8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

February 28, 2006

AMERICAN EAGLE OUTFITTERS, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-23760	13-2721761
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

150 Thorn Hill Drive Warrendale, Pennsylvania	15086-7528
(Address of principal executive offices)	(Zip Code)

(724) 776-4857

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01.

Entry into a Material Definitive Agreement

On February 28, 2006, the Compensation Committee of the Board of Directors (the "Board") of American Eagle Outfitters, Inc. (the "Company") certified achievement of the Company's financial goals based on its financial results for the fiscal year ended January 28, 2006, which resulted in the following action: Awards under the Management Incentive Plan for Fiscal 2005 Awards of Fiscal 2005 incentive compensation, under the Company's Management Incentive Plan, to the Company's named executive officers and certain other individuals were authorized to be paid.  The incentive compensation target amounts were determined as a percentage of the executive's base salary and range from zero to 200 percent of the target based on achievement of the Company's financial goals.  Based on the Company's achievement of its financial goals for Fiscal 2005, which were based on the Company's income per common share, fully diluted, excluding certain non-recurring items, the following awards were authorized to be paid:

Name and Principal Position	Incentive Compensation Award
James V. O'Donnell Chief Executive Officer	$1,900,000
Roger S. Markfield Vice Chairman	$1,900,000
Susan P. McGalla President and Chief Merchandising Officer, American Eagle brand	$1,440,000
LeAnn Nealz Executive Vice President and Chief Design Officer	$952,500
Michael J. Leedy (A) Executive Vice President and Chief Marketing Officer	$665,000
(A) Mr. Leedy resigned his employment with the Company effective March 4, 2006, as previously disclosed on the Form 8-K dated February 20, 2006, filed February 24, 2006.

On February 28, 2006, the Compensation Committee of the Board of the Company also took the following action relating to Fiscal 2006 compensation for certain executive officers of the Company:

     - fixed individual salaries;

     - established performance goals under the Company's Management Incentive Plan (the "Bonus Plan") and under the Company's 2005 Stock Award and Incentive Plan (the "Stock Plan") based on the Company's income per common share, fully diluted, excluding certain charges, at three levels, "threshold", "target" and "outstanding";

    - established individual annual bonus targets under the Bonus Plan as a percentage of the respective participant's base salary, with the actual bonus payment ranging from zero at threshold, to 100% at target and 200% if the outstanding goals are achieved for Fiscal 2006 (the "EPS Goals");
    - granted awards of stock options under the Stock Plan, exercisable at the fair market value on the grant date and vesting over three years; and

    - granted awards of restricted stock under the Stock Plan, which awards vest based on achievement of the EPS Goals ranging from 0% of the shares at threshold to 100% at target.  If the threshold EPS Goal is not met the shares shall be forfeited.
  

The following table sets forth the annual base salary levels, individual participant target bonus percentages, stock option awards and restricted stock awards of the indicated named executive officers: 
  

Name and Principal Position		Fiscal 2006 Base Salary	Annual Bonus (% of Base Salary)	Stock Option Awards	Restricted Stock Awards
Roger S. Markfield Vice Chairman	$	570,000	100%	-	157,047
Susan P. McGalla President and Chief Merchandising Officer, American Eagle brand	$	850,000	90%	-	37,424
LeAnn Nealz Executive Vice President and Chief Design Officer	$	665,000	75%	73,800	22,600

	On February 28, 2006, the Company's Board appointed Dennis Parodi, Executive Vice President, Chief Operating Officer-New York Design Center, as an Executive Officer of the Company. In connection with Mr. Parodi's appointment as an executive officer of the Company, the employment agreement between Mr. Parodi and the Company, dated February 18, 2003, became a material agreement to the Company. A copy of the employment agreement between the Company and Mr. Parodi is being filed herewith as exhibit 10.1 and is incorporated herein by reference. Additionally, the Company entered into an amendment of Mr. Parodi's employment agreement, dated February 6, 2006, which became a material agreement to the Company upon Mr. Parodi's appointment as an executive officer of the Company. A copy of the amendment is being filed herewith as exhibit 10.2 and is incorporated herein by reference. On February 28, 2006, the Company's Board appointed Kathy Savitt, Executive Vice President, Chief Marketing Officer, American Eagle brand, as an Executive Officer of the Company, effective upon her employment by the Company. In connection with Ms. Savitt's appointment as an executive officer of the Company, the employment agreement between Ms. Savitt and the Company, dated January 3, 2006, became a material agreement to the Company. A copy of the employment agreement between the Company and Ms. Savitt is being filed herewith as exhibit 10.3 and is incorporated herein by reference.
ITEM 2.02.	Results of Operations and Financial Condition
	The information in this Item 2.02 of Form 8-K, including the accompanying exhibits, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing. On March 1, 2006, the Company issued a press release announcing, among other things, the Company's financial results for the fourth quarter ended January 28, 2006.  A copy of this press release is attached hereto as Exhibit 99.1. The Company's Management team held a conference call on March 1, 2006 at 9:00 a.m. Eastern Time to review the aforementioned financial results. Additionally, Management provided its first quarter 2006 earnings expectation on the conference call. A replay of the conference call will be available through March 15, 2006. To listen to the replay, dial 1-800-642-1687 and reference confirmation code 3321190#. An audio replay of the conference call will also be available at www.ae.com. A copy of the conference call transcript is attached hereto as Exhibit 99.2.

ITEM 7.01.	Regulation FD Disclosure
	The information in this Item 7.01 of Form 8-K, including the accompanying exhibits, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing. On February 28, 2006, the Company issued a press release announcing the launch of its new intimates sub-brand, aerieTM by American Eagle.  A copy of the press release is attached hereto as Exhibit 99.3. On February 28, 2006, the Company issued a press release announcing its new Chief Marketing Officer, American Eagle brand, Kathy Savitt.  A copy of the press release is attached hereto as Exhibit 99.4. On March 1, 2006, the Company issued a press release announcing, among other things, the Company's February 2006 sales.  A copy of the press release is attached hereto as Exhibit 99.5. The Company's Management issued a recorded sales commentary on March 1, 2006 to review the Company's sales results for the month ended February 25, 2006. Additionally, Management provided its first quarter 2006 earnings expectation in the commentary.  A copy of the sales commentary transcript is attached hereto as Exhibit 99.6. On March 1, 2006, the Company issued a press release announcing the first retail locations for Martin + Osa. A copy of the press release is attached hereto as Exhibit 99.7. On March 2, 2006, the Company issued a press release announcing that its Board declared a quarterly cash dividend of $0.075 per share. The dividend is payable on April 7, 2006 to stockholders of record at the close of business on March 24, 2006. A copy of the press release is attached hereto as Exhibit 99.8.
ITEM 9.01.	Financial Statements and Exhibits
(c) Exhibits
Exhibit No.	Description
10.1*	Employment agreement between the Company and Dennis Parodi dated February 18, 2003
10.2*	Amendment to Dennis Parodi's employment agreement dated February 6, 2006
10.3*	Employment agreement between the Company and Kathy Savitt dated January 3, 2006
99.1**	Press Release dated March 1, 2006 announcing fourth quarter 2005 financial results
99.2**	Conference Call Transcript dated March 1, 2006
99.3***	Press Release dated February 28, 2006 announcing launch of intimates sub-brand
99.4***	Press Release dated February 28, 2006 announcing new Chief Marketing Officer
99.5***	Press Release dated March 1, 2006 announcing February sales
99.6***	February Sales Commentary Transcript dated March 1, 2006
99.7***	Press Release dated March 1, 2006 announcing Martin + Osa retail locations
99.8***	Press Release dated March 2, 2006 announcing dividend declaration
* Such Exhibit is being filed herewith pursuant to Item 1.01 of the Current Report on Form 8-K.
** Such Exhibit is being "furnished" (not filed) pursuant to Item 2.02 of the Current Report on Form 8-K.
*** Such Exhibit is being "furnished" (not filed) pursuant to Item 7.01 of the Current Report on Form 8-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AMERICAN EAGLE OUTFITTERS, INC.
	(Registrant)
Date: March 6, 2006	By:	/s/ Dale E. Clifton
		Dale E. Clifton
		Senior Vice President and Chief Accounting Officer

EXHIBIT INDEX

Exhibit Number	Description
10.1*	Employment agreement between the Company and Dennis Parodi dated February 18, 2003
10.2*	Amendment to Dennis Parodi's employment agreement dated February 6, 2006
10.3*	Employment agreement between the Company and Kathy Savitt dated January 3, 2006
99.1**	Press Release dated March 1, 2006 announcing fourth quarter 2005 financial results
99.2**	Conference Call Transcript dated March 1, 2006
99.3***	Press Release dated February 28, 2006 announcing launch of intimates sub-brand
99.4***	Press Release dated February 28, 2006 announcing new Chief Marketing Officer
99.5***	Press Release dated March 1, 2006 announcing February sales
99.6***	February Sales Commentary Transcript dated March 1, 2006
99.7***	Press Release dated March 1, 2006 announcing Martin + Osa retail locations
99.8***	Press Release dated March 2, 2006 announcing dividend declaration
* Such Exhibit is being filed herewith pursuant to Item 1.01 of the Current Report on Form 8-K.
** Such Exhibit is being "furnished" (not filed) pursuant to Item 2.02 of the Current Report on Form 8-K.
*** Such Exhibit is being "furnished" (not filed) pursuant to Item 7.01 of the Current Report on Form 8-K.

EX-10

EXHIBIT 10.1

February 18, 2003

Mr. Dennis Parodi

Dear Dennis:

I am pleased to offer you the position of COO/Vice-President of our New York Design Center reporting to Jim O'Donnell, Co-CEO/COO. The following summarizes your total compensation package from American Eagle Outfitters, Inc. including our Benefits Program, which proudly reflects the value we place on our Associate family.

Title: COO/VP -- New York Design Center

Start Date: March 3, 2003

Annual Salary: $275,000 (to be paid bi-weekly)

Incentive Compensation Bonus: You will be eligible to earn an incentive compensation bonus of 40% (Target) up to 80% (Maximum) of your salary. You will be eligible to receive said bonus in March 2004. Bonus eligibility is based upon American Eagle Outfitters achieving budgeted EPS goals.

Stock Options: Subject to approval by the Board of Directors, you will receive 25,000 stock options. The options will be priced based on your employment date with a five-year vesting schedule. You will be eligible for consideration of additional options under our Stock Options Program on an annual basis beginning in Spring 2004.

Deferred Compensation Plan: You will be eligible to start contributing on the first of the month following your employment date. You may contribute a before-tax % of your salary in the first year (minimum of $5,000). In following years, you may also defer a % of your bonus. This plan provides you with an additional savings vehicle and allows scheduled withdrawals without early withdrawal penalties.

