PROXY STATEMENT SUMMARY

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of American Eagle Outfitters, Inc., a Delaware corporation, for use at the Annual Meeting of Stockholders to be held on May 23, 2017, at 11:00 a.m., local time, at Langham Place, New York, located at 400 Fifth Avenue, New York, New York and at any adjournment or postponement thereof. It is being mailed to the stockholders on or about April 12, 2017. (“We,” “our,” “AEO,” “us” and the “Company” refer to American Eagle Outfitters, Inc.)

Fiscal 2016 Business Highlights

In Fiscal 2016, we continued to build on our progress, generating sales and earnings growth despite a challenging retail environment. Greater consistency in financial results is a priority and was achieved in Fiscal 2016. AEO posted 2% revenue growth and adjusted earnings per share grew 24%⁽¹⁾ to $1.25⁽¹⁾, marking the second consecutive year of financial growth. Results were driven by merchandise improvements led by innovation, quality and value, improved costs and expense leverage. Cash flow was strong and we ended the year with $379M in cash.

Notice of Annual Meeting of Stockholders

The Board of Directors is divided into three classes. Each class of directors is elected for a three-year term. On the recommendation of the Nominating and Corporate Governance Committee (the “Nominating Committee”), the Board of Directors will fix the size of the board at six directors immediately following the Annual Meeting. The Board has nominated one candidate, Jay L. Schottenstein, who currently is a director of the Company, to be elected as a Class I director at the Annual Meeting. If re-elected,

Mr. Schottenstein will serve for a three-year term ending at the 2020 annual meeting, or when his successor is duly elected and qualified. The terms of Class II and Class III directors expire at the annual meetings to be held in 2018 and 2019, respectively.

Biographical information regarding Mr. Schottenstein, our nominee, and each incumbent director is set forth below as of April 1, 2017, together with a brief description of each individual’s business experience and qualifications.

The Board of Directors recommends that the stockholders vote “FOR”

the following nominee for Class I Director:

The following Class II Directors have been previously elected to terms that expire

as of the 2018 Annual Meeting:

The following Class III Directors have been previously elected to terms that expire

as of the 2019 Annual Meeting:

The following section discusses the Company’s corporate governance, including the role of the Board and its Committees. Additional information regarding corporate governance, including our Corporate Governance Guidelines, the charters of our audit, compensation and nominating committees and our Code of Ethics that applies to all of our directors, officers (including the Principal Executive Officer,

Principal Financial Officer and Principal Accounting Officer) and employees may be found on our Investors website at investors.ae.com. Any amendments or waivers to our Code of Ethics will also be available on our website. A copy of the corporate governance materials is also available in print to any stockholder upon request.

The Board is responsible for overseeing management, which is, in turn, responsible for the operations of the Company. The Board’s primary areas of focus are strategy, risk management, corporate governance and compliance, as well as evaluating management and making changes as

circumstances warrant. In many of these areas, significant responsibilities are delegated to the Board’s Committees, which are responsible for reporting to the Board on their activities and actions. Please refer to “Board Committees” for additional information on our Committees.

The Board as a whole has the responsibility for overseeing risk associated with our business, although our Board committees oversee and review risk areas which are particularly relevant to them. The risk oversight responsibility of the Board and its committees is supported by our management reporting processes, which are designed to provide visibility to the Board to those Company personnel responsible for risk assessment (including our management-led risk management committee), and information about management’s identification, assessment and mitigation strategies for critical risks. The risk areas identified by the Company include, but are not limited to, strategic, competitive, economic, operational, financial, legal, regulatory, compliance, and reputational risks.

Each of the Board’s Committees has oversight of risks associated with their respective principal areas of focus. In performing this function, each Committee has full access to management, as well as the ability to engage advisors. As set

forth in its charter, the Audit Committee is responsible for discussing with management our major financial or information technology and cybersecurity risk exposures and the steps management has taken to monitor and control those exposures. The Audit Committee also meets privately with the Company’s independent registered public accounting firm, the internal auditor and management, including the Chief Financial Officer, frequently. As set forth in its charter, the Compensation Committee oversees our risk management related to employee compensation plans and arrangements. The Nominating Committee manages risks associated with corporate governance policies and practices, and reviews any risks and exposures relating to director succession planning or the Company’s governance or social responsibility programs. While each committee is responsible for overseeing the management of those risk areas within their responsibility, the entire Board of Directors is also regularly informed of such risks through committee reports.

The Nominating Committee periodically reviews the appropriate size of the Board, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the Board. In evaluating and determining whether to recommend a candidate to the Board, the Nominating Committee reviews the appropriate skills and characteristics required of Board members in the context of the background of existing members and in light of the perceived needs for the future growth of our business. This

includes issues of diversity and experience in different substantive areas such as retail operations, marketing, technology, distribution, real estate and finance. The Board seeks the best director candidates based on the skills and characteristics required without regard to race, color, national origin, religion, disability, marital status, age, sexual orientation, gender, gender identity and expression, or any other basis protected by federal, state or local law.

The Nominating Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time. The Committee and the Board also believe that long-serving directors bring critical skills to the Board. Among other things, such directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as retailing. In addition, the

Nominating Committee and the Board believe that long-serving directors have knowledge of the business that tends to make them less dependent upon management for information and perspectives than may be the case with newer directors. Accordingly, while the Committee considers tenure as a factor in determining the nominee slate, it is not a critical or determinative factor.

Candidates may come to the attention of the Nominating Committee from a variety of sources, including current Board members, stockholders and management. All candidates are reviewed in the same manner regardless of the source of the recommendation. In the past, the Nominating Committee has retained the services of a search firm to assist in identifying and evaluating qualified director candidates.

The Nominating Committee will consider the recommendations of stockholders regarding potential director candidates. See “Submission of Nominations and Proposals for the 2018 Annual Meeting” for information regarding the submission of recommendations.

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

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

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

See “Related Party Transactions Policy” for information regarding our policy on related party transactions and transactions with affiliates of Mr. Schottenstein.

The current leadership structure of our Board consists of a combined Executive Chairman and Chief Executive Officer position held by Mr. Schottenstein and a Lead Independent Director appointed annually by the independent directors. The Board has determined that combining the positions of Executive Chairman and Chief Executive Officer is the most appropriate for the Company at this time. Having Mr. Schottenstein in the combined position provides unified leadership and direction to the Company and strengthens his ability to develop and implement strategic initiatives. Our Board believes that the current board composition, along with an emphasis on board independence, provides effective independent oversight of management. Mr. Jesselson was appointed as our Lead Independent Director for Fiscal 2016, and the Board anticipates appointing a new Lead Independent Director effective after the conclusion of the Annual Meeting. The Lead Independent Director is responsible for:

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

Meetings of Independent Directors

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

Self-assessments

We conduct self-assessments of the Board and its Committees annually. From time to time, these evaluations are conducted by a third party to refresh the process.

