Comparable Sales Rise 9%
EPS Increases 57%
2.3 Million Shares
Repurchased
PITTSBURGH--(BUSINESS WIRE)--
American Eagle Outfitters, Inc. (NYSE: AEO) today reported EPS of $0.22
for the quarter ended May 5, 2018, compared to $0.14 for the quarter
ended April 29, 2017. Excluding restructuring charges of $0.01, the
company’s adjusted EPS increased 44% to $0.23, compared to adjusted EPS
of $0.16 last year.
Adjusted amounts are based on Non-GAAP results, as presented in the
accompanying GAAP to Non-GAAP reconciliation.
First Quarter 2018 Results
-
Total net revenue increased 8% to $823 million compared to $762
million last year.
-
Consolidated comparable sales increased 9% over the comparable period
ending May 6, 2017.
-
By brand, American Eagle’s comparable sales increased 4% and Aerie’s
comparable sales increased 38%.
-
Gross profit increased 10% to $304 million from $278 million. The
gross margin rate increased 50 basis points to 37.0% of revenue
compared to 36.5% last year, reflecting rent leverage and a favorable
markdown rate, partially offset by increased digital delivery expense.
-
Selling, general and administrative expense of $210 million leveraged
10 basis points to 25.5% as a rate to revenue due to strong comparable
sales. Higher store compensation and incentive expense drove the
majority of the increase from $195 million last year.
-
Depreciation expense increased 4% to $42 million from $40 million last
year, leveraging 20 basis points to 5.1% as a rate to revenue.
-
Operating income of $51 million, which includes $1.6 million of
restructuring charges, compared to $37 million last year. Adjusted
operating income increased 23% to $52 million from $42 million last
year, leveraging 80 basis points to 6.4% as a rate to revenue.
-
EPS of $0.22 increased 57% compared to EPS of $0.14 last year.
Adjusted EPS of $0.23 increased 44% compared to adjusted EPS of $0.16
last year.
Jay Schottenstein, AEO’s Chief Executive Officer commented, “I'm very
pleased to see our momentum continue. The first quarter marked our 13th
consecutive quarter of positive comparable sales, leading to an
increased operating margin and earnings growth, which exceeded our
expectations. American Eagle leveraged strong brand equity and its
dominant jeans business to deliver comparable sales gains across brick
and mortar stores and e-commerce. After starting a body positivity
movement, Aerie is posting record growth rates and striking a real
emotional connection with its expanding customer base. We are highly
focused on our strategic plan, centered on expanding American Eagle,
accelerating Aerie’s growth, elevating the customer experience and
delivering strong financial returns.”
Restructuring Charges
In the first quarter, the company incurred restructuring charges
primarily related to corporate severance, totaling $1.6 million, or
approximately $0.01 per share.
Inventory
Total ending inventories at cost increased 11% to $404 million, in line
with the company’s expectations. The increase reflected the company’s
clearance store strategy and the support of strong sales trends in
American Eagle and Aerie. Looking forward, we expect second quarter
ending inventory to be up in the high-single digits.
Capital Expenditures
In the first quarter, capital expenditures totaled $47 million, with
more than half related to store remodeling projects and new openings,
and the balance to support the digital business, omni-channel tools and
general corporate maintenance.
Shareholder Returns, Cash and Investments
During the first quarter, the company returned $69 million to
shareholders through cash dividends and share repurchases. We
repurchased 2.3 million shares for $45 million and paid dividends of $24
million. As a result of strong free cash flow, we ended the quarter with
total cash and investments of $310 million compared to $225 million last
year.
Store Information
During the quarter, the company opened 4 American Eagle stores and
closed 2, ending with 935 American Eagle stores, including 118 Aerie
side-by-side locations. Additionally, the company opened 1 Aerie
stand-alone store and closed 1, ending with 109 Aerie stand-alone
stores. Internationally, the company ended the quarter with 217 licensed
stores. For additional store information, see the accompanying table.
Second Quarter Outlook
Based on an anticipated comparable sales increase in the mid-single
digits, management expects second quarter 2018 EPS to be approximately
$0.27 to $0.29. This guidance excludes potential asset impairment and
restructuring charges. Last year’s second quarter reported EPS of $0.12
included approximately $0.07 per share of restructuring and related
charges. Excluding these items, last year’s second quarter adjusted EPS
was $0.19. See the accompanying table for the GAAP to Non-GAAP
reconciliation.
Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast at
9:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or
internationally dial 1-201-689-8562 or go to http://investors.ae.com
to access the webcast and audio replay. Additionally, a financial
results presentation is posted on the company’s website.
Non-GAAP Measures
This press release includes information on non-GAAP financial measures
(“non-GAAP” or “adjusted”), including earnings per share information and
the consolidated results of operations excluding non-GAAP items. These
financial measures are not based on any standardized methodology
prescribed by U.S. generally accepted accounting principles (“GAAP”) and
are not necessarily comparable to similar measures presented by other
companies. Management believes that this non-GAAP information is useful
for an alternate presentation of the company’s performance, when
reviewed in conjunction with the company’s GAAP financial statements.
