69
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		69
	Item 14.	Principal Accounting Fees and Services		69

PART IV
	Item 15.	Exhibits, Financial Statement Schedules		69
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I


ITEM 1.	*BUSINESS.*

General

American Eagle Outfitters, Inc., a Delaware corporation, is a leading retailer that operates under the American Eagle Outfitters ® , aerie ® by American Eagle, 77kids tm by american eagle and MARTIN + OSA ® brands.

American Eagle Outfitters designs, markets and sells its own brand of high quality, on-trend clothing, accessories and personal care products at affordable prices while targeting 15 to 25 year-old customers. We opened our first American Eagle Outfitters store in the United States in 1977 and expanded the brand into Canada in 2001. American Eagle Outfitters also operates ae.com ® , which offers additional sizes, colors and styles of favorite AE ® merchandise and ships to 62 countries around the world. The American Eagle Outfitters original collection includes standards like jeans and graphic Ts, as well as essentials like accessories, outerwear, footwear, basics and swimwear under our American Eagle Outfitters, American Eagle ® and AE brand names.

During Fiscal 2006, American Eagle Outfitters launched its new intimates brand, aerie by American Eagle ("aerie"). The aerie collection is available in aerie stores, predominantly all American Eagle stores and at aerie.com. The collection offers Dormwear ® and intimates collections for the AE ® girl. Designed to be subtly sexy, comfortable and cozy, the aerie brand offers AE customers a new way to express their personal style everyday, from the dormroom to the coffee shop to the classroom.

We also introduced MARTIN + OSA ® ("M+O") during Fiscal 2006, a concept targeting 28 to 40 year-old women and men, which offers Refined Casual tm clothing and accessories, designed to be valuable, irresistible, inspiring, authentic and adventurous. In Fiscal 2008, MARTIN + OSA began offering merchandise online at martinandosa.com.

In October 2008, we launched a new children's apparel brand, 77kids by american eagle tm ("77kids"). The 77kids brand offers "kid cool," durable clothing and accessories for kids ages two to 10. The brand debuted worldwide online at 77kids.com during Fiscal 2008, with future plans for stores in the U.S.

As used in this report, all references to "we," "our," and the "Company" refer to American Eagle Outfitters, Inc. and its wholly-owned subsidiaries. "American Eagle Outfitters," "American Eagle," "AE," and the "AE Brand" refer to our U.S. and Canadian American Eagle Outfitters stores. "AEO Direct" refers to our e-commerce operations, ae.com, aerie.com, martinandosa.com and 77kids.com. "NLS" refers to National Logistics Services which we operated in Canada prior to its disposition during Fiscal 2006. "Bluenotes" refers to the Bluenotes/Thriftys specialty apparel chain which we operated in Canada prior to its disposition during Fiscal 2004.

As of January 31, 2009, we operated 954 American Eagle Outfitters stores in the United States and Canada, 116 aerie stand-alone stores and 28 MARTIN + OSA stores.

Our financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, "Fiscal 2010" and "Fiscal 2009" refer to the 52 week periods ending January 29, 2011 and January 30, 2010, respectively. "Fiscal 2008" and "Fiscal 2007" refer to the 52 week periods ended January 31, 2009 and February 2, 2008, respectively. "Fiscal 2006" refers to the 53 week period ended February 3, 2007. "Fiscal 2005" and "Fiscal 2004" refer to the 52 week periods ended January 28, 2006 and January 29, 2005, respectively.

Information concerning our segments and certain geographic information is contained in Note 2 of the Consolidated Financial Statements included in this Form 10-K and is incorporated herein by reference.

Growth Strategy

During Fiscal 2008, we continued to make significant progress on our key growth initiatives. As we enter Fiscal 2009, we are taking a more cautious stance on real estate growth in light of a slow-down in the economy. However, we remain focused on several well-defined strategies that we have in place to grow our business and

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strengthen our financial performance. Our primary growth strategies are focused on the following key areas of opportunity:

Real Estate

We are continuing the expansion of our brands throughout the United States. At the end of Fiscal 2008, we operated in all 50 states, the District of Columbia, Puerto Rico and Canada. During Fiscal 2008, we opened 122 new stores, consisting of 33 U.S. AE stores, two Canadian AE stores, 77 aerie stores (including eight Canadian aerie stores) and 10 MARTIN + OSA stores. These store openings, offset by 11 store closings, increased our total store base by approximately 11% to 1,098 stores.

Additionally, our gross square footage increased by approximately 11% during Fiscal 2008, with approximately 89% attributable to new store openings and the remaining 11% attributable to the incremental square footage from 30 AE store remodels.

In Fiscal 2009, we will continue to open AE and aerie by American Eagle stores. We plan to open 17 aerie stores, with an average size of 4,200 gross square feet. Additionally, we plan to open 11 new AE stores including a flagship location in the Times Square area of New York, New York. We also plan to remodel approximately 25 to 35 existing AE stores. Our square footage growth is expected to be approximately 3%. We believe that there are attractive retail locations where we can continue to open American Eagle stores and our other brands in enclosed regional malls, urban areas and lifestyle centers.

The tables below show certain information relating to our historical store growth in the U.S. and Canada:


	Fiscal			Fiscal			Fiscal			Fiscal			Fiscal
	2008			2007			2006			2005			2004

Consolidated stores at beginning of period		987			911			869			846			805
Consolidated stores opened during the period		122			80			50			36			50
Consolidated stores closed during the period		(11	)		(4	)		(8	)		(13	)		(9	)

Total consolidated stores at end of period		1,098			987			911			869			846


	Fiscal			Fiscal			Fiscal			Fiscal			Fiscal
	2008			2007			2006			2005			2004

AE Brand stores at beginning of period		929			903			869			846			805
AE Brand stores opened during the period		35			30			42			36			50
AE Brand stores closed during the period		(10	)		(4	)		(8	)		(13	)		(9	)

Total AE Brand stores at end of period		954			929			903			869			846


	Fiscal		Fiscal		Fiscal		Fiscal		Fiscal
	2008		2007		2006		2005		2004

aerie stores at beginning of period		39		3		-		-		-
aerie stores opened during the period		77		36		3		-		-
aerie stores closed during the period		-		-		-		-		-

Total aerie stores at end of period		116		39		3		-		-


	Fiscal			Fiscal		Fiscal		Fiscal		Fiscal
	2008			2007		2006		2005		2004

M+O stores at beginning of period		19			5		-		-		-
M+O stores opened during the period		10			14		5		-		-
M+O stores closed during the period		(1	)		-		-		-		-

Total M+O stores at end of period		28			19		5		-		-

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Remodeling of our AE stores into our current store format is important to enhance our customer's shopping experience. In order to maintain a balanced presentation and to accommodate additional product categories, we selectively enlarge our stores during the remodeling process to an average 7,000 gross square feet, either within their existing location or by upgrading the store location within the mall. We believe the larger format can better accommodate our expansion of merchandise categories. We select stores for expansion or relocation based on market demographics and store volume forecasts.

During Fiscal 2008, we remodeled 30 AE U.S. stores. Of the 30 remodeled stores, 18 stores were remodeled and expanded within their existing locations, 10 stores were relocated to a larger space within the mall and two stores were remodeled within their existing locations. Additionally, three stores were refurbished as discussed below.

We maintain a cost effective store refurbishment program targeted towards our lower volume stores, typically located in smaller markets. Stores selected as part of this program maintain their current location and size but are updated to include certain aspects of our current store format, including paint and certain new fixtures.

AE Brand

American Eagle is an established and leading brand for 15-25 year olds, with a long heritage of quality merchandise offered at a great value. We believe that we can leverage the success we have had in making American Eagle a destination brand and increase market-share in brand-defining key categories. In Fiscal 2009, we expect to strengthen categories such as knit tops, jeans, sweaters, dresses, shorts, fleece and accessories by offering AE classics combined with relevant fashion. We have reinforced our customer connection and increased our focus on identifying emerging fashion trends that are embraced by the AE customer. We will highlight AE value offerings by strengthening our everyday value pricing, as well as with promotional events planned throughout the year. Our customer loyalty program, the AE All-Access Pass ® serves as a critical one-on-one connection point with our best customers and rewards brand loyalty.

aerie by American Eagle

In the fall of 2006, we launched our new intimates brand, aerie by American Eagle, which targets our core AE customers. The aerie collection offers Dormwear ® and intimates collections for the AE ® girl. It is intended to drive store productivity by expanding the product categories and building upon our experience. The aerie collection is offered in 116 stand-alone stores, predominantly all American Eagle stores and on aerie.com. aerie also offers its customers a loyalty program, the aerie a-list ® . aerie rewards its a-list members with a free special gift on any Thursday of their choosing, once a month.

Based on the positive customer response to aerie, in Fiscal 2008, we accelerated our real estate strategy for this brand. Our accelerated strategy included opening 77 stores during Fiscal 2008. The aerie brand remains a focus in Fiscal 2009, with planned openings of approximately 17 stores.

AEO Direct

We sell merchandise via our e-commerce operations, ae.com and aerie.com, which are extensions of the lifestyle that we convey in our stores. In Fiscal 2008, we expanded AEO Direct through the addition of e-commerce operations for martinandosa.com and 77kids.com. During Fiscal 2008, we added 21 countries to our shipping destinations and currently ship to 62 countries. In addition to purchasing items online, customers can experience AEO Direct in-store. The Company has implemented a new program called Store-to-Door, which enables store associates to sell any item available online to an in-store customer in a single transaction, without placing a phone call. Customers are taking advantage of Store to Door by purchasing extended sizes that are not available in-store, as well as finding a certain size or color that happens to be sold out at the time of their visit. The ordered items are shipped to the customer's home free of charge. During Fiscal 2008, we began accepting PayPal as a means of payment from our ae.com, aerie.com and 77kids.com customers. We are continuing to focus on the growth of AEO Direct through various initiatives, including improved site efficiency and faster check-out, expansion of sizes and styles, unique online content and targeted marketing strategies.

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MARTIN + OSA

In the fall of 2006, we launched MARTIN + OSA, a concept targeting 28 to 40 year-old women and men. MARTIN + OSA offers Refined Casual tm clothing and accessories designed to be valuable, irresistible, inspiring, authentic and adventurous. During Fiscal 2008, we opened 10 MARTIN + OSA stores. Additionally, in Fiscal 2008, MARTIN + OSA began offering merchandise online at martinandosa.com. At this time, our 2009 capital expenditures projection does not include new M+O stores. We will continue to strengthen our operating model with the 28 existing stores and look for ongoing progress in merchandising and building consumer awareness.

77kids by american eagle

In October 2008, we launched a new children's apparel brand, 77kids. The 77kids brand offers "kid cool," durable clothing and accessories for kids ages two to 10. The brand debuted worldwide online at 77kids.com during Fiscal 2008, with future plans for stores in the U.S.