Director Orientation/Education

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

Throughout Fiscal 2016, we continued to regularly meet and speak with stockholders. On a quarterly basis, we invited top holders to visit with senior management. These discussions

were consistently reported to the Board, and management and the Board discussed comments and business insights provided by stockholders.

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

Stockholders wishing to communicate with the Board may send an email to boardofdirectors@ae.com or writing to: American Eagle Outfitters, Inc., 77 Hot Metal Street,

Pittsburgh, PA 15203, c/o the Corporate Secretary, Communications intended for a specific director or directors (such as the Lead Independent Director or non-management directors) should be addressed to his, her or their attention c/o the Corporate Secretary at this address. Communications received from stockholders are provided directly to Board members following receipt of the communications.

During Fiscal 2016, the Board met thirteen times and all members of the Board attended no fewer than 75% of the total number of meetings of the Board and of the committees of the Board on which they served. It is our expectation that

all incumbent directors attend the Annual Meeting of Stockholders. All current members of the Board were present at our 2016 Annual Meeting.

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

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

During Fiscal 2016, we entered into a store lease for a flagship store with SG Island Plaza LLC, an entity in which an affiliate of Mr. Schottenstein has a 25% interest. Pursuant to that lease we expect to pay rent, together with other expenses, of approximately $2.5 million annually (subject to annual adjustments), in addition to an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. The lease expires in September 2027. No rent was paid in Fiscal 2016.

In January 2016, we renewed our agreement for a period of two years with Retail Entertainment Design, LLC (“R.E.D.”) for in-store music program services. A majority of R.E.D. is owned by Jubilee-RED LLC, which is indirectly owned by trusts for which Mr. Schottenstein serves as trustee. Mr. Schottenstein does not receive any remuneration for serving as trustee of the trusts. Payments by the Company during Fiscal 2016 under the agreements totaled $660,000.

In June 2015, we entered into a one-year design services agreement with Artisan de Luxe, a company which is owned by trusts for the benefit or Mr. Schottenstein’s sons for an annual fee of $300,000. The agreement expired in June 2016.

In September 2013, we entered into a store lease with J Foothills, LLC, an affiliate of Mr. Schottenstein, pursuant to which we paid rent, together with other expenses, of

approximately $270,000 annually (subject to annual adjustments), in addition to an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. We incurred rent and other expenses under the lease of approximately $285,000 during Fiscal 2016. J Foothills, LLC sold the property and no longer has an interest in the lease as of December, 2016.

Directors who are employees of the Company do not receive additional compensation for serving as directors. The table below sets forth the compensation for directors who were not employees of the Company during Fiscal 2016. In addition, we pay attorneys fees related to the preparation and filing of director stock ownership forms with the SEC. We also reimburse travel expenses to attend Board and committee meetings and director continuing education expenses. The Compensation Committee is charged with reviewing and making recommendations to the Board regarding director compensation. In making its recommendations, the

Compensation Committee considers the overall size of the Board, the significant time committed by each of our directors to the performance of their duties, as well as peer data and input from the Compensation Committee’s independent compensation consultant. During Fiscal 2016, the Compensation Committee engaged FW Cook to conduct a comprehensive review and competitive assessment of the Company’s non-employee director compensation program. As a result of this assessment, the Board approved multiple director compensation changes effective for Fiscal 2016 as described below.

The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending February 3, 2018. In the event the stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider its appointment. In addition, even if the stockholders ratify the appointment of Ernst & Young LLP, the Audit Committee may in its discretion appoint a different independent registered public accounting

firm at any time during the year if the Audit Committee determines that a change is in the best interest of the Company.

Representatives of Ernst & Young LLP are expected to be present at the annual meeting to respond to appropriate questions and to make a statement if such representatives so desire.

The Board of Directors recommends that the stockholders vote “FOR” the ratification of

the appointment of Ernst & Young LLP as our independent registered public accounting firm

for the fiscal year ending February 3, 2018.

The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report for the year ended January 28, 2017 with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

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

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

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended January 28, 2017 for filing with the Securities and Exchange Commission.

Noel J. Spiegel (Chair)

Michael G. Jesselson

Thomas R. Ketteler

Cary D. McMillan

Janice E. Page

David M. Sable

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

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

The Board of Directors is asking stockholders to approve the American Eagle Outfitters, Inc. 2017 Stock Award and Incentive Plan (the “2017 Plan”).

Background and Reasons for the Proposal

The 2017 Plan is designed to aid the Company in attracting, retaining, motivating and rewarding employees, consultants, and non-employee directors of the Company or its subsidiaries or affiliates, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Company goals, and to promote the creation of long-term value for stockholders by closely aligning the interests of participants with those of stockholders.

The Board believes that the adoption of the 2017 Plan is in our best interests and necessary, in part, because approval of the 2017 Plan will also enable certain incentive compensation under the 2017 Plan to qualify for tax-deductibility as “performance-based” compensation under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). In order to qualify as performance-based compensation, Section 162(m) requires, among other things, stockholder approval of the material terms of the performance criteria under which compensation may be paid under the 2017 Plan. Such criteria and the maximum individual limits on the amounts that can be paid are discussed in more detail below.

We believe it is in the best interest of the Company and our stockholders to permit the grant of “performance-based” compensation under Section 162(m). However, in certain circumstances, we may determine to grant compensation to covered employees that will not qualify as “performance-based” compensation for purposes of Section 162(m).

In addition to Section 162(m) considerations, the Board and the Compensation Committee evaluated a number of factors described below in connection with the decision to recommend approval of the 2017 Plan. The Compensation Committee’s independent compensation consultant, FW Cook, also provided assistance with preparing the 2017 Plan.

As of January 28, 2017, there were stock options outstanding under our 2014 Plan and our 2005 Stock Award and Incentive Plan, as amended (the “2005 Amended Plan” and collectively with the 2014 Plan, the “Prior Plans”) with respect to approximately 2,314,000 shares, and there were approximately 4,826,000 shares of restricted stock outstanding subject to time and/or performance vesting under the Prior Plans. There

were approximately 3.4 million shares available for issuance under the 2014 Plan at January 28, 2017.

Based on its review of relevant factual information, the Compensation Committee approved and recommended that the Board approve the 2017 Plan, which would increase the number of available shares by approximately 7.8 million shares from approximately 3.4 million shares as of January 28, 2017, to approximately 11.2 million shares. Any shares granted subsequent to January 28, 2017, under the 2014 Plan reduce the number of shares available for grant under the 2017 Plan on a 1:1 basis. A portion of those shares has been granted as part of our Fiscal 2017 compensation program, and it is anticipated that we will continue to grant shares prior to the Annual Meeting date. The 2017 Plan is designed to replace the 2014 Plan. Accordingly, if the 2017 Plan is approved at the Annual Meeting, no further awards will be granted under the 2014 Plan.