Performance Review: Annual performance appraisals take place in March. Mid-year performance discussions occur each fall. You will receive your first evaluation for merit consideration in March 2004 with an April effective date. Any salary adjustment will be pro-rated based upon your start date.

401(k) Plan: You will be eligible to start contributing on the first of the month following your 60^th day of employment. You may contribute up to 5% of your salary before-tax (up to the annual IRS allowable maximum of $12,000). AE will match up to 4.5% of your pay after your first full year with the company. You are 100% vested in your before-tax and rollover contributions. Employer contributions vest over five years based on a sliding scale of 20% per year.

Employee Stock Purchase Plan: You will be eligible to start contributing on the first of the month following your 60^th day of employment. You may contribute any dollar amount up to $60 per pay period. AE will match 15% of your contribution (up to $9 per pay period). This stock vests immediately!

Health Insurance: Medical, dental and vision coverage (if you elect to participate) will begin after your 60^th day of employment.

Disability Insurance: You will be provided with Short-term and Long-term Disability after your 60^th day of employment at no cost to you. Additional supplemental insurance is also available.

Life Insurance: You will be provided with Life Insurance at one times your annual salary after your 60^th day of employment at no cost to you. Accidental Death & Dismemberment Insurance will also be provided after you 60^th day of employment at no cost to you. Also, you may purchase supplemental dependent and spousal life insurance.

Paid Time Off (PTO): You will accrue paid time off each pay period (every two weeks) to earn a maximum of 23 PTO days in your first year of employment. You may begin to use your PTO days after 60 days of employment. Paid Time Off is inclusive of all personal, sick and vacation days.

Associate Discount: You will receive 40% off regular price merchandise and 25% off sale merchandise.

References/Drug Screen: Your employment is contingent upon successful completion of your references and you passing a pre-hire drug screen.

We very much look forward to you becoming a member of our team at American Eagle Outfitters. Please sign and date one copy of this offer and return it to us; the additional copy is for your records. Please let me know if you have any questions.

Sincerely,

/s/ Jeffrey D. Skoglind

Jeffrey D. Skoglind

AMERICAN EAGLE OUTFITTERS, INC.

Vice-President -- Human Resources

I accept the offer as outlined above:

/s/ Dennis Parodi                     2/20/03                

Dennis Parodi                         Date

EX-10

EXHIBIT 10.2

February 6, 2006

Dennis Parodi

EVP/COO New York Design Center

Dear Dennis:

Congratulations on your promotion. The following information summarizes your revised American Eagle Outfitters, Inc.'s compensation package effective February 5, 2006:

TITLE:	Executive Vice President/Chief Operating Officer New York Design Center
ANNUAL SALARY: TARGET BONUS:	$400,000 (to be paid bi-weekly) 50%

All other benefits and compensation components will remain unchanged. This increase will be inclusive of any merit consideration in spring 2006. A detailed compensation term sheet is attached for your information.

Dennis, I am excited to be able to offer you this promotion. Your hard work and dedication are appreciated. Please sign and date below and return to Chris Bertha, Executive Staff Assistant, EVP-HR, your acceptance of this promotion. I have enclosed an additional copy for your records. Please let me know if you have any questions.

Sincerely,

/s/ Jim O'Donnell

Jim O'Donnell

Chief Executive Officer

Attachment

I accept this offer as outlined above:

/s/ Dennis R. Parodi	3/3/06
Dennis Parodi	Date

EX-10

EXHIBIT 10.3

Via FedEx

January 3, 2006

Kathy Savitt

Dear Kathy,

I am pleased to offer you the position of EVP/Chief Marketing Officer for American Eagle Outfitters, Inc. reporting directly to me. The following summarizes the terms and conditions of your employment.

Position and Duties: You will be employed as EVP/Chief Marketing Officer, including AE Direct, with such authority and duties as are customary for the position supporting the AE Brand, and shall perform such other services and duties as the CEO and President/Chief Merchandising Officer may designate, including projects related to Martin & Osa and any other future divisions. Your formal election as EVP/Chief Marketing Officer is subject to approval at the next meeting of the Board of Directors. You will also be a member of the Executive Council.

Start Date: Your first day of active employment for the Company will be on or before March 20, 2006.

Annual Base Salary: For our 2006 fiscal year, your base salary will be at an annual rate of $600,000.00 payable in accordance with Company's payroll practices.

Sign-On Restricted Stock Grant: You will receive 30,000 shares of restricted stock that will vest proportionally over three years, beginning one year from your start date, pursuant to and subject to all terms and conditions set forth in the Company's 2005 Stock Award and Incentive Plan ("the 2005 Plan"). Vesting of the shares will be conditioned on your continued employment with the Company.

Annual Incentive Compensation Bonus: For fiscal year 2006, you will be eligible to earn an annual incentive bonus targeted at 70% of your annual base salary ($420,000), with a maximum annual incentive bonus equal to 140% of your annual base salary ($840,000). You will be eligible to receive said bonus in April 2007 based upon achievement of established performance based goals. This Bonus will not be pro-rated if you start on or before March 20, 2006.

Long Term Incentive Cash Plan: You will be eligible to receive a long term incentive bonus under the Bonus Plan (the "LTI Plan"), where an amount targeted at 35% of annual base salary and a maximum of 70% of annual base salary will be contributed to your LTI bonus account, conditioned on achievement of pre-determined performance goals set forth in writing and based on objective measurements all established by the Compensation Committee of the Board of Directors (the "Committee"). The Committee must verify that the performance goals and other material terms have been met prior to crediting the LTI bonus account. You will receive payment of: (a) one-third of the amount in your LTI bonus account in each fiscal year beginning in fiscal 2009; (b) the entire amount in your LTI bonus account on death, disability or retirement; and (c) no amount of your LTI bonus account, which will be forfeited, on any voluntary termination of employment. It is the parties' intention that the LTI Plan be ad opted and administered in a manner that enables the Company to deduct for federal income tax purposes all amounts paid pursuant to the LTI Plan. No amount of your LTI bonus is guaranteed and the entire amount will depend on whether applicable performance goals are achieved.

Restricted Stock: You will receive shares of restricted stock with a value equal to 66% of your annual base salary, or $396,000. For example, at a stock price of $22.00, you would receive 18,000 shares. This number of shares can fluctuate based on the stock price at the grant date, but the overall value will remain constant. The shares are a part of the grant made by the Compensation Committee pursuant to and subject to all terms and conditions set forth in the 2005 Plan. Pursuant to the terms of the 2005 Plan, the Committee will condition the vesting of this restricted stock based on achievement of pre-determined performance goals set forth in writing and based on objective measurements all established by the Committee. The Committee must verify that the performance goals and other material terms are met prior to vesting. If the performance goals are not met then the restricted stock will be forfeited. It is the parties' intention that the 2005 Plan be adopted and administered in a manner that ena bles the Company to deduct for federal income tax purposes the full value of all restricted stock grants. The restricted stock grant will be one-year performance based vesting. You will be eligible to receive your first grant in April 2006.

Stock Options: You will receive stock options with a value equal to 99% of your annual base salary, or $594,000. For example, at a stock price of $22.00 and the current accounting value for stock options (34.5%), you would receive 78,300 stock options. This number of stock options can fluctuate based on the stock price at the grant date, but the overall value will remain constant. The shares are a part of the grant made by the Compensation Committee pursuant to and subject to all terms and conditions set forth in the 2005 Plan. The stock options will vest proportionally over three years, subject to your continued employment with the Company. You will be eligible to receive your first grant in April, 2006.

Relocation: You will be eligible for a full relocation package. American Eagle Outfitters, Inc. will pay all costs related to your relocation as outlined in the attached relocation policy.

Transition: We recognize that from March 20, 2006 until June 13, 2006, you will be commuting from Seattle. We will make every effort to allow you to maintain a manageable balance between the demands of your position and the demands of your family. Toward that end, we agree to have you commuting to Seattle on Thursday of each week where business conditions allow. During those weeks which require you to stay in Pittsburgh or New York for business reasons, we agree to fly your family to Pittsburgh.

Auto Allowance: You will receive an automobile allowance of $750 per month, with the amount grossed up for tax purposes.

401(k) Plan: You will be eligible to start contributing on the first of the month following your 60th day of employment. You may contribute up to 3% of your salary before-tax. After one year of service, AE will match 3% of your initial 3% contribution. You are 100% vested in your before-tax and rollover contributions. Employer contributions vest over five years based on a sliding scale of 25% after the first year.

Deferred Compensation Plan: You will be eligible to start contributing on the first of the month following your 60^th day of employment date. You may contribute a before-tax % of your salary in the first year (minimum of $2,000). You may also defer a % of your annual incentive compensation bonus. This plan provides you with an additional savings vehicle and allows scheduled withdrawals without early withdrawal penalties. If enrolled in the Deferred Compensation & 401(k) Plan, you will be able to take advantage of a discretionary company-match contribution into the Deferred Compensation plan up to 1.5% of your first 3% of earnings after one year of service.

Health Insurance: Medical, dental and vision coverage (if you elect to participate) will begin the pay period following your 60^th day of employment. You can choose between our Aetna U.S. Healthcare PPO plan and our Highmark Blue Cross Blue Shield PPO plan. Dental coverage is provided by MetLife and Vision coverage is provided by Highmark Clarity Vision.

Cobra Bonus: A bonus will be provided to you equal to 100% of the cost of your Cobra premiums for sixty days. Documentation of paid premiums is required.

Disability Insurance: You will be provided with Short-term and Long-term Disability after your 60^th day of employment at no cost to you. Additional supplemental insurance is also available.

Life Insurance: You will be provided with Life Insurance at one times your annual salary after your 60^th day of employment at no cost to you. Accidental Death & Dismemberment Insurance will also be provided after your 60^th day of employment at no cost to you. Also, you may purchase supplemental dependent and spousal life insurance.

Paid Time Off (PTO): You will accrue paid time off each pay period (every two weeks) to earn a maximum of 28 PTO days in your first year of employment. You may begin to use your PTO days after 60 days of employment. Paid Time Off is inclusive of all personal, sick and vacation days.

External Organizations: American Eagle Outfitters, Inc. will allow you to serve on one outside Board of Directors as long as it does not represent a conflict of interest and that it is approved by the President and CEO of American Eagle Outfitters, Inc.

Performance Review: Annual performance appraisals take place in March. You will receive your first evaluation for merit consideration in April 2007 with a retro-active effective date to the beginning of Fiscal, 2007.

Confidentiality, Non-competition and Intellectual Property Agreement: Your employment is conditioned upon your execution of the form of Confidentiality, Non-Competition and Intellectual Property Agreement, attached to this letter.