Consolidated Store Locations

Our stores average approximately 5,800 gross square feet and approximately 4,600 on a selling square foot basis. As of January 31, 2009, we operated 1,098 stores in the United States and Canada under the American Eagle Outfitters, aerie and MARTIN + OSA brands as shown below:

United States, including the District of Columbia and the Commonwealth of Puerto Rico - 1,012 stores


Alabama	19	Illinois	36	Montana	2	Puerto Rico	2
Alaska	5	Indiana	21	Nebraska	8	Rhode Island	4
Arizona	17	Iowa	12	Nevada	7	South Carolina	15
Arkansas	8	Kansas	10	New Hampshire	8	South Dakota	3
California	92	Kentucky	13	New Jersey	28	Tennessee	24
Colorado	16	Louisiana	15	New Mexico	3	Texas	71
Connecticut	18	Maine	4	New York	58	Utah	12
Delaware	4	Maryland	21	North Carolina	30	Vermont	3
District of Columbia	1	Massachusetts	34	North Dakota	4	Virginia	30
Florida	52	Michigan	35	Ohio	41	Washington	20
Georgia	33	Minnesota	20	Oklahoma	12	West Virginia	9
Hawaii	4	Mississippi	8	Oregon	11	Wisconsin	18
Idaho	4	Missouri	18	Pennsylvania	67	Wyoming	2
Canada - 86 stores
Alberta	10	New Brunswick	4	Ontario	43
British Columbia	12	Newfoundland	2	Quebec	9
Manitoba	2	Nova Scotia	2	Saskatchewan	2

Purchasing

We purchase merchandise from suppliers who either manufacture their own merchandise, supply merchandise manufactured by others, or both. During Fiscal 2008, we purchased a majority of our merchandise from non-North American suppliers.

All of our merchandise suppliers receive a vendor compliance manual that describes our quality standards and shipping instructions. We maintain a quality control department at our distribution centers to inspect incoming merchandise shipments for uniformity of sizes and colors and for overall quality of manufacturing. Periodic inspections are also made by our employees and agents at manufacturing facilities to identify quality problems prior to shipment of merchandise.

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Corporate Social Responsibility

We are firmly committed to the goal of using highly regarded and efficient suppliers throughout the world. We require our suppliers to provide a workplace environment that not only meets basic human rights standards, but also one that complies with local legal requirements and treats workers with dignity and respect.

For many years, we have had a policy to inspect factories throughout the world where goods are produced to our order. This inspection process is an important component of our comprehensive vendor compliance program that was developed with the assistance of an internationally recognized consulting firm. This program contractually requires all suppliers to meet our global workplace standards, including human rights standards, as set forth in our Vendor Code of Conduct. The Vendor Code of Conduct is required to be posted in all factories in the local language. The program utilizes third party inspectors to audit compliance by vendor factories with our workplace standards and Vendor Code of Conduct. A copy of the Vendor Code of Conduct is also posted on our website at www.ae.com. In Fiscal 2007, we opened a compliance office in Hong Kong. The key functions performed by the AE team there are to validate the inspection reporting of our third-party auditors, and to work with new and existing factories on remediation of issues. Also in Fiscal 2007, we instituted a process of pre-inspection for facilities being considered for AE production and expanded our annual re-audit program to strive to include all primary existing facilities.

Security Compliance

During recent years, there has been an increasing focus within the international trade community on concerns related to global terrorist activity. Various security issues and other terrorist threats have brought increased demands from the Bureau of Customs and Border Protection ("CBP") and other agencies within the Department of Homeland Security that importers take responsible action to secure their supply chains. In response, we became a certified member of the Customs - Trade Partnership Against Terrorism program ("C-TPAT") during 2004. C-TPAT is a voluntary program offered by CBP in which an importer agrees to work with CBP to strengthen overall supply chain security. Our internal security procedures were reviewed by CBP during February 2005 and a validation of processes with respect to our external partners was completed in June 2005 and then re-evaluated in June 2008. We received formal written validations of our security procedures from CBP during the first quarter of Fiscal 2006 and the second quarter of Fiscal 2008, each indicating the highest level of benefits afforded to C-TPAT members.

Additionally, we took significant steps to expand the scope of our security procedures during 2004, including, but not limited to: a significant increase in the number of factory audits performed; a revision of the factory audit format to include a review of all critical security issues as defined by CBP; a review of security procedures of our other international trading partners, including forwarders, consolidators, shippers and brokers; and a requirement that all of our international trading partners be members of C-TPAT. In Fiscal 2007, we further increased the scope of our inspection program to strive to include pre-inspections of all potential production facilities and re-audits of all primary existing facilities.

Trade Compliance

We act as the importer of record for substantially all of the merchandise we purchase overseas from foreign suppliers. Accordingly, we have an affirmative obligation to comply with the rules and regulations established for importers by the CBP regarding issues such as merchandise classification, valuation and country of origin. We have developed and implemented a comprehensive series of trade compliance procedures to assure that we adhere to all CBP requirements. In its most recent review and audit of our import operations and procedures, CBP found no unacceptable risks of non-compliance.

Merchandise Inventory, Replenishment and Distribution

Purchase orders are entered into the merchandise system at the time of order. Merchandise is normally shipped directly from vendors and routed to our two US distribution centers, one in Warrendale, Pennsylvania and the other in Ottawa, Kansas, or to our Canadian distribution center in Mississauga, Ontario.

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Upon receipt, merchandise is entered into the merchandise system, then processed and prepared for shipment to the stores or forwarded to a warehouse holding area to be used as store replenishment goods. The allocation of merchandise among stores varies based upon a number of factors, including geographic location, customer demographics and store size. Merchandise is shipped to our stores two to five times per week depending upon the season and store requirements.

The expansion of our Kansas distribution center in Fiscal 2007 enabled us to bring fulfillment services for AEO Direct in-house. The second phase of this expansion was completed in Fiscal 2008 to enhance operating efficiency and support our future growth.

Customer Credit and Returns

In April 2008, we introduced a new co-branded credit card (the "AE Visa Card") and re-launched our private label credit card (the "AE Credit Card"). Both of these credit cards are issued by a third-party bank (the "Bank"), and we have no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank's procedures. Once a customer is approved to receive the AE Visa Card and the card is activated, the customer is eligible to participate in our credit card rewards program. Under the rewards program, points are earned on purchases made with the AE Visa Card at AE and aerie, and at other retailers where the card is accepted. Points earned under the credit cards reward program result in the issuance of an AE gift card when a certain point threshold is reached. The AE gift card does not expire, however points earned that have not been used towards the issuance of an AE gift card expire after 36 months of no purchase activity. AE Credit Card holders receive special promotional offers and advance notice of all American Eagle in-store sales events. The AE Visa Card is accepted in all of our stores and AEO Direct sites, while the AE Credit Card is accepted at American Eagle, aerie, ae.com, aerie.com and 77kids.com, only.

Our customers in the U.S. and Canada stores may also pay for their purchases with American Express ® , Discover ® , MasterCard ® , Visa ® , bank debit cards, cash or check. Our AEO Direct customers may pay for their purchases using American Express ® , Discover ® , MasterCard ® and Visa ® . In addition, our ae.com, aerie.com, and 77kids.com customers may pay for their purchases using PayPal ® .

Customers may also use gift cards to pay for their purchases. AE and aerie gift cards can be purchased in our American Eagle and aerie stores, respectively, and can be used both in-store and online. In addition, AE, aerie and 77kids gift cards are available through ae.com, aerie.com or 77kids.com. MARTIN + OSA gift cards can be used both in-store and online and are available for purchase in our MARTIN + OSA stores and at martinandosa.com. When the recipient uses the gift card, the value of the purchase is electronically deducted from the card and any remaining value can be used for future purchases. Our gift cards do not expire and we do not charge a service fee on inactive gift cards.

We offer our retail customers a hassle-free return policy. We believe that certain of our competitors offer similar credit card and customer service policies.

Competition

The retail apparel industry, including retail stores and e-commerce, is highly competitive. We compete with various individual and chain specialty stores, as well as the casual apparel and footwear departments of department stores and discount retailers, primarily on the basis of quality, fashion, service, selection and price.

Trademarks and Service Marks

We have registered AMERICAN EAGLE OUTFITTERS ® , AMERICAN EAGLE ® , AE ® and AEO ® with the United States Patent and Trademark Office. We have also registered or have applied to register these trademarks with the registries of many of the foreign countries in which our manufacturers are located and/or where our product is shipped.

We have registered AMERICAN EAGLE OUTFITTERS ® and have applied to register AMERICAN EAGLE tm with the Canadian Intellectual Property Office. In addition, we are exclusively licensed in Canada to use AE tm and AEO ® in connection with the sale of a wide range of clothing products.

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In the United States and around the world, we have also registered, or have applied to register, a number of other marks used in our business, including aerie ® , MARTIN+OSA ® and 77kids by american eagle tm .

These trademarks are renewable indefinitely, as long as they are still in use and their registrations are properly maintained. We believe that the recognition associated with these trademarks makes them extremely valuable and, therefore, we intend to use and renew our trademarks in accordance with our business plans.

Employees

As of January 31, 2009, we had approximately 37,500 employees in the United States and Canada, of whom approximately 31,000 were part-time and seasonal hourly employees. We consider our relationship with our employees to be good.

Seasonality

Historically, our operations have been seasonal, with a large portion of net sales and operating income occurring in the third and fourth fiscal quarter, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively. As a result of this seasonality, any factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year. Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels, competitive factors, weather and general economic conditions.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available, free of charge, under the "About AE" section of our website at www.ae.com. These reports are available as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (the "SEC").

Our corporate governance materials, including our corporate governance guidelines, the charters of our audit, compensation, and nominating and corporate governance committees, and our code of ethics may also be found under the "About AEO, Inc." section of our website at www.ae.com. Any amendments or waivers to our code of ethics will also be available on our website. A copy of the corporate governance materials is also available upon written request.

Additionally, our investor presentations are available under the "About AEO, Inc." section of our website at www.ae.com. These presentations are available as soon as reasonably practicable after they are presented at investor conferences.

Certifications

As required by New York Stock Exchange ("NYSE") Corporate Governance Standards Section 303A.12(a), on July 9, 2008 our Chief Executive Officer submitted to the NYSE a certification that he was not aware of any violation by the Company of NYSE corporate governance listing standards. Additionally, we filed with this Form 10-K, the Principal Executive Officer and Principal Financial Officer certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

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ITEM 1A.	*RISK FACTORS.*

Our ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner

Our future success depends, in part, upon our ability to identify and respond to fashion trends in a timely manner. The specialty retail apparel business fluctuates according to changes in the economy and customer preferences, dictated by fashion and season. These fluctuations especially affect the inventory owned by apparel retailers because merchandise typically must be ordered well in advance of the selling season. While we endeavor to test many merchandise items before ordering large quantities, we are still susceptible to changing fashion trends and fluctuations in customer demands.