The Board believes the adoption of the 2017 Plan as our new long-term incentive plan is in our best interests, in part, because the number of shares currently available under the Prior Plans is expected to be insufficient for awards after 2017. In setting the amount of shares subject to the 2017 Plan, the Compensation Committee and the Board considered the historical amounts of equity awards the Company has granted in the past three years. In fiscal years 2014, 2015, and 2016, the Company granted equity awards representing a total of approximately 2,946,000 shares, 2,388,000 shares, and 4,403,000 shares, respectively. After taking into consideration awards granted to date and anticipated future awards in Fiscal 2017, and assuming our stockholders approve the 2017 Plan, the Compensation Committee concluded the increased reserve under the 2017 Plan would likely be sufficient to cover awards for Fiscal 2017 plus an additional two to three years.

In setting the amount of shares subject to the 2017 Plan, the Compensation Committee and the Board also considered the Company’s three-year average equity expenditures, typically referred to as a “burn rate,” as well as the total amount of awards outstanding under existing grants relative to external guidelines. The Company’s three-year average burn rate was determined to be 2.07%. We calculated our burn rate by (i) applying a factor of 2.0 to restricted stock awards and a factor of 1.0 to stock options during the fiscal year and (ii) dividing the resulting number by a weighted average number of shares of our common stock outstanding for each fiscal year. Our burn rate includes time-based awards when granted and performance-based awards when earned.

The Company had outstanding, as of January 28, 2017, approximately 7.14 million shares related to equity awards (commonly referred to as the “overhang”) which represented approximately 3.7% of the outstanding shares. When combined with the shares proposed for reserve, total overhang would be approximately 18.34 million shares, which was approximately 9.4% of outstanding shares on a fully diluted basis, as of January 28, 2017. We believe our three-year average annual burn rate and level of potential dilution, assuming the 2017 Plan is approved by our stockholders, compare favorably to our industry peers and standards.

While the terms of the 2017 Plan specify the maximum number of shares that may be subject to awards under the 2017 Plan, the actual grant of awards to employees and directors will continue to be subject to the Compensation Committee’s and the Board’s discretion. As evidenced by our relatively conservative burn rate, the Compensation Committee and the Board have been judicious in granting such awards and have displayed a sensitivity to minimizing the impact of the potential dilution that such awards could have on our stockholders.

The historical burn rate and the potential dilution above may not be indicative of what the actual amounts are in the future. The 2017 Plan does not contemplate the amount or timing of specific equity awards. Our future burn rate and dilution will depend on a number of factors, including the number of participants in the 2017 Plan, the price per share of our common stock, and our compensation practices in general. The potential dilution is a forward-looking statement. Forward-looking statements are not fact.

The Board of Directors has unanimously approved the 2017 Plan, subject to approval by the stockholders. We believe it is in the best interest of our Company and our stockholders to

continue offering a long-term incentive program to our management-level employees.

Proxies solicited on behalf of the Board of Directors will be voted FOR this proposal unless stockholders specify a contrary choice.

Highlights of the 2017 Plan

The 2017 Plan incorporates certain equity plan governance best practices, including:

This summary is qualified in its entirety by reference to the full text of the 2017 Plan, which is attached to this proxy statement as Appendix A.

Purpose

The purpose of the 2017 Plan is to aid the Company in attracting, retaining, motivating and rewarding employees, consultants, and non-employee directors of our Company or our subsidiaries or affiliates, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Company goals, and to promote the creation of long-term value for stockholders by closely aligning the interests of participants with those of stockholders.

Eligibility

Awards may be granted under the 2017 Plan only to an employee of the Company or any subsidiary or affiliate, including any executive officer, to any non-employee director of our Company or a subsidiary or affiliate, to any person who has been offered employment by the Company or a subsidiary or affiliate, and to a consultant who provides significant services to the Company or any subsidiary or affiliate, as selected by the Compensation Committee. We currently have six non-employee directors, and our Company and our subsidiaries and affiliates currently have approximately 300 employees eligible to participate in the 2017 Plan. The actual number of participants who will ultimately receive awards under the 2017 Plan cannot be determined because eligibility for participation in the 2017 Plan is at the discretion of the Compensation Committee.

Permissible Awards

The 2017 Plan authorizes the granting of awards in any of the following forms:

Stock Subject to 2017 Plan

A total of 11,200,000 shares of stock shall be authorized for grant under the 2017 Plan less one share of stock for every one share of stock that was subject to an award granted after January 28, 2017 under the 2014 Plan. Any shares that are subject to awards granted under the 2017 Plan shall be counted against this limit as one share for every one share granted.

Shares of stock represented by awards that have been forfeited, expired, settled in cash, or tendered by a participant or withheld by us to satisfy any tax withholding obligation (for awards other than an option or SAR) under the 2017 Plan or after January 28, 2017, under the Prior Plans, shall again be available for awards under the 2017 Plan to the extent of such forfeiture, expiration, cash settlement, or tendering or withholding for taxes.

The following shares shall not again be available for grants under the 2017 Plan: (i) shares tendered or withheld by us in payment of the exercise price of a stock option under the Prior Plans or the 2017 Plan; (ii) shares tendered or withheld by us to satisfy tax withholding with respect to a stock option or SAR under the Prior Plans after January 28, 2017 or the 2017 Plan; (iii) shares subject to a SAR under the Prior Plans after January 28, 2017 or 2017 Plan that are not issued in connection with its stock settlement on exercise thereof; and (iv) shares reacquired by our Company using the proceeds from the exercise of options under the 2017 Plan or after January 28, 2017 under the Prior Plans.

Shares issued under the 2017 Plan through the assumption or substitution of outstanding awards granted by a company acquired by us or a subsidiary or affiliate (“Substitute Awards”) will not reduce the maximum number of shares available for grants under the 2017 Plan. In addition, available shares under a stockholder approved plan of a company acquired by us or a subsidiary (adjusted to reflect the transaction) may be used for awards under the 2017 Plan

under certain circumstances and will not reduce the number of shares available under the 2017 Plan.

The total number of shares that may be granted with respect to incentive stock options under the 2017 Plan is 5,000,000 shares.