Severance: The Company is an at-will employer. This means that you can terminate your employment at any time and for any reason and AE can also terminate your employment at any time and for any reason. If AE terminates your employment, other than a termination for cause (as defined in Attachment 2), you will receive severance in the form of (a) a lump sum payment equal to one year of base salary, (b) your target annual incentive compensation bonus, conditioned upon the performance goals actually being certified as achieved, provided, however, if the goals are not achieved, you will receive an amount equal to six (6) months base salary, and (c) 30 days to exercise your stock options. No severance will be paid if your employment is terminated "for cause". No severance will be paid if you voluntarily terminate your employment, unless you terminate your employment for Good Reason (as defined in Attachment 2).

Associate Discount: You will receive 40% off regular price merchandise and 25% off sale merchandise.

References/Drug Screen: Your hiring and employment with American Eagle Outfitters, Inc. are contingent upon successful completion of your references and your submission to and passing of a pre-hire drug screen. If you begin work with American Eagle Outfitters, Inc. before your references are checked and/or before your drug screen occurs or American Eagle Outfitters, Inc. has received its results, and if either your reference check results are unacceptable or you refuse to submit to or fail to pass your pre-hire drug screen requirement, your contingent employment will be terminated.

Future Compensation: The compensation package outlined here is based on current American Eagle Outfitters, Inc. benefits and compensation policies and practices. Your compensation and benefits levels are subject to change by the Company in the future.

We very much look forward to you becoming a member of the American Eagle Outfitters, Inc. team. Please sign and date one copy of this letter and the attached agreements and return them to me to indicate you understand and accept the terms; the additional copy is for your records. Please let me know if you have any questions.

Sincerely,

/s/ Susan McGalla

Susan McGalla

President/Chief Merchandising Officer

Agreed and accepted as outlined above:

/s/ Kathy Savitt                         1/5/06                  

Kathy Savitt                             Date

______________________________________

Social Security Number

EX-99

EXHIBIT 99.1

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

Reports Fourth Quarter EPS of $0.71 versus

$0.70 from Continuing Operations Last Year;
Achieves Record Annual EPS of $1.89 for Fiscal 2005;

Provides First Quarter EPS Guidance

Warrendale, PA, March 1, 2006 - American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced its consolidated financial results for the fourth quarter and year ended January 28, 2006.

Fourth Quarter Ended January 28, 2006

• Total sales increased 13.4% to $764.4 million from $674.0 million for the quarter ended January 29, 2005.
• Comparable store sales increased 7.8% compared to a 28.6% increase in the corresponding period last year.
• Gross profit for the quarter increased to $354.2 million, or 46.3% as a percent to sales, from $332.4 million, or 49.3% as a percent to sales last year. The decline in gross profit as a percent to sales was primarily due to a lower merchandise margin as well as the deleveraging of buying, occupancy and warehousing costs.
• Operating income for the quarter increased to $174.2 million from $171.7 million last year. Operating income as a percent to sales was 22.8% compared to 25.5% last year.
• On January 27, 2006, the Company entered into an agreement to sell certain assets of National Logistics Services, its Canadian distribution operation. As a result of this agreement, the Company recognized a $0.01 per diluted share loss. Additionally, the assets subject to this agreement have been classified as held-for-sale for all periods presented in the accompanying Condensed Consolidated Balance Sheets. This transaction was completed during February 2006.
• During the quarter, the Company recognized a tax charge of $0.02 per diluted share related to the anticipated repatriation of foreign earnings. This charge is reflected in the fourth quarter's 40% effective tax rate.
• Net income for the quarter increased to $107.5 million, or $0.71 per share on a diluted basis, from net income of $100.9 million, or $0.66 per share on a diluted basis last year (which included a $0.04 loss from discontinued operations). As described above, net income includes a $0.01 per diluted share loss related to National Logistics Services and a $0.02 per diluted share tax charge related to the anticipated repatriation of foreign earnings.

Fiscal Year Ended January 28, 2006

• Total sales increased 22.8% to $2.309 billion from $1.881 billion for the twelve months ended January 29, 2005.
• Comparable store sales increased 15.5% compared to a 21.4% increase in the same twelve month period last year.
• Gross profit for the period increased to $1.074 billion, or 46.5% as a percent to sales, from $877.8 million, or 46.7% as a percent to sales last year. The decline in gross profit as a percent to sales was primarily due to a lower merchandise margin, partially offset by the leveraging of buying, occupancy and warehousing costs.
• Operating income for the period increased to $461.1 million, or 20.0% as a percent to sales, from $362.7 million, or 19.3% as a percent to sales last year.
• Net income for the period increased to $294.2 million, or $1.89 per share on a diluted basis, from net income of $213.3 million, or $1.42 per share on a diluted basis last year (which included a $0.07 loss from discontinued operations). As described above, net income includes a $0.01 per diluted share loss related to National Logistics Services and a $0.02 per diluted share tax charge related to the anticipated repatriation of foreign earnings.

In a separate release this morning, the Company announced a February comparable store sales increase of 6%. At this time, Management expects first quarter earnings to be in the range of $0.36 to $0.38, compared to $0.35 per share last year. Guidance in 2006 includes the expensing of stock options. The first quarter guidance includes stock option expense of approximately $0.02 per share. For the year, we expect stock option expense to be approximately $0.04-$0.05 per share.

* * * *

At 9:00 a.m. Eastern Time, on March 1, 2006, the Company's management team will host a conference call to review the financial results. To listen to the call, dial 877-601-0864 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com or www.streetevents.com.  Anyone unable to listen to the call can access a replay beginning March 1, 2006 at 12:00 p.m. Eastern Time through March 15th.  To listen to the replay, dial 1-800-642-1687 and reference confirmation code 3321190#. An audio replay of the conference call will also be available at www.ae.com.

* * * *

American Eagle Outfitters (NASDAQ: AEOS) is a leading retailer that designs, markets and sells its own brand of laidback, current clothing for 15 to 25 year-olds, providing high-quality merchandise at affordable prices. AE's original collection includes standards like jeans and graphic T's as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle Outfitters currently operates 798 stores in 50 states, the District of Columbia, Puerto Rico, and 71 AE stores in Canada. AE also operates ae.com, which offers additional sizes and styles of favorite AE merchandise and ships around the world. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. For additional information and updates, visit www.martinandosa.com.

* * * *

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding first quarter earnings. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors beyond the Company's control. Such factors include, but are not limited to the risk that our Spring assortments are not well received, and as a result, our first quarter sales, markdowns and/or earnings expectations may not be achieved, and those other risks described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's filings with the Securities and Exchange Commission. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The Company does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

AMERICAN EAGLE OUTFITTERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
			January 28, 2006		January 29, 2005
			(Unaudited)
ASSETS
	Cash, cash equivalents and short-term investments	$	751,518	$	589,607
	Merchandise inventory (1)		210,739		170,576
	Other current assets		106,232		91,601
	Assets held for sale (2)		12,183		13,581
	Total current assets		1,080,672		865,365
	Property and equipment, net		345,518		339,833
	Goodwill, net		9,950		9,950
	Long-term investments		145,774		84,416
	Other assets, net		23,735		29,362
	Total Assets	$	1,605,649	$	1,328,926
LIABILITIES AND STOCKHOLDERS' EQUITY
	Accounts payable (1)	$	139,197	$	108,929
	Accrued compensation and payroll taxes		58,186		36,008
	Accrued rent		52,506		45,089
	Accrued income and other taxes		43,273		33,926
	Unredeemed stored value cards and gift certificates		43,045		32,724
	Current portion of deferred lease credits		10,406		9,798
	Other current liabilities		15,010		16,152
	Total current liabilities		361,623		282,626
	Deferred lease credits		60,087		57,758
	Other non-current liabilities		28,387		25,056
	Total non-current liabilities		88,474		82,814
	Total stockholders' equity		1,155,552		963,486
	Total Liabilities and Stockholders' Equity	$	1,605,649	$	1,328,926
	Current Ratio		2.99		3.06
(1) The Company has historically recognized ownership of merchandise inventory for financial reporting purposes at the point when it arrived at one of the Company's deconsolidation centers. With upgrades to merchandise systems and increased visibility, the Company will record merchandise at the FOB port, which is when risk of loss and title transfers to the Company. Merchandise inventory and accounts payable as of January 28, 2006 and January 29, 2005 have been adjusted by $31.0 million and $32.6 million, respectively, to reflect this change.
(2) Assets held for sale represent the assets of National Logistics Services subject to the sales agreement entered into during the fourth quarter of Fiscal 2005, which closed in February 2006. Amounts as of January 29, 2005 have been reclassified for comparative purposes.

* * * *

AMERICAAN EGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share amounts)
		Three Months Ended				Twelve Months Ended
		January 28, 2006		January 29, 2005		January 28, 2006		January 29, 2005
		(Unaudited)		(Unaudited)		(Unaudited)
Net sales	$	764,367	$	674,024	$	2,309,371	$	1,881,241
Cost of sales, including certain buying, occupancy and warehousing expenses		410,123		341,647		1,235,620		1,003,433
Gross profit		354,244		332,377		1,073,751		877,808
Selling, general and administrative expenses		160,869		142,386		538,091		446,829
Depreciation and amortization		19,149		18,304		74,578		68,273
Operating income		174,226		171,687		461,082		362,706
Other income (expense), net		4,378		3,343		15,885		4,129
Income before income taxes		178,604		175,030		476,967		366,835
Provision for income taxes		71,468		68,086		183,256		142,603
Income from continuing operations, net of tax		107,136		106,944		293,711		224,232
Income (loss) from discontinued operations, net of tax		405		(6,027)		442		(10,889)
Net income	$	107,541	$	100,917	$	294,153	$	213,343
Basic per common share amounts:
Income from continuing operations	$	0.72	$	0.73	$	1.94	$	1.55
Loss from discontinued operations		-		(0.04)		-		(0.08)
Net income per basic common share	$	0.72	$	0.69	$	1.94	$	1.47
Diluted per common share amounts:
Income from continuing operations	$	0.71	$	0.70	$	1.89	$	1.49
Loss from discontinued operations		-		(0.04)		-		(0.07)
Net income per diluted common share	$	0.71	$	0.66	$	1.89	$	1.42
Weighted average common shares outstanding - basic		148,112		147,094		151,604		145,150
Weighted average common shares outstanding - diluted		151,461		153,402		155,354		150,244
Total gross square footage at end of period:						4,780,187		4,540,095
Store count at end of period:						870		846

CONTACT:
American Eagle Outfitters, Inc.	OR	Financial Media Contact
Judy Meehan, 724-776-4857		Berns Communications Group
		Stacy Berns or Melissa Jaffin, 212-994-4660

EX-99

EXHIBIT 99.2

American Eagle Outfitters, Inc.
Fourth Quarter 2005
Conference Call Transcript dated March 1, 2006

Operator

At this time I would like to welcome everyone to the American Eagle Outfitters fourth quarter earnings results conference call.