In addition, the cyclical nature of the retail business requires that we carry a significant amount of inventory, especially during our peak selling seasons. We enter into agreements for the manufacture and purchase of our private label apparel well in advance of the applicable selling season. As a result, we are vulnerable to changes in consumer demand, pricing shifts and the timing and selection of merchandise purchases. The failure to enter into agreements for the manufacture and purchase of merchandise in a timely manner could, among other things, lead to a shortage of inventory and lower sales. Changes in fashion trends, if unsuccessfully identified, forecasted or responded to by us, could, among other things, lead to lower sales, excess inventories and higher markdowns, which in turn could have a material adverse effect on our results of operations and financial condition.

The effect of economic pressures and other business factors

During the second half of 2008, the global recession caused uncertainty and a wide-ranging lack of liquidity in the credit markets. This market uncertainty has resulted in a lack of consumer confidence and widespread reduction of business activity.

The success of our operations depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, consumer debt, interest rates, increases in energy costs and consumer confidence. There can be no assurance that consumer spending will not be further negatively affected by general or local economic conditions, thereby adversely impacting our continued growth and results of operations.

Our ability to grow through new store openings and existing store remodels and expansions

Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores on a timely and profitable basis. During Fiscal 2009, we plan to open 11 new American Eagle stores in the U.S. and Canada and 17 aerie stand-alone stores. Additionally, we plan to remodel or expand 25 to 35 existing American Eagle stores during Fiscal 2009. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel, particularly at the store management level, the integration of new stores into existing operations and the expansion of our buying and inventory capabilities. There can be no assurance that we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new and remodeled stores profitably.

Our ability to achieve planned store financial performance

The results achieved by our stores may not be indicative of long-term performance or the potential performance of stores in other locations. The failure of stores to achieve acceptable results could result in store asset impairment charges, which could adversely affect our continued growth and results of operations.

Our ability to grow through the internal development of new brands

We launched our new brand concepts, MARTIN + OSA and aerie by American Eagle, during Fiscal 2006. Additionally, in Fiscal 2008, we launched 77kids. Our ability to succeed in these new brands requires significant expenditures and management attention. Additionally, any new brand is subject to certain risks including customer

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acceptance, competition, product differentiation, the ability to attract and retain qualified personnel, including management and designers, and the ability to obtain suitable sites for new stores at acceptable costs. There can be no assurance that these new brands will grow or become profitable. If we are unable to succeed in developing profitable new brands, this could adversely impact our continued growth and results of operations.

Our ability to develop the MARTIN + OSA brand

We plan to continue our investment in the operations of MARTIN + OSA, however, consistent with our lower 2009 capital spending plan, we are not opening any new MARTIN + OSA stores during Fiscal 2009. We will continue to strengthen our operating model with the 28 existing stores and look for ongoing progress in merchandising and consumer awareness. Our strategy includes a targeted marketing plan to drive traffic and brand awareness in several key markets; repositioning the brand by establishing MARTIN + OSA as a destination for sweaters, knits, and denim; and refining our merchandise collection, styles and prices. In light of this strategy, we will continue to evaluate the growth and performance of MARTIN + OSA. There can be no assurance that our strategy will be successful or lead to long-term growth or profitability. If we are unable to succeed in repositioning the brand, this will adversely impact our continued growth and results of operations potentially including restructuring and additional asset impairment charges. Additionally, in the event that we were to determine in the future to exit this business, or close any stores, we may be required to record inventory impairment and/or lease termination charges at that time.

Our international merchandise sourcing strategy

Substantially all of our merchandise is purchased from foreign suppliers. Although we purchase a significant portion of our merchandise through a single foreign buying agent, we do not maintain any exclusive commitments to purchase from any vendor. Since we rely on a small number of foreign sources for a significant portion of our purchases, any event causing the disruption of imports, including the insolvency of a significant supplier or a significant labor dispute, could have an adverse effect on our operations. Other events that could also cause a disruption of imports include the imposition of additional trade law provisions or import restrictions, such as increased duties, tariffs, anti-dumping provisions, increased Custom's enforcement actions, or political or economic disruptions.

We have a Vendor Code of Conduct that provides guidelines for all of our vendors regarding working conditions, employment practices and compliance with local laws. A copy of the Vendor Code of Conduct is posted on our website, www.ae.com. We have a factory compliance program to audit for compliance with the Vendor Code of Conduct. However, there can be no assurance that our factory compliance program will be effective in discovering violations. Publicity regarding violation of our Vendor Code of Conduct or other social responsibility standards by any of our vendor factories could adversely affect our sales and financial performance.

We believe that there is a risk of terrorist activity on a global basis, and such activity might take the form of a physical act that impedes the flow of imported goods or the insertion of a harmful or injurious agent to an imported shipment. We have instituted policies and procedures designed to reduce the chance or impact of such actions including, but not limited to, a significant increase in the number of factory audits performed; a strengthening of our factory audit protocol to include all critical security issues; the review of security procedures of our other international trading partners, including forwarders, consolidators, shippers and brokers; and the cancellation of agreements with entities who fail to meet our security requirements. In addition, U.S. Customs has recognized us as a validated, tier three member of the Customs - Trade Partnership Against Terrorism program, a voluntary program in which an importer agrees to work with Customs to strengthen overall supply chain security. However, there can be no assurance that terrorist activity can be prevented and we cannot predict the likelihood of any such activities or the extent of their adverse impact on our operations.

Our reliance on external vendors

Given the volatility and risk in the current markets, our reliance on external vendors leaves us subject to certain risks should one or more of these external vendors become insolvent. Although we monitor the financial stability of

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our key vendors and plan for contingencies, the financial failure of a key vendor could disrupt our operations and have an adverse effect on our cash flows, results of operations and financial condition.

Seasonality

Our reliance on key personnel

Our success depends to a significant extent upon the continued services of our key personnel, including senior management, as well as our ability to attract and retain qualified key personnel and skilled employees in the future. Our operations could be adversely affected if, for any reason, one or more key executive officers ceased to be active in our management.

Our ability to successfully complete important infrastructure projects

We implemented multiple infrastructure projects in Fiscal 2008 and will continue to implement new projects in Fiscal 2009. The major projects in Fiscal 2009 include:


	•	the construction and opening of our 25,000 square foot flagship store in the Times Square area of New York, New York; and

	•	the construction and integration of the second phase of our new corporate headquarters in Pittsburgh, Pennsylvania.

We rely upon our facilities and information systems to support the management of our operations. Any delays or difficulties in these important projects could have a material adverse impact on our business.

Failure to comply with regulatory requirements

As a public company, we are subject to numerous regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable laws and regulations, including those imposed by the Sarbanes-Oxley Act of 2002, the SEC and the NYSE. Failure to comply with such laws and regulations could have a material adverse effect on our reputation, financial condition and on the market price of our common stock.

Negative conditions in global credit markets may further impair our investment securities portfolio.

Auction rate securities ("ARS") are long-term debt instruments with interest rates reset through periodic short-term auctions. Holders of ARS can either sell into the auctions; bid based on a desired interest rate or hold and accept the reset rate. If there are insufficient buyers, then the auction fails and holders are unable to liquidate their investment through the auction. A failed auction is not a default of the debt instrument, but does set a new interest rate in accordance with the original terms of the debt instrument. The result of a failed auction is that the ARS continues to pay interest in accordance with its terms; however, liquidity for holders is limited until there is a successful auction or until such time as another market for ARS develops. ARS are generally callable at any time by the issuer. Auctions continue to be held as scheduled until the ARS matures or until it is called.

As a result of the global recession, we have been unable to liquidate our holdings of certain ARS because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities and the auctions failed. For failed auctions, we continue to earn interest on these investments at the contractual rate. In the

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event we need to access these funds, we will not be able to do so until a future auction is successful, the issuer redeems the securities, a buyer is found outside of the auction process or the securities mature.

In addition to ARS, we hold auction rate preferred securities ("ARPS"). In the event of default or liquidation of the collateral by an ARPS issuer or trustee, we are entitled to receive non-convertible preferred shares in the ARPS issuer. As a result of the Lehman Bankruptcy, during Fiscal 2008, four ARPS were dissolved and we received 760,000 preferred shares of four companies. Furthermore, it is probable that that the trusts relating to three additional ARPS will dissolve in the first quarter of Fiscal 2009. The four ARPS that were dissolved and the three ARPS that are likely to be dissolved all have underlying preferred stock that is publicly traded. The value of these preferred shares have declined significantly in comparison to their par value.

If our ARS holdings continue to be unable to clear successfully at future auctions or if issuers do not redeem the securities, we may be required to adjust the carrying value of the securities and record additional impairment charges. If we determine that the fair value of these ARS is temporarily impaired, we would record a temporary impairment within other comprehensive income, a component of stockholders' equity. If it is determined that the fair value of our ARS is other-than-temporarily impaired, we would record a loss in our Consolidated Statements of Operations, which could materially adversely impact our results of operations and financial condition.

Additionally, if the publicly traded preferred stock that we hold or the underlying publicly traded preferred stock of our ARPS continues to decline in value, or if we sell our preferred stock holdings below their carrying value as of January 31, 2009, we may be required to record additional impairment. If we determine that the fair values of the securities are temporarily impaired, we would record a temporary impairment within other comprehensive income, a component of stockholders' equity. If it is determined that the fair values of the securities are other-than-temporarily impaired, or if we sell the preferred shares below carrying value, we would record a loss in our Consolidated Statements of Operations, which could materially adversely impact our results of operations and financial condition.

Our ability to obtain and/or maintain our credit facilities due to the ramifications of the global credit crisis and corresponding financial institution failures

We believe that we have sufficient cash flows from operating activities to meet our operating requirements. In addition, the banks participating in our various credit facilities are currently rated as investment grade, and the entire amounts under the credit facilities are currently available to us. We draw on our credit facilities to increase our cash position to add financial flexibility. Although we expect to continue to generate positive cash flow despite a slowing economy, there can be no assurance that we will be able to successfully generate positive cash flow in the future. Continued negative trends in the credit markets and/or continued financial institution failures could lead to lowered credit availability as well as difficulty in obtaining financing. In the event of limitations on our access to credit facilities, our liquidity, continued growth and results of operations could be adversely affected.

Other risk factors

Additionally, other factors could adversely affect our financial performance, including factors such as: our ability to successfully acquire and integrate other businesses; any interruption of our key business systems; any disaster or casualty resulting in the interruption of service from our distribution centers or in a large number of our stores; any interruption of our business related to an outbreak of a pandemic disease in a country where we source or market our merchandise; changes in weather patterns; the effects of changes in current exchange rates and interest rates; and international and domestic acts of terror.