Limitations on Awards

Additionally, with respect to grants of awards intended to be qualified performance-based compensation under Section 162(m), the maximum amount of awards that may be granted to any participant during any calendar year are: (i) no more than 3,000,000 aggregate shares with respect to options and SARs, (ii) no more than 1,500,000 aggregate shares with respect to restricted shares of stock, bonus stock, restricted stock units and performance awards, (iii) no more than $7,000,000 for performance-based awards not valued in shares based on performance in a performance period of one fiscal year or less, and (iv) no more than $10,000,000 for performance-based awards not valued in shares based on performance in a performance period of greater than one year. Each of the limits described in items (i) through (iv) above shall be multiplied by two with respect to such awards granted during the first calendar year in which the participant commences employment. The aggregate grant date fair value of all awards granted to any non-employee director, taken together with any cash fees for such director’s service as a member of the Board during such year, shall not exceed $750,000 in total compensation during any single calendar year. The Compensation Committee may make exceptions to this limit for a non-executive chair of the Board or, in extraordinary circumstances, for other individual non-employee directors, so long as such non-employee director does not participate in the decision to award such compensation.

Administration

The 2017 Plan is administered by the Compensation Committee, subject to its right to create subcommittees or delegate authority as required or permitted by law. The Compensation Committee has the sole authority to designate participants and determine the type, terms and conditions of awards to be granted, except that the Board of Directors may perform the functions of the Compensation Committee for granting awards to non-employee directors.

Stock Options

The Compensation Committee is authorized to grant incentive stock options or non-qualified stock options under the 2017 Plan. The exercise price of an option granted under the 2017 Plan may not be less than the fair market value of the underlying stock on the date of grant (other than for Substitute Awards) and the exercise period shall not exceed ten years; provided, however, that (other than with respect to any incentive stock options) to the extent an option would expire at a time when the holder of such option is prohibited by applicable law or our insider trading policy from selling or

otherwise disposing of shares that the holder would otherwise acquire upon exercise of such option, then the exercise period shall be extended until the 30th day following the date such prohibition lapses.

Stock Appreciation Rights (SARs)

The Compensation Committee may grant SARs under the 2017 Plan; an SAR may be free-standing or tandem in combination with another award. An SAR award permits the participant to receive the appreciation, if any, of the fair market value of a share of common stock on the date of exercise over the fair market value of such a share on the date of grant. In general, the grant price of an SAR may not be less than the fair market value of the underlying stock on the date of grant (other than for Substitute Awards). Payment of any appreciation will be paid in cash, common stock or a combination of cash and stock as the Compensation Committee directs. The exercise period with respect to any SAR shall not exceed 10 years, subject to the exception discussed above under “Stock Options.”

Restricted Stock Awards and Restricted Stock Units

The Compensation Committee may make awards of restricted stock or restricted stock units (which may consist of a combination of stock and other awards) to participants, subject to such restrictions on transferability and other restrictions as the Compensation Committee may deem appropriate. Except as set forth in certain forfeiture provisions or other special circumstances as determined by the Compensation Committee, restricted stock and restricted stock units will vest over a minimum period of three years, unless the grant or vesting is based on the achievement of one or more performance conditions, in which case, the restricted stock and restricted stock units will vest over a minimum period of one year.

Unrestricted Stock Awards and Bonus Stock

The Compensation Committee may make awards of unrestricted stock as a bonus or to grant stock in lieu of obligations of the Company or our subsidiary or affiliate of the Company.

Other Stock-Based Awards

The Compensation Committee may make awards that may be denominated or payable in stock or factors that may influence the value of stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into stock, purchase rights for stock, awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Compensation Committee, and awards valued by reference to the book value of stock or

the value of securities of or the performance of specified subsidiaries or affiliates or other business units of the Company.

Performance Awards, Including Annual Incentive Awards

The Compensation Committee may grant performance awards that are payable in cash, stock, other awards under the 2017 Plan or other property. Subject to the specific limitations discussed above under “Limitations on Awards,” the Compensation Committee has discretion to determine the number of performance awards granted to any participant and to set performance goals and other terms or conditions to payment of the performance awards. The extent to which these performance goals are met determines the amount of the settlement of the performance award that can be received by a participant.

The Compensation Committee may grant an annual incentive award to an employee who is designated by the Compensation Committee as likely to be a “covered employee” under Section 162(m), i.e., an employee who at the end of the year is our chief executive officer or one of our three most highly compensated officers, other than our chief executive officer and financial officer. Such annual incentive award will be intended to qualify as “performance-based compensation” for purposes of Section 162(m), and its grant, exercise and/or settlement shall be contingent upon achievement of pre-established performance goals and other terms set forth in the 2017 Plan.

Performance Goals

If the Compensation Committee determines that a performance award granted to an employee for whom the Company’s tax deductions would likely be subject to the deduction limitations of Section 162(m) as discussed under “Section 162(m) Deduction Limitations” below, the Compensation Committee may establish objectively determinable performance goals for awards during specified performance periods based on one or more of the business criteria listed in Section 7(b)(ii) of the 2017 Plan, including:

The goals may be established at such levels and in such terms as the Compensation Committee may determine, in its discretion, including with respect to the Company generally or any subsidiary, affiliate, business unit or business group of the Company. The Compensation Committee must establish such goals by the earlier of (i) 90 days after the beginning of the applicable performance period or (ii) the time 25% of such performance period has elapsed. Any payment of an award granted with performance goals is conditioned on the written certification of the Compensation Committee in each case that the performance goals and any other material conditions were satisfied.

Limits on Transferability

No award is assignable or transferable by a participant other than by will or the laws of descent and distribution. However, the Compensation Committee may (but need not) permit other transfers (other than for incentive stock options or SARs in tandem with incentive stock options) where it concludes that such transferability is appropriate and desirable, taking into account applicable securities laws. In no event may a transfer for value or consideration be made without the prior approval of our stockholders. A participant may, in the manner determined by the Compensation Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any award upon the participant’s death.

Change in Control

Except as otherwise provided in an award document or in another written agreement, plan or policy with respect to a

participant, upon both a “change in control” (as defined in the 2017 Plan) and a “qualifying termination” (an involuntary termination for reason other than “cause” or disability, as defined in the 2017 Plan), the vesting of all outstanding non-performance based awards will be accelerated. Except as otherwise provided in an award document or in another written agreement, plan or policy with respect to a participant, on the date of a change in control performance based awards will be converted into restricted stock based on performance to the change in control date or the target level value, depending on the portion of the performance period completed prior to the change in control, and upon a qualifying termination the vesting of the performance based awards will be accelerated. If an acquiring entity does not assume the awards, the vesting of all outstanding awards will be accelerated on the change in control date and performance based awards will be paid, either based on performance to the change in control date or based on the target level value, depending on the portion of the performance period completed prior to the change in control.