[OPERATOR INSTRUCTIONS] Thank you. At this time, I will turn the call over to Judy Meehan, Senior Director of Investor Relations. Ma'am, you may begin your conference.

Judy Meehan - American Eagle Outfitters Inc - Senior Director, IR

Good morning, everybody. Thank you for joining us today. With me from management are Jim O'Donnell, Chief Executive Officer; Susan McGalla, President, Chief Merchandising Officer; and Joan Hilson, Senior Vice-President, Finance. And also joining us for the Q&A session is Dale Clifton, Senior Vice-President, Finance and Chief Accounting Officer.

If you need a copy of the fourth quarter press release it is available on our website AE.com or please call Erin at 724-779-6076. Before we begin, I need to remind everyone that during this conference call, members of management will make certain forward-looking statements based upon information which represents the Company's current expectations or beliefs. The results actually realized may differ materially from those expectations or beliefs based on risk factors included in the management's discussion and analysis sections of our quarterly and annual reports filed with the SEC. Now, I would like to introduce our CEO, Jim O'Donnell.

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

Thank you, Judy. Good morning, everyone. I'm quite pleased with our 2005 annual performance, which followed outstanding results in 2004. Sales rose 23% driven by a comp increase of 16%. We exceeded the $2 billion milestone for the first time in our history. For the second consecutive year, our operating margins reached new highs, rising to 20% from 19.3% last year. Annual earnings per share increased 27%, to a record $1.89 compared to $1.49 from continuing operations last year. This clearly demonstrates the strength of our brand and a strong execution throughout the Company.

For the fourth quarter, our sales increased 13% and EPS exceeded last year by 6%--before one-time items. Although our goal was to deliver higher earnings growth for the quarter, we managed the business well through a period that was less robust than we planned. We feel good about achieving a 23% fourth quarter operating margin, our second highest ever. I believe this reflects the strength of our people, appeal of the brand and disciplined operating procedures.

During the quarter, we made a decision to sell the National Logistics Services, a business that handled logistics for our Canadian stores as well as third party customers. The sale reduced our fourth quarter EPS by $0.01. However, going forward, we expect a reduction in our Canadian distribution costs which will more than offset the write-off. We entered 2006 with several well-defined growth strategies. Susan will speak about the AE brand, intimates and AE.com in just a moment. First, I will comment on our real estate strategy, international and Martin + Osa.

In 2005, our square footage increased 5%. We opened a total of 36 stores, and closing 11 underperforming locations, and remodeled 43 stores. New stores are performing extremely well with sales per square foot of $454 during the first year, which is just under our mature store sale base of $472 per square foot. New stores are quickly profitable and in 2005 produced a four wall profit margin of 23% with a first year ROI of 100%. Remodeled store economics are also quite positive. After a renovation, average store sales increased 46% and sales per square foot increased 14% on a square footage increase of 29%. And currently, we have about 160 stores yet to remodel. In 2006, we will open approximately 50 new stores and remodel about 50 locations, leading to a 7% square footage growth. New stores will open in malls, as well as new lifestyle centers, where our store performance has been very productive.

Over the past year, we took initial steps to enter Japan. Although we have decided not to move forward with the agreement we discussed on our last conference call, we are pursuing other opportunities. This is a longer-term growth initiative but given our success from AE.com in Japan, the vast size of the Japanese consumer market and the strong demand for American brands, we are optimistic about our prospects.

And finally, this is an exciting time for us, as we prepare for the launch of our second major U.S. brand, Martin + Osa. The store design is complete and as we announced in a separate release this morning, we have finalized four leases with two more in its final stages. The stores are located in premiere shopping centers across the country and are scheduled to open this fall. Our merchandise assortments are a unique blend of sport, classic, and denim influences, which addresses the 25 to 40-year-old customer in a way that is not currently being done. We look forward to introducing you to Martin + Osa this fall. Now I will turn it over to Susan.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Thanks, Jim. Good morning, everybody. In the fourth quarter, we achieved strong sales results, yet we did not meet our initial plans. Our holiday line was good but not our best. While the sales trends we saw during the first half of the year did not continue into the fourth quarter, we managed our business well and carefully positioned our markdowns and promotional cadence. This enabled us to sustain strong overall operating margins and importantly brand integrity.

During the holiday season, customers responded positively to the gifting environment offered at our stores. We executed well in a number of categories, delivering solid key items. There were a few areas where the fashion basics were not as strong as they should have been, specifically women's sweaters and cold weather accessories. Overall, our women's division produced comps in the mid-single digits and men's continued to show strong results with a mid-teen comp increase. Our highest comp categories included men's and women's knit tops, graphic tees and jean, as well as men's fashion accessories and women's intimates.

AE.com performed well during the quarter. Sales increased over 50% making the AE online shopping experience the best in our space. The excitement, brand energy and innovation will be an ongoing area of focus for AE.com. Our loyalty program, AE All Access Pass which launched in the third quarter has performed well, exceeding our enrollment plan by 50%. Redemption rates to date have met our expectations. AE All Access gives us a direct one on one connection with our best customers and importantly allows us to replace direct mail coupons with a program that rewards brand loyalty.

We entered 2006 with well defined strategies to grow our brand and increase store productivity. Leveraging the success we've had making AE jeans number one in market share for 15 to 25-year-olds according to NPD data we are building brand defining items in other select categories. Near-term opportunities line the knit area including polos, graphics, fashion tees and tank tops. As we announced yesterday we are looking forward to the launch of our new intimates sub-brand, aerie by American Eagle, this coming fall. Aerie is a natural extension of our brand DNA, building upon our experience and the successful track record we've enjoyed in intimates over the past several years. We will launch with a dynamic assortment of bras, panties and dorm wear, which is designed to take our girl from the dorm room to the coffee shop. I am confident that we will build a meaningful sub-brand with aerie and that rests on the proven success we've had with intimates and the highly experienced team we have driving this business.

Now, I would like to turn and touch on our spring plans. First, we are comfortable with our inventory content and level which supports the areas of growth and demonstrates a focused discipline in inventory management. We've had a positive response to the assortment so far, and our spring two update arrived in stores on February 21, right in time for spring break. We are absolutely committed and passionate about owning a spring break business which is an increasingly important event for our brand. We remain excited about our ongoing partnership with MTV, particularly around their spring break programming, and will continue this relationship throughout the year. Look for our next assortment update on March 29.

In closing, as we announced in a press release yesterday, I would like to say how thrilled we are to have Kathy Savitt joining the AE team as our new Chief Marketing Officer. Kathy brings broad marketing experience, strong brand vision and a proven track record for inspiring creative teams. I am excited about having her partnership as we continue expanding and driving the AE brand. Thanks. And now, I will turn the call over to Joan.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Thank you, Susan and good morning everyone. As you have heard, our strong brand position, solid merchandising and disciplined operations led to an extremely successful sales and earnings performance for the full year 2005. During the fourth quarter, we sustained high operating margins while absorbing expenses related to our key growth initiatives.

Now, let's take a look at the fourth quarter. Top line sales increased 13.4% to $764 million. Comparable store sales increased 7.8%, against a 28.6% increase last year. Fourth quarter sales reflected positive store traffic trends, resulting in low double digit increase in both units sold and transactions per store. Higher merchandise markdowns resulted in a low single digit decline in our average unit retail price and our average transaction value. Units per transaction increased slightly during the quarter. All geographic regions comped positively in the fourth quarter as follows:

Low double-digits in the southeast and southwest; high single-digits in the northeast and mid-Atlantic; mid-single digits in the west; low single-digits in the midwest; and high- teens in Canada.

Turning now to our margin performance, our gross margin of 46.3% declined 300 basis points from 49.3% in the fourth quarter of last year. An increase in markdowns partially offset by higher IMU led to a 210 basis point decline in the merchandise margin. Buying, occupancy and warehousing costs increased 90 basis points. Rent expense leveraged, which was offset by expenses related to the operation and sale of our Canadian distribution business. SG&A leveraged by 10 basis points to 21%, while absorbing costs related to Martin + Osa, intimates expansion and the launch of our new loyalty program. Our leverage was achieved through continued expense discipline in store payroll and a reduction in professional service costs. Also included in SG&A was an asset write-down for our Canadian distribution business and an increase in incentive expense due to the timing of accruals.

We generated a strong fourth quarter operating margin of 22.8% versus 25.5% last year. Other income for the quarter increased 31% to $4.4 million, reflecting a higher average cash and investment balance, on a higher investment yield, compared to last year. Our fourth quarter effective tax rate was 40%. This compares to 39% last year. The higher rate was the result of a $3.8 million, or a $0.02 per share, charge for tax on a planned repatriation to take place prior to the tax year ending July, 2006. For the first quarter, we expect our effective tax rate to approximate 39%. Income from continuing operations in the fourth quarter increased to $107.1 million, compared to $106.9 million last year. Fully diluted earnings per share increased to $0.71, which includes a $0.01 loss from the sale of NLS and a $0.02 charge due to the repatriation of foreign earnings. Strong cash flows resulted in a $223 million increase in cash, short-term and long-term investments, compared to the end of last year. This was after capital expenditures and share repurchases.

During the third and fourth quarters we repurchased 7 million shares, for a total of $161 million, leaving 3.5 million shares in authorization. We will continue to pursue share repurchases as a part of our overall corporate financial plan. Capital expenditures in the quarter were $23 million and for the year totaled $83 million, primarily related to our new and remodeled stores. For fiscal year 2006, we expect capital expenditures to be approximately $175 million. This is related to new and remodeled stores, our new Pittsburgh headquarters and new data center, as well as construction of a new distribution facility in Kansas, to support Martin + Osa, intimates expansion and potentially our direct business.

Now regarding inventory. Historically, we have recognized ownership of merchandise inventory for reporting when it arrived at one of our deconsolidation centers. With upgrades to our merchandise systems, which have provided greater visibility further back in our supply chain, we will now record merchandise based on receipt at the shipping port. Merchandise inventory has been adjusted by $31 million for 2005 and $33 million for 2004 to reflect this change. At the end of the fourth quarter, total merchandise inventories increased $40 million to $211 million compared to last year. Our inventory per square foot at cost increased 16% and our units per foot were up 10%. The increase in inventories due in part to our intimates expansion plans, and our initiatives to position AE as a destination for men's and women's knit tops and jeans. Looking ahead to the end of the first quarter, we expect ending inventory to increase in the low double-digits, at cost per foot, compared to last year.

With respect to earnings guidance, at this time we expect our first quarter earnings per share to be in the range of $0.36 to $0.38. This compares to earnings of $0.35 per share last year. Our first quarter guidance includes stock option expense of $0.02 per share. For the year, we expect stock option expense to total $0.04 to $0.05 per share. We have built a strong platform for the future and are committed to our growth initiatives. We enter 2006 optimistic about our brands and are well positioned to deliver annual earnings growth in the double digits. Thank you. And now we would like to open the call for questions. We ask that you please limit yourself to one question to allow us to hear from as many of you as possible.