The impact of any of the previously discussed factors, some of which are beyond our control, may cause our actual results to differ materially from expected results in these statements and other forward-looking statements we may make from time-to-time.


ITEM 1B.	*UNRESOLVED STAFF COMMENTS.*

Not applicable.

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ITEM 2.	*PROPERTIES.*

We own a 186,000 square foot building in an urban Pittsburgh, Pennsylvania location which houses our corporate headquarters. Additionally, we began construction of a 152,000 square foot building on adjacent land, which will also be used for the expansion of our corporate headquarters. We lease three locations near our headquarters, which are used primarily for store and corporate support services, totaling approximately 68,000 square feet. These leases expire with various terms through 2022.

We own a 490,000 square foot building located in a suburban area near Pittsburgh, Pennsylvania, which houses our distribution center and contains approximately 120,000 square feet of office space. We also own a 45,000 square foot building, which houses our data center and additional office space. We lease an additional location of approximately 18,000, which is used for storage space. This lease expires in 2010.

We rent approximately 131,000 square feet of office space in New York, New York for our designers and sourcing and production teams. The lease for this space expires in May 2016. We also lease an additional 60,000 square feet of office space in New York, New York, with various terms expiring through 2018.

We own a distribution facility in Ottawa, Kansas consisting of approximately 1,220,000 total square feet, including a 544,000 square foot expansion which was completed during Fiscal 2007 and a 280,000 square foot expansion which was completed during Fiscal 2008. This expanded facility is used to support new and existing growth initiatives, including AEO Direct, aerie, MARTIN + OSA and 77kids.

We lease a building in Mississagua, Ontario with approximately 294,000 square feet, which houses our Canadian distribution center. The lease expires in 2017.

We also entered into a lease in Fiscal 2007 for a new flagship store in the Times Square area of New York, New York. The 25,000 square foot location has an initial term of 15 years with three options to renew for five years each. We anticipate this store to open in late Fiscal 2009.

All of our stores in the United States and Canada are leased. The store leases generally have initial terms of 10 years. Certain leases also include early termination options, which can be exercised under specific conditions. Most of these leases provide for base rent and require the payment of a percentage of sales as additional contingent rent when sales reach specified levels. Under our store leases, we are typically responsible for tenant occupancy costs, including maintenance and common area charges, real estate taxes and certain other expenses. We have generally been successful in negotiating renewals as leases near expiration.


ITEM 3.	*LEGAL PROCEEDINGS.*

We are a party to various legal actions incidental to our business, including certain actions in which we are the plaintiff. At this time, our management does not expect the results of any of the legal actions to be material to our financial position or results of operations.


ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.*

Not applicable.

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PART II


ITEM 5.	*MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.*

Our common stock is traded on the NYSE under the symbol "AEO". The following table sets forth the range of high and low sales prices of the common stock as reported on the NYSE during the periods indicated. As of March 16, 2009, there were 717 stockholders of record. However, when including associates who own shares through our employee stock purchase plan, and others holding shares in broker accounts under street name, we estimate the stockholder base at approximately 60,000.


	Market Price				Cash Dividends per
For the Quarters Ended	High		Low		Common Share

January 31, 2009	$	10.91	$	7.11	$	0.100
November 1, 2008	$	16.69	$	9.40	$	0.100
August 2, 2008	$	19.05	$	12.13	$	0.100
May 3, 2008	$	23.45	$	15.79	$	0.100
February 2, 2008	$	23.94	$	16.86	$	0.100
November 3, 2007	$	27.29	$	21.46	$	0.100
August 4, 2007	$	30.19	$	23.50	$	0.100
May 5, 2007	$	33.14	$	28.18	$	0.075

During Fiscal 2008 and Fiscal 2007, we paid quarterly dividends as shown in the table above. The payment of future dividends is at the discretion of our Board of Directors (the "Board") and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation and other relevant factors. It is anticipated that any future dividends paid will be declared on a quarterly basis.

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Performance Graph

The following Performance Graph and related information shall not be deemed "soliciting material" or to be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

The following graph compares the changes in the cumulative total return to holders of our common stock with that of the S&P Midcap 400 and the Dynamic Retail Intellidex. The comparison of the cumulative total returns for each investment assumes that $100 was invested in our common stock and the respective index on January 31, 2004 and includes reinvestment of all dividends. The plotted points are based on the closing price on the last trading day of the fiscal year indicated.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among American Eagle Outfitters, Inc., The S&P Midcap 400 Index
And Dynamic Retail Intellidex

1/31/04

1/29/05

1/28/06

2/3/07

2/2/08

1/31/09

American Eagle Outfitters, Inc.

100.00

266.63

283.74

533.41

394.51

155.72

S&P Midcap 400

100.00

111.10

135.89

146.71

143.45

90.41

Dynamic Retail Intellidex

100.00

104.96

99.90

103.95

100.19

83.09

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Issuer Purchases of Equity Securities

The following table provides information regarding our repurchases of our common stock during the three months ended January 31, 2009.


					Total Number of		Maximum Number of
	Total		Average		Shares Purchased as		Shares that May
	Number of		Price Paid		Part of Publicly		Yet be Purchased
	Shares Purchased		per Share		Announced Programs		Under the Program
Period	(1)		(2)		(1)(3)		(3)

Month #1 (November 2, 2008 through December 29, 2008)		-		-		-		41,250,000
Month #2 (December 30, 2008 through January 3, 2009)		1,870	$	9.36		-		41,250,000
Month #3 (January 4, 2009 through January 31, 2009)		-		-		-		41,250,000

Total		1,870	$	9.36		-		41,250,000


(1)		Shares purchased during Month #2 were all repurchased from employees for the payment of taxes in connection with the vesting of share-based payments.

(2)		Average price paid per share excludes any broker commissions paid.

(3)		Of the 41.3 million shares that may yet be purchased under the program, the authorization relating to 11.3 million shares expires at the end of Fiscal 2009 and the authorization relating to 30.0 million shares expires at the end of Fiscal 2010.

Equity Compensation Plan Table

The following table sets forth additional information as of the end of Fiscal 2008, about shares of our common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements, divided between plans approved by our stockholders and plans or arrangements not submitted to the Company's stockholders for approval. The information includes the number of shares covered by, and the weighted average exercise price of, outstanding options and other rights and the number of shares remaining available for future grants excluding the shares to be issued upon exercise of outstanding options, warrants, and other rights.

Column (a)

Column (b)

Column (c)

Number of Securities

Remaining Available

Number of Securities

Weighted-Average

for Issuance Under

to be Issued Upon

Exercise Price of

Equity Compensation

Exercise of Outstanding

Outstanding Options,

Plans (Excluding

Options,

Warrants and

Securities Reflected

Warrants and Rights(1)

Rights(1)

in Column (a))(1)(2)

Equity compensation plans approved by stockholders

14,496,734

15.25

9,610,963

Equity compensation plans not approved by stockholders

Total

14,496,734

15.25

9,610,963


(1)		Of the 9.6 million securities remaining available for issuance under equity compensation plans, 5.5 million are available for stock options, stock appreciation rights, dividend equivalents, performance awards or other non-full value stock awards, and 4.1 million are available for restricted stock awards, restricted stock units or other full value stock awards.

(2)		Equity compensation plans approved by stockholders include the 1994 Stock Option Plan, the 1999 Stock Incentive Plan and the 2005 Stock Award and Incentive Plan.

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ITEM 6.	*SELECTED CONSOLIDATED FINANCIAL DATA.*

The following Selected Consolidated Financial Data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," included under Item 7 below and the Consolidated Financial Statements and Notes thereto, included in Item 8 below. Most of the selected data presented below is derived from our Consolidated Financial Statements, which are filed in response to Item 8 below. The selected Consolidated Statement of Operations data for the years ended January 28, 2006 and January 29, 2005 and the selected Consolidated Balance Sheet data as of February 3, 2007, January 28, 2006 and January 29, 2005 are derived from audited Consolidated Financial Statements not included herein.


	For the Years Ended(1)
	January 31,			February 2,			February 3,			January 28,			January 29,
	2009			2008			2007			2006			2005
	(In thousands, except per share amounts, ratios and other financial information)

*Summary of Operations* (2)
Net sales(3)	$	2,988,866		$	3,055,419		$	2,794,409		$	2,321,962		$	1,889,647
Comparable store sales (decrease) increase(4)		(10	)%		1	%		12	%		16	%		21	%
Gross profit	$	1,174,101		$	1,423,138		$	1,340,429		$	1,077,749		$	881,188
Gross profit as a percentage of net sales		39.3	%		46.6	%		48.0	%		46.4	%		46.6	%
Operating income(5)	$	302,140		$	598,755		$	586,790		$	458,689		$	360,968
Operating income as a percentage of net sales		10.1	%		19.6	%		21.0	%		19.8	%		19.1	%
Income from continuing operations(2)	$	179,061		$	400,019		$	387,359		$	293,711		$	224,232
Income from continuing operations as a percentage of net sales(2)		6.0	%		13.1	%		13.9	%		12.7	%		11.9	%
*Per Share Results* (6)
Income from continuing operations per common share-basic(2)	$	0.87		$	1.85		$	1.74		$	1.29		$	1.03
Income from continuing operations per common share-diluted(2)	$	0.86		$	1.82		$	1.70		$	1.26		$	1.00
Weighted average common shares outstanding - basic		205,169			216,119			222,662			227,406			217,725
Weighted average common shares outstanding - diluted		207,582			220,280			228,384			233,031			225,366
Cash dividends per common share(7)	$	0.40		$	0.38		$	0.28		$	0.18		$	0.04
*Balance Sheet Information*
Total cash and short-term investments	$	483,853		$	619,939		$	813,813		$	751,518		$	589,607
Long-term investments	$	251,007		$	165,810		$	264,944		$	145,744		$	84,416
Total assets(8)	$	1,963,676		$	1,867,680		$	1,979,558		$	1,605,649		$	1,328,926
Short-term debt	$	75,000		$	-		$	-		$	-		$	-
Long-term debt	$	-		$	-		$	-		$	-		$	-
Stockholders' equity	$	1,409,031		$	1,340,464		$	1,417,312		$	1,155,552		$	963,486
Working capital(8)	$	523,596		$	644,656		$	724,490		$	725,294		$	582,739
Current ratio(8)		2.30			2.71			2.56			3.06			3.06
Average return on stockholders' equity		13.0	%		29.0	%		30.1	%		27.8	%		26.7	%

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	For the Years Ended(1)
	January 31,		February 2,		February 3,		January 28,		January 29,
	2009		2008		2007		2006		2005
	(In thousands, except per share amounts, ratios and other financial information)

*Other Financial Information* (9)
Total stores at year-end		1,098		987		911		869		846
Capital expenditures	$	265,335	$	250,407	$	225,939	$	81,545	$	97,288
Net sales per average selling square foot(10)	$	521	$	638	$	642	$	577	$	504
Total selling square feet at end of period		5,072,612		4,595,649		4,220,929		3,896,441		3,709,012
Net sales per average gross square foot(10)	$	446	$	517	$	524	$	471	$	412
Total gross square feet at end of period		6,328,167		5,709,932		5,173,065		4,772,487		4,540,095
Number of employees at end of period		37,500		38,700		27,600		23,000		20,600


(1)		Except for the fiscal year ended February 3, 2007, which includes 53 weeks, all fiscal years presented include 52 weeks.