Adjustments

In the event of a merger, reorganization, recapitalization, stock dividend, stock split or other change in corporate structure affecting our common stock, the Compensation Committee shall make adjustments in the aggregate number and kind of shares reserved for issuance under the 2017 Plan, in the maximum number of shares that may be granted in any calendar year to any employee, in the number, kind and exercise price of shares subject to outstanding awards, and such other adjustments as it may determine to be appropriate to ensure that participants are treated equitably and there is no dilution or enlargement of rights. No adjustments will be made that would cause any award to a covered employee to not comply with Section 162(m).

No Repricing

Except in connection with an equitable adjustment or a change in control, no option or SAR may be amended to reduce the exercise price per share of the shares subject to such option or the grant price of such SAR, as applicable, below the option price or grant price as of the date the option or SAR is granted, without the prior approval of our stockholders. In addition, except in connection with an equitable adjustment or a change in control, without the prior approval of our stockholders, no option or SAR may be cancelled or surrendered for another award or cash if the per share exercise or grant price is greater than the fair market value of one share, nor may any option or SAR be granted in exchange for, or in connection with, the cancellation or surrender of an option, SAR or other award, having a higher option or grant price.

Dividends and Dividend Equivalents on Certain Awards

The Compensation Committee may grant dividend equivalents in connection with other awards, except for options and SARs. Dividends and dividend equivalents with respect to restricted stock, restricted stock units and other stock-based awards that vest based on the achievement of performance goals and dividend equivalents on performance awards will be subject to the same restrictions and risk of forfeiture as the shares subject to the applicable award with respect to which the dividends and dividend equivalents are distributed or payable. Such dividends and dividend equivalents shall only be paid at the time or times such vesting requirements are satisfied.

Additional Award Forfeiture Provisions

Each award granted under the 2017 Plan to employee participants may be subject to additional forfeiture conditions, if certain events occur, including but not limited to, (i) the participant acts in competition with us; (ii) the participant discloses confidential or proprietary information; (iii) the participant fails to cooperate with us in regards to a legal suit; or (iv) the participant engages in misconduct that causes the need for restatement of financial statements.

Termination and Amendment

Our Board of Directors may terminate or amend the 2017 Plan at any time without stockholder approval, but only to the

extent that stockholder approval is not required by applicable law or regulation. Stockholder approval is required with respect to any amendment to increase any of the award limitations set forth in the 2017 Plan, extend the term of the 2017 Plan, materially change the eligibility provisions, change the provisions governing the minimum exercise price for options and the grant price of SARs, or any other provisions of the 2017 Plan that expressly requires stockholder approval.

The Compensation Committee may amend or terminate outstanding awards; however, such amendments may require the consent of the participant.

Awards to Executive Officers and Others

Awards under the 2017 Plan will be made at the discretion of the Compensation Committee. Consequently, we cannot determine with respect to any particular person or group the awards that will be made in the future pursuant to the 2017 Plan or their benefits or amounts.

Because our executive officers and non-employee directors are eligible to receive awards under the 2017 Plan, they may be deemed to have a personal interest in the approval of the 2017 Plan by our stockholders.

For information on awards earned by certain executive officers under the 2014 Plan during Fiscal 2016, see “Compensation Discussion and Analysis” and “Compensation Tables and Related Information” below.

The following is a general description of the federal income tax consequences to the participant and the Company with regard to awards granted under the 2017 Plan under present law. This discussion does not purport to discuss all tax consequences related to awards under the 2017 Plan.

Nonqualified Stock Options

There will typically be no federal income tax consequences to the optionee or to us upon the grant of a nonqualified stock option under the 2017 Plan. When the optionee exercises a nonqualified option, however, he or she will realize ordinary income in an amount equal to the excess of the fair market value of the common stock received at the time of exercise over the exercise price, and we will be allowed a corresponding deduction, subject to any applicable limitations under Section 162(m). The tax basis for the shares purchased is their fair market value on the date of exercise. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.

Incentive Stock Options

There typically will be no federal income tax consequences to the optionee or to us upon the grant or exercise of an incentive stock option. If the optionee holds the option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and we will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will realize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and we will be allowed a federal income tax of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.

Restricted Stock

Unless a participant makes an election to accelerate recognition of the income to the date of grant (as described below), the participant will not recognize income, and we will not be allowed a tax deduction, at the time a restricted stock award is granted. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the common stock as of that date (less any amount paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m). If the participant files an election under Section 83(b) of the Internal Revenue Code (“Section 83(b)”) within 30 days of the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to a Section 83(b) election.

Restricted Stock Units

A participant granted a restricted stock unit award will not recognize taxable income, and we will not be allowed a tax deduction, at the time such award is granted. Upon payment or settlement of a restricted stock unit award, the participant will recognize ordinary income equal to the value of the shares or cash received, and we will be entitled to a corresponding deduction, subject to any applicable limitations under Section 162(m). Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.

Unrestricted Stock Awards and Bonus Stock

Generally, the participant will realize ordinary income, and we will be entitled to a corresponding deduction, subject to any applicable limitations under Section 162(m), in the year such unrestricted or bonus stock is delivered to the participant. The amount of such ordinary income and deduction will be equal to the fair market value of the shares of stock received, if any, on the date of issuance. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.

Performance Awards

A participant generally will not recognize income, and we will not be allowed a tax deduction, at the time performance awards are granted, so long as the awards are subject to a

substantial risk of forfeiture. When the participant receives or has the right to receive payment of cash or shares under the performance award, the cash amount or the fair market value of the shares of stock will be ordinary income to the participant, and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m).

Stock Appreciation Rights (SARs)

There will typically be no federal income tax consequences to the participant or to us upon the grant of a SAR under the 2017 Plan. When the participant exercises a SAR, he or she will realize ordinary income in an amount equal to the excess of the fair market value of the common stock received at the time of exercise over the fair market value of a share of common stock on date of grant, and we will be allowed a corresponding deduction, subject to any applicable limitations under Section 162(m).

Section 409A Compliance

Section 409A provides that covered amounts deferred under a non-qualified deferred compensation plan are includable in the participant’s gross income to the extent not subject to a substantial risk of forfeiture and not previously included in income, unless certain requirements are met, including limitations on the timing of deferral elections and events that may trigger the distribution of deferred amounts.

Based on final regulations and other guidance issued under Section 409A, the awards under the 2017 Plan could be affected. In general, if an award either (1) meets the requirements imposed by Section 409A or (2) qualifies for an exception from coverage under Section 409A, the tax consequences described above will continue to apply. If an award is subject to Section 409A and it does not comply with the requirements of Section 409A, then amounts deferred in the current year and in previous years will become subject to immediate taxation to the participant, and the participant will be required to pay (1) a penalty equal to interest at the underpayment rate plus 1% on the tax that should have been paid on the amount of the original deferral and any related earnings and (2) in addition to any regular tax, an additional tax equal to 20% of the original deferral and any earnings credited on the deferral.