Operator

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Tom Filandro with FIG.

Tom Filandro - FIG - Analyst

Thanks. Questions, sort of a dual question, can you give us a sense of the IMU outlook for the spring season in '06? I heard you mention some opportunity was achieved in the fourth quarter. And given the change in the pricing, the tiered pricing strategy, just a general view of the average unit retail pricing heading into the spring season? Thank you.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Hi, Tom. It's Joan Hilson. I will take the question on IMU. And our view on IMU is we have experienced significant IMU growth in the past five years, and certainly in the fourth quarter we experienced it. As we look forward, we are always mining for IMU opportunities but as we structure our operating plans for '06 we expect modest increase in IMU and continue to drive that line.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Okay. Tom, hi, I will take the tiered pricing part of your question. First of all, I want to reiterate that one of our unique competitive advantages in the way that we're positioned is the way that we're priced and the way that we deliver value to our are customer, and we will -- we are committed to that, absolutely. And--but we are in select categories, really letting the talent of our design team take some key categories and develop tier pricing to help us build market share and really compelling product in those categories which is working very, very well for us.

Tom Filandro - FIG - Analyst

Does that suggest, Susan, that AURs heading into spring are moving in a more positive direction?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

I would tell you that we're counting on conservative positive improvement.

Tom Filandro - FIG - Analyst

Thank you very much. Best of luck to you all.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Thank you.

Operator

Your next question comes from the line of Margaret Mager with Goldman Sachs.

Margaret Mager - Goldman Sachs - Analyst

Hi. A couple of things quickly. I know you said your market share is number one in your target zone. Can you give us any numbers around that from your NPD data? And on your knits opportunity, where you think that is probably the biggest opportunity in front of you, can you elaborate on what that means? It is a pretty broad statement. And then lastly, on the markdown front, would you expect the markdown rates to continue at the level that you saw in the second half of '05 into the first half of '06? I'm obviously noting that you had very strong gross margins last year in the first half and then they weakened a little bit in the second half, but the markdowns situation I would think is normalizing, if you will, and if you could just help us understand that whole dynamic, it would be very helpful. Thanks.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Okay. Margaret. I will take the first two market share questions on denim and knits and then Joan will take your markdown questions. As it relates to the NPD data, our growth took us to -- with what was reported in the third quarter for NPD -- to 12.7% market share in our space when you combine men's and women's and we're very proud of that number and the number one ranking that we hold at this point. And then as it relates to the -- you mentioned it as a broad statement, when we mentioned we are going after knits, what we are doing is taking the discipline - -- we're very, obviously very high volume category for us as we sit today, but I will tell you, I think that there is a lot of improvement when it relates to trend, the way we're positioned, and the way that we're top of mind with our customer, that we can really go out there and take some core competencies on how we have internally approached our denim business, with the internal disciplines from our design to merchandising to planning teams, and we're taking those disciplines and those winning practices and applying it to the knit business because we think there is a great return, there is a great market share opportunity, and it is obviously the great outfit with a pair of jeans.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Margaret, with respect to the markdowns, as you noted, and as we've mentioned in the past, our initial plans for the third and fourth quarter were higher than the performance we achieved, and we were up against a record margin performance. But within our first quarter guidance, we have assumed a more realistic markdown rate, which is above the first quarter of last year. This rate, we believe, allows us to present fresh assortments and to also provide seasonal updates to our customer on a normal cadence. Our margin expectation for the first quarter is strong, yet it is below last year. And we believe this will lead us to deliver again and to sustain a high operating margin rate.

Margaret Mager - Goldman Sachs - Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Dana Cohen with Banc of America Securities.

Dana Cohen - Banc of America Securities - Analyst

Good morning, everybody. Just following up on, that I presume your comments about margin relate to the spring, not just the first quarter. Second, can you also talk about sort of SG&A, because if you look at SG&A for the year last year, it was up about 20, but it was up 13 in the fourth quarter. What should we be thinking of the growth in dollars for '06 given some of these investments? And then lastly, I just want to make sure I understand the inventory growth is -- can you give us a sense of how much is that is for intimates and how much for knits in terms of the increase?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Okay, Dana, let me take that. With respect to the SG&A leverage, we have, as you know, as we've mentioned, absorbed expenses related to our growth initiatives, M+O, our new loyalty program, the intimates expansion as well as international. We also made a decision in the fourth quarter to sell our Canadian distribution business, all impacting our SG&A costs. Our operating plans are structured to leverage slightly at a mid-single digit comp. So for the year last year, we leveraged 50 basis points, after investing in all of these growth initiatives, and we feel that that is a strong operating margin performance, and go forward, we expect light leverage with these costs in there at a mid-single digit.

And with respect to our inventory growth, we are behind the key focus categories that Susan mentioned. And we believe that our inventories are positioned in the right place, intimates is in there, denim is in there, knits is in there, and we are pleased with the balanced assortment that we have today.

Dana Cohen - Banc of America Securities - Analyst

Is the bulk of it intimates? Just give us a sense, is it 50/50, intimates, the other categories, just any sort of break down?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

I wouldn't even quantify it to you in that way. I think the best thing I can tell you is that we are on our plan for the beginning of February and where we wanted to be positioned in inventory. You may see that moderate slightly through the quarter, and come down a tad, but we are committed to growth and we will be investing in businesses that we're going after. But in a very responsible, disciplined way.

Dana Cohen - Banc of America Securities - Analyst

And then the comment on gross margin, I just want to make sure your comments, were they for Q1 or I presume for the spring as well.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Sorry, they are for the spring.

Dana Cohen - Banc of America Securities - Analyst

Great. Thank you.

Operator

Your next question comes from the line of Jeffrey Klinefelter with Piper Jaffray.

Jeff Klinefelter - Piper Jaffray - Analyst

Yes, Susan, a question for you on the merchandise plan for the spring/summer season, clearly off to a strong start here in February with knits and with denim and shorts, it sounds like. Where, considering your strong performance last year, where do you see the greatest opportunity? Is it more in having more of the knits and having better product in the knit category than having a different flow of inventory or different pricing? Can you just give us a sense for, without giving away the secrets, of course, where are -- where really are your biggest category or flow opportunities for the spring season?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

I think that's really two-fold. And number one is we're very -- you commented on our -- we're off to a good start, and we certainly are, we're proud of the assortment that we're offering in our store right now. It is clearly, I think, speaking to our girl and our guy and their spring break mentality and the fact that they're ready to move into the spring with some -- there are some new trends certainly reflected very well in our assortments right now. You mentioned the short business. And I won't go any further speaking to those types of trends. But as it relates specifically to knit, I reiterate the fact it is obviously a big volume driver for us but I will tell you I have not been happy with the consistency on how we've delivered fashion basics in the trend side of where knits should be positioned, and we have worked very, very hard, myself with Leann Nealz our Chief Design Officer in New York, to get the right talent in that area, particularly the women's k nit area to make sure that we're delivering upon that balanced approach that drives key item volume and consistency in that area in a more compelling way.

Jeff Klinefelter - Piper Jaffray - Analyst

So that would be, to clarify, that within knits, a better balance of fashion and basics, would that be more of either one, or is it not that specific, and then secondly on spring break, we're hearing a lot about some of the spring break business shifting into April with an Easter shift. Do you have any updated thoughts based on your own research on kind of where the timing of spring break sits this year versus last year?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Okay. A couple of things. Let me, first of all, as it relates to the balance of fashion basics to trend, the biggest example I can give you is if you look to holiday and the mix that I indicated that we had in women's sweaters. Quite honestly we had a better fall sweater assortment than holiday sweater assortment because we had the fashion basics, the really key item drivers that our girls, like a no-brainer she pops on her sweater like a T-shirt and we had that in the fall and didn't reflect that same kind of strength in holiday and it is that kind of thing that we need to be thinking about. And as it relates to the spring break effect with the later Easter, quite honestly we maybe see a slight benefit to a later Easter but for us, it is really a change of the fact that we know we're in the high school and college demographics, so a later Easter means the high school spring breaks will be right around the Easter time in April and that certainly drives mall tr affic into the month of April, but our college spring breaks we see very little change in the cadence of that, and that is a very, very strong driver for us, in weeks two, three and four of March.

Jeff Klinefelter - Piper Jaffray - Analyst

Okay. Great. Thank you very much.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Sure.

Operator

Your next question comes from the line of Jeff Black with Lehman Brothers.

Jeff Black - Lehman Brothers - Analyst

Yes, thanks. Congrats on a nice quarter. I guess for Susan, could you give us a little color on what you think the shift to more intimates means in terms of comps, as we look at AURs versus units per transaction? And when would you expect this initiative to be incremental to the comps? Can we see an impact in '06? Thanks.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

A couple of things on there. I would tell you that right now, that business is just sizable enough that it is currently contributing to our comps. It contributed to our comps in the fourth quarter. And we see that obviously being an even more important piece as we grow it on -- as we move into this year and beyond. The average unit retail of that business actually has improved. Now it is lower than the main brand runs, but it is improving because of the way that we're balancing underwear and dorm wear and that piece of the business.

And then the last thing that I will leave you with is because of -- again, I can't reiterate enough, this is not a new business for us. We have been working, we have been succeeding, we have experienced disappointments and learnings, over the last five years in this business, and in a very intense way, over the last two years, we have different real estate models and levels of assortment that we have been looking at out there. We know this business is incremental to the main brand and that is another reason that we are very confident and excited about growing this business on a go-forward.

Jeff Black - Lehman Brothers - Analyst

Okay. Fair point. Thanks. Good luck.

Operator

The next question comes from the line of Stacy Pak with Prudential Equity Group.

Stacy Pak - Prudential Equity Group - Analyst

Hi, a few things. Susan, first of all, I was hoping you could touch a little bit more on intimates. Will you guys be opening larger stores to accommodate it? And do any of the people who have been hired come from intimate apparel companies? And then in terms of SG&A, how much are you guys going to be investing in Martin + Osa, in intimates and international in '06 relative to '05, i.e. should we grow it in dollars similar to fourth quarter or first half? And then finally, on inventories, what is the percent at markdown this year versus last, and should we expect the inventory level to remain about at this kind of level for the whole year.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Do you want to take the SG&A piece first and then, Joan, do you want to take that?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Sure. What I can comment on, with respect to Martin + Osa, Stacy is, that our fourth quarter expense related to Martin + Osa was roughly $0.02 per share and for the full year it is roughly $0.06 per share, as we anniversary our investment, we expect 2006 incremental expense to be lower than the 2005 incremental expense. And then the last question you had was the percent markdown this year versus last year, I think, Stacy, and the way we commented on that, is that we realize that in the third and fourth quarter, that we have positioned our plans higher than we achieved and therefore had experienced a high markdown rate. As we look forward, into the spring of '06, our guidance includes a more realistic markdown rate, which is above the first quarter of last year. And we also mentioned that we would expect that for spring as well in its entirety. The rate as I mentioned, allows us to manage fresh assortments and seasonal update, but, we believe our margin expecta tion for the first quarter is strong. Yet it is below last year. And--.