(2)		All amounts presented are from continuing operations and exclude Bluenotes' results of operations for all periods.

(3)		Amount for the fiscal years ended January 31, 2009, February 2, 2008 and February 3, 2007 include proceeds from merchandise sell-offs. Refer to Note 2 to the accompanying Consolidated Financial Statements for additional information regarding the components of net sales.

(4)		The comparable store sales increase for the period ended February 2, 2008 is compared to the corresponding 52 week period in Fiscal 2006. The comparable store sales increase for the period ended February 3, 2007 is compared to the corresponding 53 week period in Fiscal 2005.

(5)		All amounts presented exclude gift card service fee income, which was reclassified to other income, net during Fiscal 2006. Refer to Note 2 to the accompanying Consolidated Financial Statements for additional information regarding gift cards.

(6)		Per share results for all periods presented reflect the three-for-two stock split distributed on December 18, 2006. Refer to Note 2 to the accompanying Consolidated Financial Statements for additional information regarding the stock split.

(7)		Amount for the fiscal year ended January 29, 2005 represents cash dividends paid for two quarters only. Note that the Company initiated quarterly dividend payments during the third quarter of Fiscal 2004.

(8)		Amounts for the years ended January 28, 2006 and January 29, 2005 reflect certain assets of NLS as held-for-sale.

(9)		All amounts exclude Bluenotes for all periods presented.

(10)		Net sales per average square foot is calculated using retail store sales for the year divided by the straight average of the beginning and ending square footage for the year.

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ITEM 7.	*MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.*

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements and should be read in conjunction with those statements and notes thereto.

This report contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events, including the following:


	•	the planned opening of 11 new American Eagle stores and 17 new aerie stores in the United States and Canada during Fiscal 2009;

	•	the selection of 25 to 35 American Eagle stores in the United States and Canada for remodeling during Fiscal 2009;

	•	the future opening of 77kids by american eagle stores;

	•	the success of MARTIN + OSA and martinandosa.com;

	•	the success of aerie by american eagle and aerie.com;

	•	the expected payment of a dividend in future periods;

	•	the possibility of growth through acquisitions and/or internally developing additional new brands;

	•	the possibility that we may be required to take additional temporary or other-than-temporary impairment ("OTTI") charges relating to our investment securities;

	•	the possibility that the amounts drawn on our demand borrowing agreements will be called for repayment and that the facilities may not be available for future borrowings; and

	•	the possibility that we may be required to take additional store impairment charges related to underperforming stores.

We caution that these forward-looking statements, and those described elsewhere in this report, involve material risks and uncertainties and are subject to change based on factors beyond our control, as discussed within Part I, Item 1A of this Form 10-K. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward looking statement.

Critical Accounting Policies

Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that may affect the reported financial condition and results of operations should actual results differ from these estimates. We base our estimates and assumptions on the best available information and believe them to be reasonable for the circumstances. We believe that of our significant accounting policies, the following involve a higher degree of judgment and complexity. Refer to Note 2 to the Consolidated Financial Statements for a complete discussion of our significant accounting policies. Management has reviewed these critical accounting policies and estimates with the Audit Committee of our Board.

Revenue Recognition. We record revenue for store sales upon the purchase of merchandise by customers. Our e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Revenue is not recorded on the purchase of gift cards. A current liability is recorded upon purchase, and revenue is recognized when the gift card is redeemed for merchandise.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The estimated sales return reserve is based on projected merchandise returns determined through the use of historical average return percentages. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales return reserve. However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected.

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During Fiscal 2007, we discontinued assessing a service fee on inactive gift cards. As a result, we estimate gift card breakage and recognize revenue in proportion to actual gift card redemptions as a component of net sales. We determine an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed.

Merchandise Inventory. Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses.

We review our inventory in order to identify slow-moving merchandise and generally use markdowns to clear merchandise. Additionally, we estimate a markdown reserve for future planned markdowns related to current inventory. If inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price, additional markdowns may be necessary. These markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected.

We estimate an inventory shrinkage reserve for anticipated losses for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve is calculated based on historical percentages and can be affected by changes in merchandise mix and changes in actual shrinkage trends. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory shrinkage reserve. However, if actual physical inventory losses differ significantly from our estimate, our operating results could be adversely affected.

Asset Impairment. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), we evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable. Assets are evaluated for impairment by comparing the projected undiscounted future cash flows of the asset, over its remaining useful life, to the carrying value. If the future cash flows are projected to be less than the carrying value of the asset, we adjust the asset value to its estimated fair value and an impairment loss is recorded in selling, general and administrative expenses.

Our impairment loss calculations require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions, our operating results could be adversely affected.

Investment Securities. In accordance with SFAS No. 157 Fair Value Measurements ("SFAS No. 157"), we measure our investment securities using Level 1, Level 2 and Level 3 inputs. Level 1 and Level 2 inputs are valued using quoted market prices while we use a discounted cash flow ("DCF") model to determine the fair value of our Level 3 investments. The assumptions in our model include different recovery periods depending on the type of security and varying discount factors for yield and illiquidity. These assumptions are subjective. They are based on our current judgment and our view of current market conditions. The use of different assumptions would result in a different valuation and related charge. Future adverse changes in market conditions, continued poor operating results of underlying investments or other factors could result in further losses that may not be reflected in an investment's current carrying value, possibly requiring an additional impairment charge in the future. Any OTTI charge could materially affect our results of operations.

We evaluate our investments for impairment in accordance with FSP FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("FSP FAS 115-1"). FSP FAS 115-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. We record an other-than-temporary investment impairment charge at the point we believe an investment has experienced a decline in value that is other-than-temporary. In determining whether an other-than-temporary impairment has occurred, we review information about the underlying investment that is publicly available, analyst reports, applicable industry data and other pertinent information, and assess our ability and intent to hold the securities for the foreseeable future. The investment is written down to its current fair

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value at the time the impairment is deemed to have occurred. Future adverse changes in market conditions, continued poor operating results of underlying investments or other factors could result in further losses that may not be reflected in an investment's current carrying value, possibly requiring an additional impairment charge in the future. If, after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss is recognized in the Consolidated Statement of Operations equal to the difference between the investment's carrying value and its fair value.

Share-Based Payments. We account for share-based payments in accordance with the provisions of SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123(R)"). To determine the fair value of our stock option awards, we use the Black-Scholes option pricing model, which requires management to apply judgment and make assumptions to determine the fair value of our awards. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the "expected term") and the estimated volatility of the price of our common stock over the expected term.

We calculate a weighted-average expected term based on historical experience. Expected stock price volatility is based on a combination of historical volatility of our common stock and implied volatility. We chose to use a combination of historical and implied volatility as we believe that this combination is more representative of future stock price trends than historical volatility alone. Changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our Consolidated Financial Statements.

Income Taxes. Effective February 4, 2007, we adopted Financial Accounting Standards Board (the "FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under FIN 48, a tax benefit from an uncertain position may be recognized only if it is "more likely than not" that the position is sustainable based on its technical merits. Refer to Note 12 to the Consolidated Financial Statements for further discussion of the adoption of FIN 48.

We calculate income taxes in accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS No. 109"), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to FIN 48. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in our level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact our effective tax rate.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. We believe that our assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances, or net income.

Key Performance Indicators

Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:

Comparable Store Sales - Comparable store sales provide a measure of sales growth for stores open at least one year over the comparable prior year period. In fiscal years following those with 53 weeks, including Fiscal 2007, the prior year period is shifted by one week to compare similar calendar weeks. A store is included in comparable store sales in the thirteenth month of operation. However, stores that have a gross square footage increase of 25% or greater due to a remodel are removed from the comparable store sales base, but are included in total sales. These stores are returned to the comparable store sales base in the thirteenth month following the remodel. Sales from AEO Direct are not included in comparable store sales.

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Our management considers comparable store sales to be an important indicator of our current performance. Comparable store sales results are important to achieve leveraging of our costs, including store payroll, store supplies, rent, etc. Comparable store sales also have a direct impact on our total net sales, cash and working capital.

Gross Profit - Gross profit measures whether we are optimizing the price and inventory levels of our merchandise. Gross profit is the difference between net sales and cost of sales. Cost of sales consists of: merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage, certain promotional costs and buying, occupancy and warehousing costs. Buying, occupancy and warehousing costs consist of: compensation, employee benefit expenses and travel for our buyers; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Any inability to obtain acceptable levels of initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.

Operating Income - Our management views operating income as a key indicator of our success. The key drivers of operating income are comparable store sales, gross profit, our ability to control selling, general and administrative expenses, and our level of capital expenditures.

Store Productivity - Store productivity, including net sales per average square foot, sales per productive hour, average unit retail price, conversion rate, the number of transactions per store, the number of units sold per store and the number of units per transaction, is evaluated by our management in assessing our operational performance.

Inventory Turnover - Our management evaluates inventory turnover as a measure of how productively inventory is bought and sold. Inventory turnover is important as it can signal slow moving inventory. This can be critical in determining the need to take markdowns on merchandise.

Cash Flow and Liquidity - Our management evaluates cash flow from operations, investing and financing in determining the sufficiency of our cash position. Cash flow from operations has historically been sufficient to cover our uses of cash. Our management believes that cash flow from operations will be sufficient to fund anticipated capital expenditures and working capital requirements.

Results of Operations

Overview

In Fiscal 2008, the company's financial performance did not meet management's expectations. We faced an increasingly challenging consumer environment, which impacted store traffic and transaction volume and had a particularly negative impact on the fourth quarter results. The challenging fourth quarter led to an overall decrease in Fiscal 2008 annual sales and net earnings compared to Fiscal 2007. In addition to this, we experienced slow demand in AE Brand women's merchandise, which is our highest volume division. Net sales decreased 2% to $2.989 billion from $3.055 billion in the prior year. Annual comparable store sales declined 10%.