The 2017 Plan has been designed so that most awards should be exempt from coverage under Section 409A. Certain terms have been defined in a manner so that if awards are subject to Section 409A, they should comply with Section 409A.

We do not intend the preceding discussion to be a complete explanation of all of the income tax consequences of participating in the 2017 Plan. Participants in the 2017 Plan should consult their own personal tax advisor to determine the particular tax consequences of the 2017 Plan to them, including the application and effect of foreign, state and local taxes, and any changes in the federal tax laws from the date of this proxy statement.

Section 162(m) limits the deductions a publicly held company can claim for compensation in excess of $1 million in a given year paid to the chief executive officer and any of its three most highly compensated executive officers, other than the chief financial officer, serving on the last day of the fiscal year. “Performance based” compensation that meets certain requirements is not counted against the $1 million deductibility cap, and therefore remains fully deductible. The Compensation Committee intends to structure certain awards under the 2017 Plan to be deductible under Section 162(m) provided, however, we reserve the right to determine that compliance with Section 162(m) is not desired after consideration of the goals of the Company’s executive compensation philosophy and whether it is in the best interests of the Company to have such award so qualified.

The 2017 Plan has been designed so that, assuming stockholder approval of the material terms of the 2017 Plan, certain awards granted to designated covered officers should qualify as “performance-based” compensation under Section 162(m). For purposes of Section 162(m), the material terms include (1) the employees eligible to receive compensation under the 2017 Plan, (2) a description of the business criteria on which the performance goals are based, and (3) the maximum amount of compensation that can be paid to a participant under the performance goal. Approval of the 2017 Plan will be deemed to include approval of the material terms of the 2017 Plan, including the general business criteria upon which performance objectives for performance awards are based. The key aspects of the 2017 Plan are discussed above.

The following table sets forth additional information as of the end of Fiscal 2016, about shares of our common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements. The information includes the number of shares

covered by, and the weighted average exercise price of, outstanding options and other rights and the number of shares remaining available for future grants excluding the shares to be issued upon exercise of outstanding options, warrants, and other rights.

Approval of the 2017 Plan requires the affirmative vote of a majority of the shares represented and voting, in person or by proxy, at the Annual Meeting.

The Board of Directors recommends that the stockholders vote “FOR” the adoption of the 2017 Stock Award and Incentive Plan.

The Board of Directors recommends that the stockholders vote “FOR” the

Approval of the 2017 Stock Award and Incentive Plan as set forth in the

Proxy Statement for the Annual Meeting.

We are providing stockholders with an advisory vote on the overall compensation of our named executive officers.

As discussed in the “Compensation Discussion and Analysis” section below, our executive compensation program is based on four core principles: performance, competitiveness, affordability and simplicity. We believe that our program design implements these principles and provides the framework for alignment between executive compensation opportunities and long-term strategic growth. The overall program is designed to be balanced; providing incentive to ensure the delivery of both long term results and annual profitability. Based on the advisory vote at the 2016 Annual Meeting on our executive compensation program, which was approved by 97.6% of the votes cast, we are confident that our stockholders agree.

We have an ongoing commitment to ensuring that our executive compensation plans are aligned with our principles and evolve as the industry and business changes. We continue to engage with our stockholders to gain an

understanding of their key perspectives on all aspects of the business and the broader industry, including compensation programs. We continue to evaluate and enhance plan design to align with leading practices in executive compensation.

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

In summary, we believe that our executive compensation program has provided and continues to provide appropriate incentives and remains responsive to our stockholders’ views. Accordingly, the following resolution will be submitted for a stockholder vote at the 2017 Annual Meeting:

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

The Board of Directors recommends that the stockholders vote “FOR” the

approval of the compensation of our named executive officers as set forth in this

Proxy Statement for the Annual Meeting.

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

The Committee has reviewed and discussed the following Compensation Discussion and Analysis with management, which describes the Committee’s decisions regarding our

executives’ compensation for Fiscal 2016 and how those decisions support and implement our principles. The Compensation Committee has recommended to the Board that it be included in this Proxy Statement.

Cary D. McMillan (Chair)

Michael G. Jesselson

Thomas R. Ketteler

Janice E. Page

Noel J. Spiegel

This Compensation Discussion and Analysis is organized as follows: (i) an Executive Summary setting forth our Business & Leadership Overview for Fiscal 2016, our focus for Fiscal 2017, an overview of our Compensation Program Objectives and Philosophy, and our Executive Compensation Highlights, (ii) a discussion of our Executive Compensation Program,

including our Fiscal 2016 goal setting process and compensation considerations, compensation benchmarking and details regarding each element of our annual compensation, and (iii) Additional Compensation Information, including tax considerations and payments upon termination and change in control arrangements.

In Fiscal 2016 both the American Eagle Outfitters and Aerie brands achieved sales growth and profitability improvement. Some financial highlights of our year are as follows:

Our executive compensation program, which has supported and helped drive our financial results, is designed to attract, motivate and retain key executives who will promote the short-term and long-term growth of the Company and create sustained stockholder value. We delivered strong financial results in Fiscal 2016 and continued to move our long-term initiatives forward despite a challenging and competitive retail macro environment. Our strong and consistent multi-year

growth and operating results, as shown in the chart set forth below, are a reflection of initiatives taken by our management team.

From a leadership perspective, Fiscal 2016 was a period of significant change within the organization. The Board of Directors and management remain focused on building a world-class retail team, and in Fiscal 2016 took positive steps to elevate and retain existing talent while recruiting and hiring new retail industry leaders into the team to support the Company’s long term goals as further explained herein.

Specifically, with the retirement of the former Vice Chairman, Executive Creative Director in late Fiscal 2015, the Global Brand Presidents of American Eagle Outfitters and Aerie were elevated to lead the merchandising teams to deliver strong growth. We also recruited and hired a new Chief Global Commercial and Administrative Officer, an Executive Vice President-Chief Financial Officer, a Chief Marketing Officer and a Chief Technology Officer as well as other key leadership roles. These critical new hires reinforce the Company’s focus on innovation and operational excellence.

Our compensation program design provides a framework for alignment between executive compensation and our long-term Company objectives and financial performance. We continually review leading practices in corporate governance and executive compensation and consider changes to our program to align with best practices, ensure competitiveness in order to attract and retain experienced executives in our industry, and reinforce the alignment between pay and performance. These practices are evidenced through the following:

Goal Setting:

We remain committed to setting incentive goals that are aligned with delivering strong financial performance and returns to our stockholders, while also enabling the successful execution of our strategy. This includes building a solid foundation for long-term growth while also delivering near term results. Management has been focused on improving our merchandise assortment while at the same time reducing our reliance on promotions as well as managing expenses and inventory. Capital investments have centered on growth in under-penetrated new markets, building strong omni-tools and digital capabilities.