Stacy Pak - Prudential Equity Group - Analyst

One follow-up. The Martin + Osa, what about the other investments? I mean you just said Martin + Osa but what about intimates and international or were you talking about all of those when you said incremental expense would be lower in '06?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

What I can comment on at this time is the Martin + Osa expense, and that was just Martin + Osa, Stacy.

Stacy Pak - Prudential Equity Group - Analyst

Okay.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

We are certainly investing in intimates as it relates to real estate and our store real estate approach to aerie. And Stacy, I will actually take it from there and I'm pleased to be able to talk to you guys and refer to intimates as aerie by American Eagle, so our aerie sub-brand as it relates to the real estate strategy, you asked if we are going to be opening larger stores. What we're very thrilled about right now is not only does aerie have a dynamic real estate possibility, because not only do we have shop and shops within our four walls of American Eagle, we are cautiously approaching our side by side and free standing locations as we move forward, and get more information, as we expand the sub-brand.

So we really like this multi-pronged approach in terms of getting growth out of intimates, but when we open up our current four wall American Eagle stores, we really like a 900 to 1,000 square feet of space for aerie, and it does nothing but succeed in that environment. So that's a great thing for us on a go forward, as we expand and remodel stores. As it relates to people and talent, we have some people on our design team that have experience directly in the intimates area, but Betsy Schumacher who we brought in, she doesn't have specifically intimates background but has a wonderful background as it relates to strategy and new businesses, so we just really feel the dynamic of the team is positioned to take this forward.

Stacy Pak - Prudential Equity Group - Analyst

Great. Thank you.

Operator

Your next question comes from the line of Todd Slater with Lazard Capital Markets.

Todd Slater - Lazard Capital Markets - Analyst

Good morning. Good numbers again.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Thank you.

Todd Slater - Lazard Capital Markets - Analyst

Just, I may have missed it so I apologize, could you just talk about the comp growth you're seeing and expect to see in the denim area? Just talk a little bit about how denim is tracking both as a percent of revenue and a percent of inventory ownership? In other words are you turning it the way you hope to, and sort of how is it performing? My second question, just on the inventory ownership, just go over a little bit where the biggest areas of the increase are again? Up 16% per square feet, it's obviously tracking ahead of your sales per square foot numbers, and then lastly, in the SG&A, if you back out the incremental cost issues that you mentioned, like Canadian assets, write-down, Martin + Osa expenses and so forth, how much would the SG&A have been leveraged by -- on your 7% comp and what is sort of the leverage point on comps going forward with the Martin + Osa and other expenses you expect? Thank you.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

All right, Todd, I will take your denim question. As it relates to denim and I would tell you we are turning denim slightly better than a year ago. We're very happy with its current performance. And this being not only certainly a powerful market share player for us, but also as well, and even more importantly, it is probably the most important component of our lifestyle, and what our girl and guy care about in terms of when they get dressed in the morning. So we will continue to be improving and growing this business throughout the year. You want to take the inventory, Joan?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Yes, with respect to the inventory, our inventory, as we mentioned, Todd, is positioned for growth, particularly in the categories we've talked about, intimates, knits and our denims business, as well as, we have some growth in their positioned for men's.

We have focused the inventory content on the categories that we're going after. We believe it is appropriately positioned and balanced, and it provides us an opportunity for potential upside. But it is a very well-managed position. With respect to the SG&A question, I would roughly say that without some of those costs, it would be about an 80 basis point leverage in the fourth quarter.

Todd Slater - Lazard Capital Markets - Analyst

Okay. And looking forward in '06, what's sort of the leverage point there on comps?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

As I mentioned, we look at our operating plan to leverage at a mid single-digit, slightly leverage at a mid-single digit, with you know -- including a view of investment in all of our critical growth initiatives.

Todd Slater - Lazard Capital Markets - Analyst

Okay. And just a follow-up on the inventory, so you're planning for -- the inventories are obviously up a lot higher than the comp numbers are running, so the inventory is turning more slowly, but you're planning for upside there? On the comps? Upside from the current levels?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

For clarity, we have positioned our inventory in a way that allows us to achieve opportunities so that they clear itself. We also, as I mentioned, as we look to the guidance in our first quarter end, that that is moving toward a low double-digit, so we are also managing our inventory flow, Todd.

Todd Slater - Lazard Capital Markets - Analyst

Low double-digit on the inventories, or the comps?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

On the inventories for the end of Q1.

Todd Slater - Lazard Capital Markets - Analyst

Got it. Okay. Thank you.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Thank you.

Operator

Your next question comes from the line of Richard Jaffe Stifel Nicolaus.

Richard Jaffe - Stifel Nicolaus - Analyst

Thanks very much, guys. Very good quarter. A couple of follow-on questions. If you could talk about marketing initiatives obviously with the staffing up we've seen. What you will be doing and how much more you might be spending year-over-year, if I could just follow on the Canadian comment that is say that the sale of the distribution center, and the possible savings, if you could make an effort to quantify that a little bit, that would be helpful. And if you could talk about average unit retail in store, it appears to be going up, and wondering -- I'm wondering what is driving that? Three at once. Thank you.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

I will take the marketing initiatives and AUR. Do you want to go ahead and take the Canadian.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Actually, Dale is going to speak. Dale Clifton will speak to the Canadian sales.

Dale Clifton - American Eagle Outfitters Inc - SVP-Finance, Chief Accounting Officer

Hi, Richard, how are you?

Richard Jaffe - Stifel Nicolaus - Analyst

Hi.

Dale Clifton - American Eagle Outfitters Inc - SVP-Finance, Chief Accounting Officer

The NLS transaction was very strategic for us, and as you know, we did incur a loss for Q1, expect some residual loss -- I'm sorry, Q4, some residual loss and carry over into Q1. But going forward we expect that we'll save $0.01 to $0.02 in earnings over the course of the year on an annual basis in reduced distribution and logistics costs in Canada.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Okay. As it relates, Richard, to average unit retail, and what you're seeing, our pricing positioning in our store right out is actually not very different from a year ago. Again, as I mentioned earlier in the call, we're committed to the value side of our proposition, and in select categories, where the product and trend command it, we are very, very successfully working on tiered pricing, again in select categories in the brand, and with really no price resistance. And the other thing I will tell you, we are very, very proud, our ticket prices mean something. We're a full priced retailer, we sell a very large amount of our inventory at ticket price.

And then as it relates to marketing initiatives, I think you can expect to see our spend as a percent of sales remain constant, we're not looking at the percent of sales to really take that up. I think it is a very robust number and we manage it well. We are very excited about the marketing initiatives we have going on, I keep talking about our passion around owning spring break, that is a big initiative for us this year, we're doing some grass roots marketing, we're at the college basketball arenas, we're doing some contests in some events that have been very well received, and woven through all of that is our live your life tag line that we are on a mission to really make that so top of mind with our girl and our guy and every marketing effort that you see us do, whether it is in the magazines, Maxim, Rolling Stone, 17, Teen, Vogue, whether it is our store experience or our online environment, you will see us really standing behind live your life.

Operator

Your next question comes from the line of Kimberly Greenberger with Citigroup.

Kimberly Greenberger - Citigroup - Analyst

Great. Thank you. Good morning. I think there's something in buying occupancy and distribution that I don't really understand so I would love some help on it. It seemed, I think you said you had negative leverage of 90 basis points in the fourth quarter on the 7.8% comp increase. So if there are some pressures in there that you could help me understand, that would be great.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Sure, Kimberly. It's Joan. The situation in BOW, as we call it, is we have NLS in there as well, and we also have -- we did experience some leverage in rent which was a positive, but the decision to sell the Canadian distribution business is the biggest piece of that. So that is probably what wasn't included in your model.

Kimberly Greenberger - Citigroup - Analyst

Okay. Joan, could you tell me what the charge was in the gross margin line for the -- for NLS?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Sure. Let me--.

Kimberly Greenberger - Citigroup - Analyst

I think you said it was $0.01.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Yes. And I believe that would be margin level, Dale, do you have that number?

Dale Clifton - American Eagle Outfitters Inc - SVP-Finance, Chief Accounting Officer

Yes, the pure dollars are about $1.3 million that were included in the buying, occupancy and warehousing. Kimberly, in addition to that we had incurred an operating loss through the NLS business of about $1 million, it was incremental to last year as well. So the combination of those two things really deleveraged the buying, occupancy and warehousing from the distribution side.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Yes, against a rent leverage of about 40 basis points.

Kimberly Greenberger - Citigroup - Analyst

Okay. I was just doing a quick calculation, it looks as though if buying, occupancy and distribution would have been flat year-over-year instead of down 90 basis points, it would have been almost a $7 million differential, so we've got $1 million on the operating loss for NLS, $1.3 million on I guess the loss on the sale, so I'm still coming up short, maybe by $3.5 million.

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Okay. You know what we will do is we will take that away and we will come back to you on that.

Kimberly Greenberger - Citigroup - Analyst

Great. Thank you.

Operator

Your next question comes from the line of Dorothy Lakner with CIBC World Markets.

Dorothy Lakner - CIBC World Markets - Analyst

Thanks, good morning everyone. I wanted to ask Susan about the intimates business again, if you could just look at the margin potential versus the core business, and also how the bra test is going, when you expect to get some recent results from that. And then for Jim, what the next steps are for international expansion in Japan, and finally, just the timing on the new home offices and distribution center. Thanks.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Jim, do you want to take the international and home office first?

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

Yes, let me take that. Dorothy, as I stated in my presentation, that we had a little change in course in our Asian operation, what we're doing now, we have a number of different options that are available to us, and I'm just trying to evaluate which one would be the most expeditious for us and one that would put the least amount of strain on the American Eagle brand. I would say that we would have something much more definitive to speak to in probably third quarter of this year, but we're still very optimistic about the Asian market. We have -- we do have opportunities in other countries there, but we feel strongly that Japan should be the entry point, and hopefully--.

Dorothy Lakner - CIBC World Markets - Analyst

Do you feel strongly that you need a partner there?

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

I don't feel as strongly as I did after some due diligence. I think it would be beneficial to have one, but I'm not sure how the structure would work as it relates to ownership and also overseeing the operations.

Dorothy Lakner - CIBC World Markets - Analyst

Okay. So you might consider going alone?

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

With some minority help, yes.

Dorothy Lakner - CIBC World Markets - Analyst

Okay. Great.