A slowdown in consumer demand resulted in significantly higher promotional activity, leading to a 17% decline in gross profit. Negative comparable stores sales also impacted fixed expenses. Rent increased to 10.6% from 9.0% as a percent to net sales while total selling, general, and administrative expenses increased to 24.8% from 23.4% as a rate to net sales.

Operating income as a percent to net sales was 10.1% for Fiscal 2008 compared to 19.6% for Fiscal 2007.

For Fiscal 2008, net income decreased 55% to $179.1 million. As a percent to net sales, net income decreased to 6.0% during Fiscal 2008 from 13.1% during Fiscal 2007. Net income per diluted share decreased 53% to $0.86 from $1.82 last year.

We ended Fiscal 2008 with $734.9 million in cash, short-term and long-term investments, a decrease of $50.9 million from last year. During the year, we continued to make investments in our business, including

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$265 million in capital expenditures. These expenditures related primarily to our new and remodeled stores in the U.S. and Canada, as well as headquarters, point-of-sale and distribution center projects.

The following table shows, for the periods indicated, the percentage relationship to net sales of the listed items included in our Consolidated Statements of Operations.


	For the Fiscal Years Ended
	January 31,			February 2,			February 3,
	2009			2008			2007

Net sales		100.0	%		100.0	%		100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses		60.7			53.4			52.0

Gross profit		39.3			46.6			48.0
Selling, general and administrative expenses		24.8			23.4			23.8
Depreciation and amortization expense		4.4			3.6			3.2

Operating income		10.1			19.6			21.0
Other income, net		0.6			1.2			1.5
Other-than-temporary impairment charge		0.8			-			-

Income before income taxes		9.9			20.8			22.5
Provision for income taxes		3.9			7.7			8.6

Income from continuing operations		6.0	%		13.1	%		13.9	%

Our operations are conducted in one reportable segment, which includes our 954 U.S. and Canadian AE retail stores, 116 aerie by American Eagle retail stores, 28 MARTIN + OSA retail stores and AEO Direct.

Comparison of Fiscal 2008 to Fiscal 2007

Net Sales

Net sales decreased 2% to $2.989 billion from $3.055 billion. The decrease resulted primarily from a 10% decrease in comparable store sales despite an increase in sales from our e-commerce operation and an increase in gross square feet due to new and remodeled stores.

During Fiscal 2008, our AE Brand average transaction value was flat compared to Fiscal 2007. This was driven by a mid-single digit increase in units per transaction offset by a mid-single digit decline in average unit retail price. Comparable store sales were essentially flat in the AE Brand men's business and declined in the high teens in the AE Brand women's business compared to Fiscal 2007.

Gross Profit

Gross profit decreased 17% to $1.174 billion from $1.423 billion in Fiscal 2007. Gross margin as a percent to net sales decreased by 730 basis points to 39.3% from 46.6% last year. The percentage decrease was attributed to a 560 basis point decrease in the merchandise margin rate and a 170 basis point increase in buying, occupancy and warehousing costs as a percent to net sales. Merchandise margin decreased for the period due primarily to increased markdowns as well as an increase in merchandise costs.

Buying, occupancy and warehousing expenses increased 170 basis points as a percent to net sales. This was primarily due to a 160 basis point increase in rent as a percent to net sales, driven by new store openings and the negative comparable store sales, as well as higher utilities. These increases were partially offset by lower distribution and warehousing service costs due to bringing our AEO Direct fulfillment and Canadian distribution services in-house. Share-based payment expense included in gross profit decreased to approximately $5.7 million compared to $6.2 million last year.

Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as well as design costs in cost of sales. Other retailers may exclude a portion of these

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costs from cost of sales, including them in a line item such as selling, general and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 4% to $740.7 million from $715.2 million. As a percent to net sales, selling, general and administrative expenses increased by 140 basis points to 24.8% from 23.4% last year. These amounts include $6.7 million, or 20 basis points, of asset impairment charges related primarily to the impairment of five M+O stores this year.

The higher rate this year is primarily due to the comparable store sales decline, partially offset by an improvement in incentive compensation of 100 basis points. Share-based payment expense included in selling, general and administrative expenses decreased to approximately $14.6 million compared to $27.5 million last year.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 20% to $131.2 million from $109.2 million last year. This increase is primarily due to a greater property and equipment base driven by our level of capital expenditures. As a percent to net sales, depreciation and amortization expense increased to 4.4% from 3.6% due to the increased expense as well as the impact of the comparable store sales decline.

Other Income, Net

Other income, net decreased to $17.8 million from $37.6 million, due primarily to interest income decreasing to $18.9 million from $39.3 million. This resulted from decreased interest rates and lower investment balances compared to last year. Additionally, interest expense relating to our borrowings increased. Partially offsetting this decrease was a net $1.1 million foreign currency transaction gain compared to a $1.2 million loss last year. This is the result of a stronger U.S. dollar.

Other-than-Temporary Impairment Charge

OTTI charges relating to our investment securities were $22.9 million for Fiscal 2008. There was no OTTI recorded during Fiscal 2007.

Refer to the Fair Value Measurements caption below for additional information.

Provision for Income Taxes

The effective tax rate increased to approximately 40% from 37% last year. The increase in the effective tax rate is primarily related to the OTTI charges recorded in connection with the valuation of our investment securities in which no income tax benefit was recognized.

Net Income

Net income decreased 55% to $179.1 million, or 6.0% as a percent to net sales, from $400.0 million, or 13.1% as a percent to net sales last year. Net income per diluted share decreased to $0.86 from $1.82 last year. The decrease in net income was attributable to the factors noted above. The decrease in net income per diluted share was attributable to the factors noted above partially offset by a lower weighted average share count this year compared to last year as a result of share repurchases during Fiscal 2007, as well as a lower average price of our common stock during Fiscal 2008.

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Comparison of Fiscal 2007 to Fiscal 2006

Net Sales

Net sales increased 9% to $3.055 billion from $2.794 billion. The sales increase resulted primarily from an increase in gross square feet due to new and remodeled stores, an increase in sales from our e-commerce operation, as well as a 1% increase in comparable store sales.

During Fiscal 2007, our AE Brand experienced a low single-digit increase in average transaction value, driven by a low single-digit increase in units per transaction and a slight increase in average unit retail price. Comparable store sales increased in the high single-digits in the AE Brand men's business and declined in the low single-digits in the AE Brand women's business over last year.

Gross Profit

Gross profit increased 6% to $1.423 billion from $1.340 billion in Fiscal 2006. Gross margin as a percent to net sales decreased by 140 basis points to 46.6% from 48.0% last year. The percentage decrease was attributed to a 50 basis point decrease in the merchandise margin rate and a 90 basis point increase in buying, occupancy and warehousing costs as a percent to net sales. Merchandise margin decreased for the period due primarily to increased markdowns and merchandise sell-offs partially offset by lower product costs. Refer to Note 2 to the Consolidated Financial Statements for additional information regarding merchandise sell-offs. Buying, occupancy and warehousing expenses increased 90 basis points as a percent to net sales primarily due to higher rent, as well as delivery costs related to our AEO Direct business. Share-based payment expense included in gross profit increased to approximately $6.2 million compared to $5.8 million in Fiscal 2006.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 7% to $715.2 million from $665.6 million. However, as a percent to net sales, selling, general and administrative expenses improved by 40 basis points to 23.4% from 23.8% last year. For the period, incentive compensation and supplies expense improved as a percent to net sales partially offset by increases in professional fees and advertising. Share-based payment expense included in selling, general and administrative expenses decreased to approximately $27.5 million compared to $30.8 million in Fiscal 2006.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 24% to $109.2 million from $88.0 million. As a percent to net sales, depreciation and amortization expense increased to 3.6% from 3.2%. These increases are primarily due to a greater property and equipment base driven by our level of capital expenditures.

Other Income, Net

Other income, net decreased to $37.6 million from $42.3 million. The decrease was primarily due to a $3.5 million realized capital gain in Fiscal 2006 and a decrease in our gift card service fee revenue due to the gift card program change that occurred in July 2007. These decreases were partially offset by increased investment income resulting from an overall increase in rates compared to Fiscal 2006. Additionally, we recorded a $1.2 million foreign currency transaction loss as a result of a stronger Canadian Dollar versus the U.S. Dollar compared to a $0.7 million loss in Fiscal 2006.

Prior to July 2007, we recorded gift card service fee income in other income, net. As of July 8, 2007, we discontinued assessing a service fee on inactive gift cards and now record estimated gift card breakage revenue in net sales. In Fiscal 2007, we recorded gift card service fee income of $0.8 million compared to $2.3 million for Fiscal 2006. For Fiscal 2007, we recorded breakage revenue of $13.1 million in net sales. This amount included cumulative breakage revenue related to gift cards issued since we introduced the gift card program.

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Provision for Income Taxes

The effective tax rate decreased to approximately 37% from 38% in Fiscal 2006. The decrease in the effective tax rate is primarily related to a reduction in state income taxes and audit settlements.

Net Income

Net income increased 3% to a record $400.0 million, or 13.1% as a percent to net sales, from $387.4 million, or 13.9% as a percent to net sales in Fiscal 2006. Net income per diluted share increased to $1.82 from $1.70 in Fiscal 2006. The increase in net income was attributable to the factors noted above. The increase in net income per diluted share was attributable to the factors noted above, as well as a lower weighted average share count in Fiscal 2007 compared to Fiscal 2006.

Fiscal 2009 Outlook

Looking ahead, we expect consumer spending to remain under pressure. In response, we have planned Fiscal 2009 with negative comparable store sales and our inventory investment is planned down compared to last year. Additionally, we have reduced budgeted selling, general and administrative expense through various expense reduction initiatives and we have lowered our capital spending plans. We believe that our current cash holdings and cash generated from operations in Fiscal 2009 will be sufficient to fund anticipated capital expenditures and working capital requirements.

Adoption of New Accounting Standard

Effective February 4, 2007, we adopted FIN 48. As a result of adopting FIN 48, we recorded a net liability of approximately $13.3 million for unrecognized tax benefits, which was accounted for as a reduction to the beginning balance of retained earnings as of February 4, 2007. Refer to Note 12 to the Consolidated Financial Statements for a discussion of the FIN 48 adoption.

Income Taxes

The effective tax rate used for the provision of income tax approximated 40% and 37% in Fiscal 2008 and Fiscal 2007, respectively. The increase in the effective tax rate is primarily related to the OTTI charges recorded in connection with the valuation of our investment securities in which no income tax benefit was recognized.

Fair Value Measurements

SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. Fair value is defined under SFAS No. 157 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. We have adopted the provisions of SFAS No. 157 as of February 3, 2008, for our financial instruments, including its investment securities.

