For much of last year, American Eagle and the entire teenage apparel space appeared to be in free fall. To compete with the fast-fashion assault from retailers like H&M and Forever 21, American Eagle’s windows blared the largest bargains, its T-shirts for barely $10.

American Eagle’s sales slumped 10 percent in the year’s first three months. A clash over strategy with Mr. Schottenstein was blamed for Mr. Hanson’s dismissal, adding to turmoil at the brand. Some rivals like Wet Seal and American Apparel were driven into bankruptcy.

“We’d been trying to compete by screaming with the loudest promotions from the windows, having among the lowest price points on fleece and T-shirts,” said Chad Kessler, a former Abercrombie & Fitch executive who was named the brand’s global president in March. He added, “It wasn’t working.”

Mr. Kessler, who joined American Eagle in February 2014, was determined to distance the brand from the disposable styles and rock-bottom pricing that had hurt the company’s bottom line.

The brand closed unprofitable stores and overhauled its women’s T-shirts, developing a new spandex jersey fabric it calls “Soft and Sexy” and doubling some prices to almost $20 a shirt. It also started high-performance stretch denim lines for men and women, also raising prices to about $49 a pair.