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

That is one of the options. The headquarters, right now, we're on course to move into the first part of our growth and expansion into the downtown Pittsburgh market. There are two structures, one is already constructed, which we call Quantum II, and we expect, based on our current schedule to move in there sometime around late spring of '07, and in Quantum III, it will probably be spring of '08.

Dorothy Lakner - CIBC World Markets - Analyst

Okay. Great. And the distribution center?

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

On the distribution center, we are expanding approximately 530,000 square feet in Ottawa, Kansas, where we already have an existing facility of approximately 400,000 square feet. That is scheduled right now to, if all things go well, we could be operational mid '07.

Dorothy Lakner - CIBC World Markets - Analyst

Okay. Great.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Hey, Dorothy, to sum up your questions on aerie, as it relates to margin, we have a track record here, and our track record has shown us that the margins for aerie are at or slightly above that of the main brand which obviously is one of the reasons this is so attractive us to, and to answer your question on bras, we mentioned that we were putting a bra test out there for spring of this year, in about 100 stores. And we've -- we have about a month under our belts and we've learned a lot and have been very pleased with our results, and the learnings and are looking to expand that into the fall of this year.

Dorothy Lakner - CIBC World Markets - Analyst

Okay. And any sense of the number of stores you might expand that to?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

We're hoping by the fall time period it will be at least double that.

Dorothy Lakner - CIBC World Markets - Analyst

Great. Thanks. Good luck.

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

Judy, I think we should just take three more and that will be it.

Operator

Your next question comes from the line of Adrienne Tennant with Wedbush Morgan.

Adrienne Tennant - Wedbush Morgan - Analyst

Good morning, congratulations.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Thank you.

Adrienne Tennant - Wedbush Morgan - Analyst

Just a couple of questions, I guess Susan, the first question would be, kind of as you're looking at back to school, and how strong denim was last year, can you give us any color on kind of the penetration of denim last year, and what you're thinking about in terms of categories that can either replace some of that penetration, as well as some of the AUR increase there? And then secondly, when you look at the historical sales productivity, it looks like you're reaching new levels, new highs, where do you think that can go? Thanks.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

All right. First of all, Adrienne, as it relates to denim, we are, as I told you, we spent years, every month of the year, we're constantly working on what our next strategy in denim will be and back to school is the most important time period for launching newness. The one thing I will tell you is that we have had in work, for the past eight months, since we launched last back to school, is a positioning for this coming third quarter, a significant amount of newness that will be driven into our denim category. We are going to be leveraging all of our key fits that our girl and guy come to us for that we've built market share in, but we will be offering some new fits and also compelling, a compelling amount of newness in wash jeans.

So we are very excited and the fastest growing category, we will absolutely be anniversarying our value price point at $29 and $39.50 and making sure that we maintain that penetration. Our growth right now is actually coming at jeans over $40. So we are going to be very strategic about that. Very balanced in our price positioning. But we are very, very excited about where we're moving toward for back to school in denim. And then what was the other question?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

With respect to the, Adrienne, with respect to the sales productivity, our goals are to achieve $550 to $600 per square foot and we believe that we're seeing strong productivity in our stores, we have seen historical levels that were relatively high but at this point we do have a larger store than we did historically, so we feel comfortable with that target of $550 to $600, with the growth initiatives that we have in the pipeline.

Adrienne Tennant - Wedbush Morgan - Analyst

Okay. And then Susan, just, did you have -- the penetration of denim, last back to school season.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Do we quote that? Yes, we're right around that 20% range that we have been -- that we've been running and we will be planning it somewhere around there, with the opportunity to grow it.

Adrienne Tennant - Wedbush Morgan - Analyst

Okay. And then just with the skinny leg silhouette, are you a believer in that and will you be playing that?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

We're certainly aware of that. I think the great thing about how we approach these trends is we certainly have to be aware of them, but our design team is working very hard to take that trend and figure out precisely what it means for our American Eagle girl, and you will see our American Eagle version of that trend for this back to school.

Adrienne Tennant - Wedbush Morgan - Analyst

Okay. Great. Thank you so much. Good luck.

Operator

Your next question comes from the line of Janet Kloppenburg with JJK Research.

Janet Kloppenburg - JJK Research - Analyst

Hi, guys. Congratulations.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Thank you.

Janet Kloppenburg - JJK Research - Analyst

Susan, just a question on the inventory. I know that you're saying at the end of the second quarter, I think I'm right, Joan, that it will be up double digits or at least at the end of the first quarter, going into the second quarter, and I know that coming out of the second quarter, last year, your inventories were increasing, and probably increased at a level you weren't comfortable with in hindsight, so other than Internet, maybe you could talk about the differences in the inventory build that is going on this year, versus last year, and why it may not be as risky as it turned out to be last year? And also, if you could comment a little bit about the bottoms business beyond denim, what is happening there, both on the men's and women's side, and if there is a -- if there is something happening in the non-denim business, if that continues into fall, as you see it today, well, right now. Thanks.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

Okay. As it relates to inventory and our comfort level with it, again, I have to reiterate, we are very comfortable, we have strategically worked through, throughout the fourth quarter, in a very productive way to sit where we sit today and we're very comfortable with where our inventory investments sit. We talked about those moderating slightly. But we're a growth brand. And we are strategically going to be investing as we keep saying today, but I think it is important, we are strategically investing in categories. I think the big thing for last year is hindsight is 20/20, of course, but as we mentioned in our comments, we were positioning our inventories to be aligned with sales growth rates at the first half of the year, and that did slow down slightly for us. So anyway, so we've given you our guidance for this year. We're very comfortable with where that sits. And how we're investing in our business. But we can't be afraid of this business, either.< /P>

We have successes, we are going to build upon those, and be very strategic about where we place our investments. So anyway, as it relates to the bottoms business, it obviously -- we're seeing success in denim, there are some other things happening in the business that you're probably seeing in trend, whether it is the short business, Capris, we're doing those things our way, and we do see those are -- those are some trends that have momentum that could continue into the third quarter. And then into the back half of this year, with the military trend, et cetera.

Janet Kloppenburg - JJK Research - Analyst

Susan, are they at the -- is that business growing at the expense of denim, or is it just augmenting the growth of the bottoms business?

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

No, it is not happening at the expense of denim at all. But I will tell you there is some shifting in some other bottoms businesses. And that is honestly what we're so good at as a brand. I feel really proud, we don't have last year-itis in this building and we really look at areas we want to push and then down trending categories we want to pull back on. And we have -- we're very well positioned right now in doing exactly just that.

Janet Kloppenburg - JJK Research - Analyst

Okay. Thank you.

Judy Meehan - American Eagle Outfitters Inc - Senior Director, IR

We will take one more question.

Operator

Okay. Your final question comes from the line of Holly Guthrie with Morgan Keegan.

Holly Guthrie - Morgan Keegan - Analyst

Thank you. And congratulations everybody. I have three questions. First, could you just break out the impact on the comps for including the charges there should be charges in it. Then second, just a further clarification, on gross margin, your guidance, and the impact of the AE All Access Pass, you could talk a little bit about your plan to maybe pull back some of the markdown activity at the store as the AE Pass rolls out and is implemented and is used? And do you think at some point this year some of those markdowns start to pull back? How does that flow? And then if you could, talk about any differences in your product planning, in '06 versus '05, either thinking more on the lines of immediate, a little bit of change in the cycle, and is there any -- are there any product delivery differences in the spring versus last spring?

Joan Hilson - American Eagle Outfitters Inc - SVP-Finance

Okay. Let me start off by saying with the shipping, there is little -- there is no impact, really to comps, relative to that item. As we look forward, in the mark downs, what we have been articulating I think is that we believe that we have taken a very realistic view of what we need to position markdowns at in our operating plans to support a good solid assortment on the floor, provide the freshness, and the seasonal updates. But also, we have to bear in mind that we are doing other things in the business to leverage that, and one of those would be a key initiative that is under way, which is size profiling, which will help us understand and provide better allocations to our store, by individual location at the size level, and we also continued to fine tune and leverage our profit logic tool. So -- and coupled with that, to Susan's point, our inventories are very strategically focused, and we feel good about where they are, we feel good about the inventory flow in spring, and as we look forward, with the tools that we have, believe that we can really manage that very well.

And Susan, and I, with the merchandise team and the merchandise planning team, and finance groups, are very much in lock step on managing our inventories and our margins to sustain the high rates that -- high operating margin rates that we've achieved. So that would be the comment on markdown. With respect to the AE All Access Pass, we recorded initial investments in that program in the fourth quarter. As Susan mentioned, that we feel very good about the enrollment exceeding our expectations, and feel good about how the program has been moving along. And we expect to be able to talk to you more about AE All Access, as we progress through the spring season and can better assimilate and have the good information to report back to you on.

Susan McGalla - American Eagle Outfitters Inc - Chief Merchandising Officer, President

And the other -- and the other thing I will add, in addition to what Joan said, we have been pulling back on markdowns in preparation for rolling out our AE All Access, so all of that double couponing and multiple couponing that quite honestly was going on in our business a couple of years ago, we have been working over the last 18 months to pull that back. That has happened and we obviously ran a very successful business last year, as we were working through that change and we sit today in position to reward loyalty productively. And again, our markdowns are focused productively into driving loyalty into our business. And then to answer your last question, we have no major product planning changes as we move into this year. The only thing I can tell you we are committed to our 10 core sets a year that offer newness to our customer, it is a very important part of the way that we run the business.

Holly Guthrie - Morgan Keegan - Analyst

Thank you.

Operator

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I will now turn the call back over for any closing remarks.

James O'Donnell - American Eagle Outfitters Inc - CEO, Director

I just want to thank everyone who participated on the call, and we will be speaking to all of you very soon. Thanks again. Bye now.

Operator

This concludes today's American Eagle Outfitters fourth quarter earnings results conference call. You may now disconnect.

EX-99

EXHIBIT 99.3

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

EX-99

EXHIBIT 99.4

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

Names Kathy Savitt Chief Marketing Officer

20-Year Marketing Veteran with Brand Building Expertise from Amazon.com

To Lead American Eagle Brand Marketing

Warrendale, PA, February 28, 2006 -- American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced that it has named Kathy Savitt as Executive Vice President, Chief Marketing Officer, American Eagle brand. In this role, Ms. Savitt will be responsible for Marketing and Brand Strategies for the AE Brand and ae.com. She will report directly to American Eagle brand President, Susan McGalla.

Ms. Savitt joins the Company from Amazon.com, where she was Vice President of Strategic Communications, Content and Initiatives. In this role, Ms. Savitt had responsibility for global brand management, external and internal strategic communications, entertainment and original programming, worldwide PR, and all offline marketing programs. Ms. Savitt also led Amazon's gifting and holiday customer experience programs. Prior to her position at Amazon, Ms. Savitt was President and Co-Founder of MWW/Savitt, where she counseled more than 150 corporate clients including many global Fortune 500 brands.