Valuation techniques used to measure fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. Prior to Fiscal 2008, due to the auction process which took place every 30 to 35 days for most of our auction rate securities, quoted market prices were readily available, thus qualifying as Level 1 under SFAS No. 157. However, due to events in credit markets beginning in the first quarter of Fiscal 2008, the auction events for most of these instruments failed and therefore we have determined the estimated fair values of these securities using Level 2 and/or Level 3 inputs.

SFAS No. 157 establishes this three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:


	•	Level 1 - Quoted prices in active markets for identical assets or liabilities. Our short-term investments with active markets, which represent our preferred stock investments, as well as cash and cash equivalents are reported at fair value utilizing Level 1 inputs. For these items, quoted current market prices are readily available.

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	•	Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. We have concluded that the ARPS with underlyings of publicly traded preferred stock that we have classified as short term represent a Level 2 valuation and have been valued using the publicly available trading prices of the underlying preferred shares as the basis for valuation.

	•	Level 3 - Unobservable inputs (i.e. projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We have concluded that the ARS that we have classified as long-term due to failed auctions or that have long-term auction resets, as well as ARPS with underlyings of non-publicly traded preferred stock, represent a Level 3 valuation and should be valued using a discounted cash flow analysis. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, timing and amount of cash flows and expected recovery periods of the ARS.

As of January 31, 2009, we held certain assets that are required to be measured at fair value on a recurring basis. These include cash equivalents and short and long-term investments, consisting primarily of AAA and AA rated ARS and ARPS.

In accordance with SFAS No. 157, the following table represents the fair value hierarchy for our financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of January 31, 2009:


	Fair Value Measurements at January 31, 2009
				Quoted Market
				Prices in Active						Significant
	Carrying Amount			Markets for			Significant Other			Unobservable
	as of January 31,			Identical Assets			Observable Inputs			Inputs
	2009			(Level 1)			(Level 2)			(Level 3)
	(In thousands)

Cash and Cash Equivalents
Cash	$	61,355		$	61,355		$	-		$	-
Money-market		411,987			411,987			-			-

Total cash and cash equivalents	$	473,342		$	473,342		$	-		$	-
Short-term Investments
Preferred stock	$	6,219		$	6,219		$	-		$	-
Auction rate preferred securities		4,292			-			4,292			-

Total Short-term Investments	$	10,511		$	6,219		$	4,292		$	-
Long-term Investments
Student-loan backed ARS	$	169,254		$	-		$	-		$	169,254
State and local government ARS		69,970			-			-			69,970
Auction rate preferred securities		11,783			-			-			11,783

Total Long-term Investments	$	251,007		$	-		$	-		$	251,007

Total	$	734,860		$	479,561		$	4,292		$	251,007

Percent to total		100.0	%		65.3	%		0.6	%		34.1	%

We used a discounted cash flow ("DCF") model to value our Level 3 investments. The assumptions in our model included different recovery periods depending on the type of security and varying discount factors for yield and illiquidity. These assumptions are subjective. They are based on our current judgment and our view of current market conditions. The use of different assumptions would result in a different valuation and related charge. For example, an increase in the recovery period by one year would reduce the fair value of our investment in auction rate securities by approximately $6.1 million. An increase to the yield and illiquidity premium of 100 basis points would reduce the estimated fair value of our investment in auction rate securities by approximately $11.7 million.

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Factors that may impact our valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity.

As a result of the fair value analysis for Fiscal 2008, we recorded a net temporary impairment of $35.3 million ($21.8 million, net of tax). This amount was recorded in other comprehensive income ("OCI"). For instruments deemed to be temporarily impaired, we believe that these ARS investments can be liquidated through successful auctions or redemptions at par plus accrued interest. We maintain our ability and intent to hold these investments until recovery of market value and believe that the current illiquidity and impairment of these investments is temporary.

We also recorded OTTI of $22.9 million during Fiscal 2008. The reconciliation of our assets measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:


	Level 3 (Unobservable Inputs)
							Student
							Loan-
				Auction-			Backed
				Rate			Auction-			Auction-Rate
				Municipal			Rate			Preferred
	Total			Securities			Securities			Securities
	(In thousands)

Carrying Value at February 2, 2008	$	-		$	-		$	-		$	-
Additions to Level 3 upon adoption of SFAS No. 157(1)		340,475			84,575			212,000			43,900
Settlements		(29,875	)		(18,575	)		(11,300	)		-
Additions to Level 3(2)		4,600			4,600			-			-
Transfer out of Level 3(3)		(28,900	)		-			-			(28,900	)
Gains and losses:
Reported in earnings		-			-			-			-
Reported in OCI		(35,293	)		(630	)		(31,446	)		(3,217	)

Balance at January 31, 2009	$	251,007		$	69,970		$	169,254		$	11,783


(1)		Represents amounts transferred upon the adoption of SFAS No. 157 during the first quarter of Fiscal 2008.

(2)		Additions to Level 3 include securities previously classified as Level 2, which were securities that had experienced partial calls prior to the fourth quarter of 2008 and were previously valued at par.

(3)		Transfers out of Level 3 include preferred securities (into Level 1) and ARPS (into Level 2). The transfers to Level 1 occurred due to the Company acquiring exchange traded preferred shares as a result of the ARPS trusts liquidating. The transfers to Level 2 occurred as a result of the company determining that it was more appropriate to value these investments using observable market prices of the underlying securities. Refer to Note 3 to the Consolidated Financial Statements. The OTTI charge of $22.9 million that was reported in earnings was taken on Level 1 and Level 2 securities transferred from Level 3.

Refer to Item 7A as well as Notes 3 and 4 to the Consolidated Financial Statements for additional information on our investment securities, including a description of the securities and a discussion of the uncertainties relating to their liquidity.

Liquidity and Capital Resources

Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology upgrades, distribution center improvements and expansion, the purchase of both short and long-term investments, the repurchase of common stock and the payment of dividends. Historically, these uses of cash have been funded with cash flow from operations. Additionally, our uses of cash include the completion of our new corporate headquarters, the development of aerie by American Eagle and 77kids by american eagle and the continued investment in the operations of MARTIN + OSA. We expect to be able to fund our future cash requirements

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through current cash holdings as well as cash generated from operations. In the future, we expect that our uses of cash will also include new brand concept development, including development of 77kids by american eagle.

Our growth strategy includes internally developing new brands and the possibility of acquisitions. We periodically consider and evaluate these options to support future growth. In the event we do pursue such options, we could require additional equity or debt financing. There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase our profitability.

The following sets forth certain measures of our liquidity:


	January 31,		February 2,
	2009		2008

Working Capital (in 000's)	$	523,596	$	644,656
Current Ratio		2.30		2.71

Our current ratio decreased to 2.30 as of January 31, 2009 from 2.71 last year due primarily to a decrease in total cash and short-term investments as well as an increase in short-term notes payable. Notes payable increased by $75.0 million as a result of drawing on our credit facilities to increase our cash position to add financial flexibility.

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $302.2 million during Fiscal 2008 compared to $464.3 million during Fiscal 2007 and $749.3 million during Fiscal 2006. Our major source of cash from operations was merchandise sales. Our primary outflows of cash for operations were for the purchase of inventory and operational costs.

The decrease in net cash provided by operating activities of $162.1 million from the prior year was due primarily to lower net income driven by lower sales and gross margin. Additionally, the decrease in net cash from operating activities was driven by an increase in prepaid taxes due to the timing of payments and a reduction in accrued compensation due to lower incentive compensation accruals during Fiscal 2008.

Cash Flows from Investing Activities

Investing activities for Fiscal 2008 included $344.9 million from the net sale of investments classified as available-for-sale partially offset by $265.3 million for capital expenditures. Investing activities for Fiscal 2007 included $354.2 million from the net sale of investments classified as available-for-sale, partially offset by $250.4 million for capital expenditures. Investing activities for Fiscal 2006 primarily included $437.4 million for the net purchase of investments classified as available-for-sale as well as $225.9 million for capital expenditures.

We invest our cash primarily in liquid money market funds. We also have investments, made under our prior investment policy, in auction rate and auction rate preferred securities, with an original contractual maturity of up to 39 years and an expected rate of return of approximately a 2.7% taxable equivalent yield. All investments made under our new investment policy must have a highly liquid secondary market at the time of purchase and an effective maturity not exceeding two years.

Cash Flows from Financing Activities

During Fiscal 2008, cash used for financing activities resulted primarily from $82.4 million used for the payment of dividends partially offset by $75.0 million in borrowings against our demand line of credit. During Fiscal 2007, cash used for financing activities resulted primarily from $438.3 million used for the repurchase of our common stock as part of our publicly announced repurchase programs and $80.8 million used for the payment of dividends. During Fiscal 2006, cash used for financing activities resulted primarily from $146.5 million used for the repurchase of our common stock and $61.5 million used for the payment of dividends.

SFAS No. 123(R) requires that cash flows resulting from the benefits of tax deductions in excess of recognized compensation cost be classified as financing cash flows. Accordingly, for Fiscal 2008, 2007 and 2006, the excess tax benefit from share-based payments of $0.7 million, $6.2 million and $19.5 million, respectively, are classified as financing cash flows.

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Credit Facilities

We have borrowing agreements with two separate financial institutions under which we may borrow an aggregate of $350.0 million. Of this amount, $150.0 million can be used for demand letter of credit facilities and $100.0 million can be used for demand line borrowings. The remaining $100.0 million can be used for either letters of credit or demand line borrowings at our discretion. As of January 31, 2009, we had outstanding demand letters of credit of $57.3 million and demand line borrowings of $75.0 million. The outstanding amounts on these facilities can be demanded for repayment by the financial institutions at any time. Additionally, the availability of any remaining borrowings is subject to acceptance by the respective financial institution. The average borrowing rate on the demand lines for Fiscal 2008 was 2.9% and we have incorporated the demand line proceeds into working capital. The demand line facilities comprising the $100.0 million borrowing capacity expire on April 22, 2009. We are currently working with our lenders to renew these facilities or to obtain committed credit lines of a comparable amount. If we are unable to renew both of our demand line facilities, we would be required to repay immediately the $75 million that we have drawn on those facilities. We believe that this would have no material impact on our ability to fund operations.

Capital Expenditures

Fiscal 2008 expenditures included $135.2 million related to investments in our AE stores, including 122 new AE, aerie, and M+O stores in the United States and Canada, 30 remodeled stores in the United States and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology including the roll-out of our new point-of-sale system ($43.6 million), the expansion and improvement of our distribution centers ($52.8 million), construction of our corporate headquarters in Pittsburgh, Pennsylvania ($16.1 million) and other home office projects ($17.6 million).

For Fiscal 2009, we significantly lowered our capital spending plans driven by our decision to open fewer new stores. Therefore, we expect capital expenditures to be in the range of $110 million to $135 million with approximately half of the amount relating to store growth and renovation. This includes approximately 11 new and 25 to 35 remodeled AE stores, including our new flagship store in the Times Square area of New York, New York, and 17 new aerie stores. The remaining half relates to the completion of our headquarters, information technology and distribution center projects. At this time, our 2009 capital expenditures projection does not include new M+O stores.