Compensation Considerations:

When reviewing the results for the year and making year end pay decisions, the Compensation Committee considered a variety of factors, including our performance relative to the pre-established goals as well as our financial and operational performance relative to peers within the context of a highly competitive retail environment.

Fiscal 2016 financial and operational measures represent aggregate global results from our portfolio of brands and channels, including the American Eagle Outfitters, Aerie, Tailgate and Todd Snyder New York brands.

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

Role of Our Compensation Committee

The Board has delegated authority to the Compensation Committee to develop and approve the Company’s overall compensation program for NEOs, including the authority to establish and award annual base salaries, annual incentive bonuses and long-term incentive awards pursuant to our stockholder approved 2014 Plan. Furthermore, the Compensation Committee reviews and approves changes to our compensation peer group, as deemed appropriate. In making its decisions, the Compensation Committee takes into consideration a variety of factors, including suggestions made by the CEO, compensation consultants and external advisory firms. The Compensation Committee acts in accordance with its charter which can be found on our Investors website at investors.ae.com.

Role of Executive Officers in Compensation Decisions

Our CEO annually reviews the performance of each NEO and makes recommendations to the Compensation Committee

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

Role of Compensation Consultants

The Compensation Committee has the authority under its charter to retain outside consultants or advisors for assistance. In accordance with this authority, during Fiscal 2016, the Compensation Committee continued to retain the services of FW Cook as its outside independent compensation consultant to update the Company’s peer group and advise on matters related to CEO and other executive compensation. The services provided by FW Cook are subject to a written agreement with the Compensation Committee. The Compensation Committee has sole authority to terminate the relationship. The Compensation Committee reviewed the relationship with FW Cook and determined that there are no conflicts of interest. FW Cook does not provide any other services to the Company. The Compensation Committee may engage other consultants as needed in order to provide analysis, recommendations or other market data.

Under the direction of the Compensation Committee, FW Cook interacts with members of the senior management team to provide insights into market practices and to ensure that management is aware of emerging best practices and market trends. In 2016, representatives from FW Cook contributed to this Compensation Discussion and Analysis as well as assisting with a review of Board of Director Compensation, annual incentive plan design, peer group, and stock ownership guidelines.

Response to 2016 Advisory Vote on Executive Compensation

At our 2016 Annual Meeting of Stockholders, 97.6% of all votes cast supported the compensation of our NEOs. While this vote demonstrated a very high level of support for our compensation program, our executive team remained engaged with stockholders throughout Fiscal 2016 to obtain an understanding of their views on a variety of issues, including our compensation programs.

In addition to many other factors that affect compensation determinations, we take into account the compensation practices of comparable companies in formulating our compensation program. We consider three key factors in choosing the companies that comprise our peer group:

Other selection criteria include an international presence and multi-channel retailing. We evaluate our peer group on an annual basis and propose changes when appropriate.

Effective in late Fiscal 2016 and based upon an analysis performed by FW Cook, changes to our peer group were approved by the Compensation Committee. The changes reflect the addition of four companies and the removal of three companies. Companies that were added represent peers who are comparable in their size and business model and those with which we compete for customers and talent. One company in the prior peer group is no longer publicly-traded and two others were removed because they had a different business model or product. Our peer group consists of 19 companies. In terms of size, our revenue and market capitalization are near the median of the peer group. Peer group data is also primarily used for benchmarking of other NEO compensation and is supplemented as needed with additional data from various retail and general industry market surveys, adjusted to reflect our revenue scope.

The following provides additional details around our compensation components and related decisions for Fiscal 2016.

Our executive compensation program is designed to place a considerable amount of compensation at risk for all executives. This philosophy is intended to cultivate a pay-for-performance environment.

The portion of total compensation which is performance-based increases at successively higher levels of management. This approach seeks to ensure that executive compensation closely aligns with changes in stockholder value and achievement of performance objectives while also ensuring that executives are held accountable for results relative to position level.

Base Salary

Base salaries represent approximately 20%-30% of the NEO’s total compensation package, are reviewed annually and increases, where applicable, are typically effective in the first quarter of the new fiscal year.

For Fiscal 2016, four of the seven NEO’s did not receive a base salary increase, including Mr. Schottenstein. Ms. Boland retired in April 2016, Mr. Horvath joined in May 2016 with a salary of $850,000 and Mr. Madore joined in October 2016 with a salary of $850,000.

Three of the NEOs did receive salary increases in Fiscal 2016. Mr. Kessler received a 6% salary increase to $850,400 and Ms. Foyle received a 10% salary increase to $775,040 to recognize their contributions to a very strong performance in Fiscal 2015, to appropriately position their salary to the competitive market, and recognize their elevated role in brand leadership given the retirement of the former Vice Chairman, Executive Creative Director. Mr. Hurd received a salary increase of 12% to $500,000 to recognize his increasing responsibilities in finance leadership.

Annual Incentive Bonus

Our NEOs are eligible for annual cash incentive awards which focus the executive team on key annual objectives and business drivers that support growth in revenue and profits, improvement in overall operations, and increases in stockholder value. We establish a NEO’s annual incentive bonus opportunity as a percentage of his or her base salary, with increases in target percentages directly related to position level.

Target bonus award opportunities constitute about 25%-35% of the NEO’s total compensation package. During Fiscal 2016, the target bonus award opportunities for the NEOs were as follows:

For Fiscal 2016, annual incentive bonus payouts were tied to EBIT (80% of payout) and Revenue Growth (20% of payout) results. Based upon pre-established goals and payout levels, actual payments each year range from 0% of the targeted percentage amount for below threshold performance, to 25% of the targeted percentage amount at threshold performance, to 100% of the targeted percentage amount at target performance, to 200% of the targeted percentage amount if we achieve goals that are substantially above our business plan for the fiscal year.

Fiscal 2016 annual incentive bonuses were earned at 90% of target. The amounts earned by each applicable NEO are set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

Details of the realized performance and resulting payout for Fiscal 2016 are found in the “Fiscal 2016 Performance Metrics, Targets and Results” section.

Annual Long-Term Incentive Awards

We utilize a combination of time- and performance-based annual long-term incentives to focus management on long-term corporate performance and sustainable earnings growth. Annual long-term incentive awards are approximately 30%-60% of the NEO’s total compensation package. In Fiscal 2016 we awarded PSUs and RSUs, with a heavy emphasis on PSUs to directly link compensation to achievement of performance objectives.