Susan McGalla, President and Chief Merchandising Officer, American Eagle brand commented, "Kathy brings more than 20 years of broad marketing experience, strong brand vision and a proven track record for inspiring and leading creative teams. In addition, her extensive experience with new product launches, e-commerce and global brand marketing fit perfectly with our growth goals for the AE brand." McGalla continued, "Together with our talented marketing team, I am confident that Kathy will build upon the strengths of the American Eagle brand to further our positioning as a premier lifestyle destination for 15-25 year olds."

American Eagle Outfitters (NASDAQ:AEOS) is a leading retailer that designs, markets and sells its own brand of laidback, current clothing for 15 to 25 year-olds, providing high-quality merchandise at affordable prices. AE's original collection includes standards like jeans and graphic T's as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle Outfitters currently operates 798 stores in 50 states, the District of Columbia, Puerto Rico, and 71 AE stores in Canada. AE also operates ae.com, which offers additional sizes and styles of favorite AE merchandise and ships around the world. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. For additional information and updates, visit www.martinandosa.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding growth of the AE brand. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors beyond the Company's control. Such factors include, but are not limited to the risk that we do not continue to grow and those other risks described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's filings with the Securities and Exchange Commission. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The Company does not undertake to publicly update or revise its forward-looking stateme nts even if future changes make it clear that projected results expressed or implied will not be realized.

CONTACT:       

American Eagle Outfitters, Inc.

Judy Meehan, 724-776-4857

OR

Financial Media Contact

Berns Communications Group

Stacy Berns or Melissa Jaffin, 212-994-4660

EX-99

EXHIBIT 99.5

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

Reports February Sales of $143.1 Million on a Same Store Sales Increase of 6%

Establishes First Quarter EPS Guidance

Warrendale, PA, March 1, 2006 -- American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced that total sales for the month ended February 25, 2006 increased 12% to $143.1 million, compared to $127.7* million for the month ended February 26, 2005. Comparable store sales increased 6% for the February period. The Company attributes the increase in February comparable store sales to the positive customer response to the Spring assortments, with positive performance in both our women's and men's businesses.

At this time the Company expects first quarter earnings to be in the range of $0.36 to $0.38 per share, compared to $0.35 per share last year. Guidance in 2006 includes the expensing of stock options. The first quarter guidance includes stock option expense of approximately $0.02 per share. For the year, we expect stock option expense to be approximately $0.04 to $0.05 per share.

* Please note that beginning in February 2006, we are now recording shipping charges from our AE Direct business as sales revenue, rather than as a reduction in cost of goods sold, as we have historically done.  Sales for the year-ago period have been reclassified to conform to the current presentation. The effect of this change on February 2005 sales was an increase of $0.7 million.

To access our recorded monthly sales commentary, please call 800-642-1687, conference code 3282124#.

In a separate press release issued this morning, the company announced its fourth quarter financial results. Management will hold a conference call to discuss the results at 9:00 a.m. Eastern Time this morning. To listen to the call please dial 877-601-0864 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com or www.streetevents.com. Anyone unable to listen to the call can access a replay beginning March 1, 2006 at 12:00 p.m. Eastern Time through March 15, 2006 by dialing 800-642-1687 and referencing confirmation code 3321190#.

American Eagle Outfitters (NASDAQ: AEOS) is a leading retailer that designs, markets and sells its own brand of laidback, current clothing for 15 to 25 year-olds, providing high-quality merchandise at affordable prices. AE's original collection includes standards like jeans and graphic T's as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle Outfitters currently operates 798 stores in 50 states, the District of Columbia and Puerto Rico, and 71 AE stores in Canada. AE also operates ae.com, which offers additional sizes and styles of favorite AE merchandise and ships around the world. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. For additional information and updates, visit www.martinandosa.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding first quarter earnings. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors beyond the Company's control. Such factors include, but are not limited to, the risk that our Spring assortments are not well received, and as a result, our first quarter sales, markdowns and/or earnings expectations may not be achieved, and those other risks described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's filings with the Securities and Exchange Commission. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The C ompany does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

CONTACT:       

American Eagle Outfitters, Inc.

Judy Meehan, 724-776-4857

OR

Financial Media Contact

Berns Communications Group

Stacy Berns or Melissa Jaffin, 212-994-4660

EX-99

EXHIBIT 99.6

American Eagle Outfitters, Inc.
February 2006
Recorded Sales Commentary Transcript dated March 1, 2006

Good morning. Welcome to the American Eagle Outfitters February 2006 Sales Commentary. I am Joan Hilson, Senior Vice President of Finance. During this call, I will make certain forward-looking statements based on our current expectations. Actual results may be materially different based on risk factors included in the Management's Discussion and Analysis sections of our quarterly and annual reports filed with the SEC.

We kicked off 2006 with a positive response to our spring assortments. February sales was slightly above our expectations. Total sales of $143.1 million increased 12% compared to $127.7 million last year. We achieved a comparable store sales increase of 6%, on top of a 32% comp last year.

Sell-throughs on our initial spring line were favorable, and on February 21st, we introduced a strong follow-on line, featuring new key items, seasonal updates and a focus on spring-break. Our next spring update will arrive in stores on March 29^th.

Looking at our results by division, our women's business achieved a positive mid single-digit comp and men's increased in the high single digits. The best performing spring categories included men's and women's knit tops -- which continues to be a key area of focus to build dominance in the market for our brand. Also men's and women's shorts and jeans performed well. We also continue to see growth in intimates, which strengthens our confidence in our new aerie sub-brand.

Turning now to the components of February sales, trends were generally quite positive.

Transactions per store were up in the low single-digits, generated by a stronger conversion on a slight increase in traffic. A mid single-digit increase in units per transaction and a slight increase in our average unit retail price resulted in a mid single-digit increase in the average transaction value; and strong sell-throughs were demonstrated by a high single digit increase in units sold per store.

Ae.com continued to show strong results, achieving a 50% increase in sales during February.

Our positive comp performance by week compares to comp increases last year as follows:

• Week one of low single-digit, compared to mid-forty;
• Week two of low single-digit, compared to low-twenty;
• Week three of high single-digit, compared to high-twenty; and
• Week four of low double-digit, compared to high-thirty last year.

All geographic regions comped positively in February as follows:

• The Northeast and Southwest achieved a high single-digit comp;
• The Southeast, Mid-Atlantic and West regions rose in the mid single-digits;
• The Mid-West was positive low single-digits; and
• Our Canadian stores performed at a high single-digit comp.

At this time we expect first quarter earnings to be in the range of $0.36 to $0.38, compared to $0.35 last year. Guidance in 2006 includes the expensing of stock options. The first quarter guidance includes stock option expense of approximately $0.02 per share. For the year, we expect stock option expense to be roughly $0.04-$0.05 per share.

Thank you for your interest in American Eagle and please note that in a separate press release issued this morning, we announced our fourth quarter financial results. We will hold a conference call to discuss the results at 9:00 a.m. Eastern Time this morning. To listen to the call please dial (877) 601-0864 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com or www.streetevents.com.

EX-99

EXHIBIT 99.7

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

MARTIN + OSA Announces First Retail Locations

Warrendale, PA, March 1, 2006 -- American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced the first group of retail lease agreements signed for MARTIN + OSA, its new sportswear brand targeting men and women aged 25 to 40. This fall, four locations will open in Tysons Corner Center (McLean, VA), Fashion Island (Newport Beach, CA), NorthPark Center (Dallas, TX) and San Francisco Center. Two additional locations are currently pending.

"MARTIN + OSA will be a unique and refreshing concept in the retail clothing landscape. As a result, we chose to be very selective about our initial store locations, specifically targeting premier centers across the country which offer the right co-tenancies and demographics that best support our brand," said MARTIN + OSA President, Ken Pilot.

SVP and Chief Operating Officer, Chuck Chupein added, "We are excited to partner with top developers to open the first MARTIN + OSA stores. Recent expansions at Tysons Corner, NorthPark, and San Francisco Center have added to a world-class tenant mix, making these centers even more dominant in key markets. In addition, Fashion Island's open air venue reflects a major component of our brand philosophy -- the outdoors."

MARTIN + OSA stores will range in size from 6,500 to 7,500 square feet.  The store design and customer experience was designed by Michael Neumann Architecture in collaboration with Richard Altuna.  The company plans to open 10 to 15 stores in 2007 in better shopping venues throughout the U.S.

MARTIN + OSA will carry men's and women's apparel, accessories and footwear that combine classics, denim and active sportswear in an innovative way.  The Brand will cater to men and women aged 25 to 40 who lead an active life.  Visit www.martinandosa.com for further information and to sign up for future updates.

American Eagle Outfitters (NASDAQ:AEOS) is a leading retailer that designs, markets and sells its own brand of laidback, current clothing for 15 to 25 year-olds, providing high-quality merchandise at affordable prices. AE's original collection includes standards like jeans and graphic T's as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle Outfitters currently operates 798 stores in 50 states, the District of Columbia, Puerto Rico, and 71 AE stores in Canada. AE also operates ae.com, which offers additional sizes and styles of favorite AE merchandise and ships around the world. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. For additional information and updates, visit www.martinandosa.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding the opening of MARTIN + OSA stores. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors beyond the Company's control. Such factors include, but are not limited to the risk that MARTIN + OSA stores do not open as planned or does not perform to expectations, and those other risks described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's filings with the Securities and Exchange Commission. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The Company does not undertake to publicly update or revise it s forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

CONTACT:       

American Eagle Outfitters, Inc.

Judy Meehan, 724-776-4857

OR

Financial Media Contact

Berns Communications Group

Stacy Berns or Melissa Jaffin, 212-994-4660

EX-99

EXHIBIT 99.8

NEWS RELEASE

AMERICAN EAGLE

OUTFITTERS

Declares Quarterly Cash Dividend

WARRENDALE, Pa., March 2, 2006 -- American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced that its Board of Directors has declared a quarterly cash dividend of $0.075 per share payable on April 7, 2006 to stockholders of record at the close of business on March 24, 2006.

American Eagle Outfitters (NASDAQ:AEOS) is a leading retailer that designs, markets and sells its own brand of laidback, current clothing for 15 to 25 year-olds, providing high-quality merchandise at affordable prices. AE's original collection includes standards like jeans and graphic T's as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle Outfitters currently operates 798 stores in 50 states, the District of Columbia, Puerto Rico, and 71 AE stores in Canada. AE also operates ae.com, which offers additional sizes and styles of favorite AE merchandise and ships around the world. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. For additional information and updates, visit www.martinandosa.com.

CONTACT:       

American Eagle Outfitters, Inc.

Judy Meehan, 724-776-4857

OR

Financial Media Contact

Berns Communications Group

Stacy Berns or Melissa Jaffin, 212-994-4660