Stock Repurchases

During Fiscal 2007, our Board authorized a total of 60.0 million shares of our common stock for repurchase under our share repurchase program with expiration dates extending into Fiscal 2010. During Fiscal 2007, we repurchased 18.7 million shares as part of our publicly announced repurchase programs for approximately $438.3 million, at a weighted average price of $23.38 per share. We did not repurchase any common stock as part of our publicly announced repurchase program during Fiscal 2008. As of March 25, 2009, we had 41.3 million shares remaining authorized for repurchase. These shares will be repurchased at our discretion. Of the 41.3 million shares that may yet be purchased under the program, the authorization relating to 11.3 million shares expires at the end of Fiscal 2009 and the authorization relating to 30.0 million shares expires at the end of Fiscal 2010.

During Fiscal 2008 and Fiscal 2007, we repurchased 0.2 million and 0.4 million shares, respectively, from certain employees at market prices totaling $3.4 million and $12.3 million, respectively. These shares were repurchased for the payment of taxes in connection with the vesting of share-based payments, as permitted under the 2005 Stock Award and Incentive Plan.

The aforementioned share repurchases have been recorded as treasury stock.

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Dividends

A $0.075 per share dividend was paid during the first quarter of Fiscal 2007 and a $0.10 per share dividend was paid during each of the second, third and fourth quarters of Fiscal 2007. A $0.10 per share dividend was paid during each quarter of Fiscal 2008. Subsequent to the fourth quarter of Fiscal 2008, our Board declared a quarterly cash dividend of $0.10 per share, payable on April 10, 2009, to stockholders of record at the close of business on March 30, 2009. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation and other relevant factors. It is anticipated that any future dividends paid will be declared on a quarterly basis.

Obligations and Commitments

Disclosure about Contractual Obligations

The following table summarizes our significant contractual obligations as of January 31, 2009:


	Payments Due by Period
			Less than		1-3		3-5		More than
	Total		1 Year		Years		Years		5 Years
	(In thousands)

Operating Leases(1)	$	1,770,367	$	234,095	$	442,603	$	373,416	$	720,253
Unrecognized tax benefits(2)		52,528		12,630		-		-		39,898
Purchase Obligations(3)		353,437		353,396		41		-		-

Total Contractual Obligations	$	2,176,332	$	600,121	$	442,644	$	373,416	$	760,151


(1)		Operating lease obligations consist primarily of future minimum lease commitments related to store operating leases (Refer to Note 8 to the Consolidated Financial Statements). Operating lease obligations do not include common area maintenance, insurance or tax payments for which we are also obligated.

(2)		The amount of unrecognized tax benefits as of January 31, 2009 is $52.5 million, including approximately $11.4 million of accrued interest and penalties. Unrecognized tax benefits are positions taken or expected to be taken on an income tax return that may result in additional payments to tax authorities. We estimate that $12.6 million of unrecognized tax benefits may be realized within one year. The balance of the unrecognized tax benefits are included in the "More than 5 Years" column as we are not able to reasonably estimate the timing of the potential future payments.

(3)		Purchase obligations primarily include binding commitments to purchase merchandise inventory as well as other legally binding commitments made in the normal course of business. Included in the above purchase obligations are inventory commitments guaranteed by outstanding letters of credit, as shown in the table below.

Disclosure about Commercial Commitments

The following table summarizes our significant commercial commitments as of January 31, 2009:


	Amount of Commitment Expiration per Period
	Total Amount		Less than		1-3		3-5		More than
	Committed		1 Year		Years		Years		5 Years
	(In thousands)

Letters of Credit(1)	$	57,267	$	57,267		-		-		-

Total Commercial Commitments	$	57,267	$	57,267		-		-		-


(1)		Letters of credit represent commitments, guaranteed by a bank, to pay vendors for merchandise upon presentation of documents demonstrating that the merchandise has shipped.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

Recent Accounting Pronouncements

Recent accounting pronouncements are disclosed in Note 2 of the Consolidated Financial Statements.

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Certain Relationships and Related Party Transactions

Refer to Part III, Item 13 of this Form 10-K for information regarding related party transactions.

Impact of Inflation/Deflation

We do not believe that inflation has had a significant effect on our net sales or our profitability. Substantial increases in cost, however, could have a significant impact on our business and the industry in the future. Additionally, while deflation could positively impact our merchandise costs, it could have an adverse effect on our average unit retail price, resulting in lower sales and profitability.


ITEM 7A.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.*

We have market risk exposure related to interest rates, foreign currency exchange rates and investment security valuation. Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates over the next year.

Interest Rate Risk

Our earnings are affected by changes in market interest rates as a result of our investments in money market funds and auction rate securities, which have long-term contractual maturities but feature variable interest rates that reset at short-term intervals. If our Fiscal 2008 average yield rate decreases by 10% in Fiscal 2009, our income before taxes will decrease by approximately $0.8 million. Comparatively, if our Fiscal 2007 portfolio average yield rate had decreased by 10% in Fiscal 2008, our income before taxes would have decreased by approximately $2.9 million. These amounts are determined by considering the impact of the hypothetical yield rates on our cash, short-term and long-term investment balances.

Additionally, borrowings under our demand lines, which expire on April 22, 2009, bear interest at variable rates based on the prime rate or LIBOR. At January 31, 2009, the weighted average interest rate on our borrowings was 2.4%. Based upon a sensitivity analysis as of January 31, 2009, assuming average outstanding borrowing during Fiscal 2008 of $75.0 million, a 50 basis point increase in interest rates would have resulted in a potential increase in interest expense of approximately $375,000.

These analyses do not consider the effects of the reduced level of overall investments that could happen in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our investments structure.

Foreign Exchange Rate Risk

We are exposed to the impact of foreign exchange rate risk primarily through our Canadian operations where the functional currency is the Canadian dollar. We do not hedge against foreign currency exchange risks. We believe our foreign currency translation risk is minimal as a hypothetical 10% change in the Canadian foreign exchange rate would not materially affect our results of operations or cash flows.

Investment Securities

As of January 31, 2009, we had a total of $734.9 million in cash and cash equivalents, short-term and long-term investments, which included $255.3 million of investments in ARS and $6.2 million of preferred securities, net of

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$35.3 million of temporary impairment and $22.9 million in OTTI. Our short-term and long-term investments consist of the following:


	No. of				Temporary						Carrying Value as of
	Issues		Par Value		Impairment			OTTI			January 31, 2009
	(In thousands, except no. of issues amount)

Auction-rate securities ("ARS"):
Closed-end municipal fund ARS		5	$	41,750	$	(263	)	$	-		$	41,487
Municipal Bond ARS		5		28,850		(367	)		-			28,483
Auction rate preferred securities		5		29,400		(3,217	)		(10,108	)		16,075
Federally-insured student loan ARS		17		166,700		(17,283	)		-			149,417
Private-insured student loan ARS		4		34,000		(14,163	)		-			19,837

Total Auction-rate securities		36		300,700		(35,293	)		(10,108	)		255,299
Preferred Stock		4		19,000		-			(12,781	)		6,219

Total		40	$	319,700	$	(35,293	)	$	(22,889	)	$	261,518

Auction rate preferred securities ("ARPS") are a type of ARS that have an underlying asset of perpetual preferred stock. In the event of default or liquidation of the collateral by the ARS issuer or trustee, we are entitled to receive non-convertible preferred shares in the ARS issuer. Lehman Brothers Holdings, Inc. ("Lehman") (which filed for Chapter 11 bankruptcy protection during September 2008) acted as the broker and auction agent for all of the ARPS held by us. The Lehman bankruptcy resulted in the dissolution of the investment trusts for most of our ARPS. As a result, during Fiscal 2008, we received a total of 760,000 preferred shares of four companies. For Fiscal 2008, we recorded an OTTI charge of $12.8 million based on the closing market price of these preferred shares on January 30, 2009.

Furthermore, as a result of the Lehman bankruptcy, it is probable that the trusts for three additional ARPS will dissolve in the first quarter of 2009. Since it is unlikely that these investments will recover in value in the near term, for Fiscal 2008 we recorded an OTTI charge of $10.1 million based on the closing market price for the underlying preferred shares on January 30, 2009.

In addition to the OTTI recorded, as a result of the current market conditions, we recorded a net temporary impairment charge of $35.3 million ($21.8 million, net of tax) in connection with the valuation of the remainder of our ARS portfolio at January 31, 2009.

For instruments deemed to be temporarily impaired, we believe that these ARS investments can be liquidated through successful auctions or redemptions at par plus accrued interest. We maintain our ability and intent to hold these investments until recovery of market value and believe that the current illiquidity and impairment of these investments is temporary. In addition, we believe that the current lack of liquidity relating to ARS investments will have no impact on our ability to fund our ongoing operations and growth initiatives.

We continue to monitor the market for ARS and consider the impact, if any, on the fair value of its investments. If current market conditions deteriorate further, or the anticipated recovery in market values does not occur, we may be required to record additional OTTI and/or temporary impairment.

As a result of several states' Attorney General's actions, during mid-August 2008, several large financial institutions/broker dealers announced that they will purchase auction rate securities from their clients, beginning in September 2008 through June 2010 at par. Prior to this announcement, these securities had experienced failed auctions and were illiquid. While these purchases are intended to restore liquidity to the ARS market, at this time we cannot determine if any of our ARS investments will be included in the announced purchases. As a result, we have not considered any of these announcements in the valuation of our ARS at January 31, 2009.

Refer to Note 4 to the Consolidated Financial Statements for additional information regarding the fair value measurement of our ARS and Note 14 to the Consolidated Financial Statements for additional information regarding a subsequent event relating to our investment securities.


ITEM 8.	*FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.*

Index to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm			35
Consolidated Balance Sheets			36
Consolidated Statements of Operations			37
Consolidated Statements of Comprehensive Income			38
Consolidated Statements of Stockholders' Equity			39
Consolidated Statements of Cash Flows			40
Notes to Consolidated Financial Statements			41

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
American Eagle Outfitters, Inc.

We have audited the accompanying consolidated balance sheets of American Eagle Outfitters, Inc. (the Company) as of January 31, 2009 and February 2, 2008, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Eagle Outfitters, Inc. at January 31, 2009 and February 2, 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 12 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109," effective February 4, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Eagle Outfitters, Inc.'s internal control over financial reporting as of January 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 25, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

March 25, 2009

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AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

American Eagle Outfitters Inc (AEO) SEC Annual Report (10-K) for 2009

Form 10-K

American Eagle Outfitters, Inc.