PSUs: PSUs represented approximately 70% of the value of a NEO’s annual long-term incentive for Fiscal 2016. We determine the number of target PSUs based on the overall dollar grant value of the award divided by the closing price of our common stock on the grant date. Dividend equivalents on the PSUs are reinvested in additional units and paid out to the extent the associated PSUs vest.

Annual PSU grants cliff vest at the end of a three-year performance period. Fiscal 2016 PSUs vest upon achievement of pre-established three-year cumulative EBIT goals.

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

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

RSU awards represent approximately 30% of the value of an NEO’s annual long-term incentive award. Annual RSU grants vest proportionately over three years from the grant date assuming continued employment.

Retention and New Hire Awards

We operate in an extremely competitive industry, and it is important that we ensure the retention of our successful executives when we introduce new leaders into the organization. Although not a standard element of the executive compensation program, retention cash or stock awards have been granted from time to time in an effort to reward increased responsibilities during times of leadership changes and to position our leaders appropriately internally.

During Fiscal 2016, Mr. Madore received a cash sign-on bonus of $500,000 and Mr. Hurd received a cash recognition bonus in the amount of $200,000 for serving as the Interim CFO as well as a time based restricted stock unit award in recognition of his increased role in Finance leadership.

NSOs and performance based restricted stock were granted as part of the new hire package for Mr. Horvath and NSO’s were granted as part of the compensation package for Mr. Kessler and Ms. Foyle in recognition of the elevation of their roles. Market benchmarking of new hire and retention award practices was conducted to inform the offer and retention packages. Additional detail regarding these awards can be found in the “Grants of Plan Based Awards – Fiscal 2016.” section.

Benefits and Perquisites

Executives generally are eligible for the same health and welfare plans as other full-time Company employees, including medical, dental, life and disability insurance, and retirement plans. We provide a comprehensive security benefit to the CEO, a portion of which, based upon the disclosure rules, is deemed to be personal even though we believe there is a legitimate business reason for providing such a benefit.

The Compensation Committee selected EBIT and Revenue Growth as the key performance metrics for Fiscal 2016 because they are reflective of our success in managing our core operations, growing the business and driving sustained increases in profits. We believe that these metrics reflect a balanced approach to all aspects of performance, including top-line revenue and expense control, while maintaining simplicity in the design and execution of our executive compensation program. The Fiscal 2016 performance metrics for our annual incentive bonus and PSUs with the

weighting ascribed to each metric were as follows: annual incentive bonus: EBIT – 80% and Revenue Growth – 20% and PSUs: EBIT – 100%. Additional detail regarding 2016 performance metrics for the PSU awards will not be disclosed until the end of the performance period given that the goal detail is confidential and competitive in nature. Such disclosure could cause competitive harm. The Compensation Committee deemed the goals to be challenging but achievable.

We establish a performance-based Annual Award Pool (the “Award Pool”) for NEOs who are subject to Internal Revenue Code Section 162(m) (which does not include the CFO). At the beginning of each fiscal year, the Compensation Committee establishes annual performance goals for the Award Pool based on our earnings before interest, taxes, depreciation and amortization (“EBITDA”).

Achievement of the performance goal determines the maximum amount payable as cash awards for a fiscal year and/or grants of time-based RSUs to the NEOs in the following fiscal year. The following maximum award levels were established during Fiscal 2016 as a percent of Adjusted EBITDA, in each case subject to the 2014 Plan maximum of $5 million per person:

Clawback Policy: Recovery and Adjustments to Award

The Compensation Committee believes that it is appropriate that our cash and long-term incentive awards be subject to financial penalties or clawbacks in the event of misconduct. Pursuant to the 2005 Amended Plan and the 2014 Plan, equity and cash awards are subject to additional forfeiture conditions. Forfeiture and recovery will be determined by the Compensation Committee and triggered in the event of misconduct related to: (a) acts in competition with the Company; (b) disclosure of confidential or proprietary information; (c) failure to cooperate with the Company in regards to a legal suit; or (d) restatement of financial statements. The forfeiture will be triggered upon the occurrence of any of the aforementioned events at any time during active employment and resulting in termination of employment, or during the one-year period following termination. If any of the above events occur, the unexercised portion (vested or unvested) of an option, and any other

award not settled, will immediately cancel and forfeit. Additionally, the NEO will be required to repay the Company the total amount of the award gain realized upon each exercise of an option or award settlement that occurred on or after the date which is one-year prior to either (a) the forfeiture event or (b) the termination date.

Prohibition Against Hedging Transactions and Pledging

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

Our NEOs are entitled to receive consideration upon the termination of the executive’s employment with us under specified circumstances, including a change in control (“CIC”) related termination. These arrangements provide essential protections to both the NEO and to us and assist us

in attracting and retaining qualified executives in a competitive environment. At the same time, certain agreements preserve our valuable assets by imposing non-competition and non-solicitation restrictions, confidentiality obligations, and cooperation covenants on our NEOs.

Change in Control Provisions

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

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

Severance Payments

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

Additionally, in the event of termination of employment, Messrs. Schottenstein, Kessler, and Hurd as well as Ms. Foyle and Ms. Boland, who signed the RSU Confidentiality, Non-Solicitation, Non-Competition and Intellectual Property Agreement (the “Non-Compete Agreement”) may be eligible to receive a pro-rata portion of their PSUs following termination of employment, based on actual days worked and performance goals being met for the full performance period, but not at an amount above the “target” award level. The NEOs also agreed to certain provisions under the Non-Compete Agreement, including the following: (i) agreement not to use trade secrets, intellectual property, and other confidential or proprietary information of the Company for his or her own benefit, or for the benefit of any third party, including a competitor; (ii) agreement to provide the Company with at least 30 days written notice of any resignation; (iii) an 18-month non-solicit provision following any termination of employment; (iv) a waiver relating to the development of intellectual property during the executive’s tenure with the Company; and (v) a 12-month non-compete provision following any termination of employment. The breach of any of the foregoing provisions may result in the executive forfeiting unvested equity awards.

Section 162(m) of the Internal Revenue Code generally permits a tax deduction to public corporations for compensation over $1,000,000 paid in any fiscal year to a corporation’s CEO and the three other most highly compensated NEOs (other than the CFO) employed at the end of the year only if the compensation qualifies as being performance-based under Section 162(m). We endeavor to structure our compensation policies to allow for tax deductibility whenever it is reasonably possible to do so while meeting our compensation objectives.

Nonetheless, from time to time certain non-deductible compensation may be paid and the Board of Directors and the Compensation Committee reserve the authority to award non-deductible compensation in their discretion. Further compensation which is intended to be performance-based pursuant to Section 162(m) may fail to be so if the requirements of 162(m) are not met.

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

of our most recent annual report on Form 10-K and in other filings with the SEC.

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