These amounts are not determined in accordance with GAAP and therefore,
should not be used exclusively in evaluating the company’s business and
operations.
About American Eagle Outfitters, Inc.
American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global
specialty retailer offering high-quality, on-trend clothing, accessories
and personal care products at affordable prices under its American Eagle
Outfitters® and Aerie® brands. The company operates more than 1,000
stores in the United States, Canada, Mexico, China and Hong Kong, and
ships to 81 countries worldwide through its websites. American Eagle
Outfitters and Aerie merchandise also is available at more than 200
international locations operated by licensees in 24 countries. For more
information, please visit www.ae.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
This release and related statements by management contain
forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which represent our
expectations or beliefs concerning future events, including second
quarter 2018 results. All forward-looking statements made by the company
involve material risks and uncertainties and are subject to change based
on many important factors, some of which may be beyond the company’s
control. Words such as "estimate," "project," "plan," "believe,"
"expect," "anticipate," "intend," “potential,” and similar expressions
may identify forward-looking statements. Except as may be required by
applicable law, we undertake no obligation to publicly update or revise
any forward-looking statements whether as a result of new information,
future events or otherwise and even if experience or future changes make
it clear that any projected results expressed or implied therein will
not be realized. The following factors, in addition to the risks
disclosed in Item 1A., Risk Factors, of the company’s Annual Report on
Form 10-K for the fiscal year ended February 3, 2018 and in any
subsequently-filed Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission in some cases have affected, and
in the future could affect, the company's financial performance and
could cause actual results for second quarter 2018 and beyond to differ
materially from those expressed or implied in any of the forward-looking
statements included in this release or otherwise made by management: the
risk that the company’s operating, financial and capital plans may not
be achieved; our inability to anticipate customer demand and changing
fashion trends and to manage our inventory commensurately; seasonality
of our business; our inability to achieve planned store financial
performance; our inability to react to raw material cost, labor and
energy cost increases; our inability to gain market share in the face of
declining shopping center traffic; our inability to respond to changes
in e-commerce and leverage omni-channel demands; our inability to expand
internationally; difficulty with our international merchandise sourcing
strategies; challenges with information technology systems, including
safeguarding against security breaches; and changes in global economic
and financial conditions, and the resulting impact on consumer
confidence and consumer spending, as well as other changes in consumer
discretionary spending habits, which could have a material adverse
effect on our business, results of operations and liquidity.
|
AMERICAN EAGLE OUTFITTERS, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Dollars in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 5,
|
|
February 3,
|
|
April 29,
|
|
|
|
2018
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
289,700
|
|
|
$
|
413,613
|
|
|
$
|
225,197
|
|
|
Short-term investments
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Merchandise inventory
|
|
|
404,264
|
|
|
|
398,213
|
|
|
|
364,274
|
|
|
Accounts receivable
|
|
|
72,800
|
|
|
|
78,304
|
|
|
|
79,432
|
|
|
Prepaid expenses and other
|
|
|
87,832
|
|
|
|
78,400
|
|
|
|
94,769
|
|
|
Total current assets
|
|
|
874,596
|
|
|
|
968,530
|
|
|
|
763,672
|
|
|
Property and equipment, net
|
|
|
732,179
|
|
|
|
724,239
|
|
|
|
710,500
|
|
|
Intangible assets, net
|
|
|
45,966
|
|
|
|
46,666
|
|
|
|
48,462
|
|
|
Goodwill
|
|
|
14,962
|
|
|
|
15,070
|
|
|
|
14,772
|
|
|
Non-current deferred income taxes
|
|
|
9,105
|
|
|
|
9,344
|
|
|
|
33,408
|
|
|
Other assets
|
|
|
54,106
|
|
|
|
52,464
|
|
|
|
62,379
|
|
|
Total Assets
|
|
$
|
1,730,914
|
|
|
$
|
1,816,313
|
|
|
$
|
1,633,193
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
207,774
|
|
|
$
|
236,703
|
|
|
$
|
208,857
|
|
|
Accrued compensation and payroll taxes
|
|
|
27,904
|
|
|
|
54,324
|
|
|
|
31,106
|
|
|
Accrued rent
|
|
|
83,524
|
|
|
|
83,312
|
|
|
|
78,018
|
|
|
Accrued income and other taxes
|
|
|
22,048
|
|
|
|
12,781
|
|
|
|
12,446
|
|
|
Unredeemed gift cards and gift certificates
|
|
|
39,918
|
|
|
|
52,347
|
|
|
|
39,744
|
|
|
Current portion of deferred lease credits
|
|
|
10,657
|
|
|
|
11,203
|
|
|
|
12,743
|
|
|
Other current liabilities and accrued expenses
|
|
|
42,979
|
|
|
|
34,551
|
|
|
|
37,677
|
|
|
Total current liabilities
|
|
|
434,804
|
|
|
|
485,221
|
|
|
|
420,591
|
|
|
Deferred lease credits
|
|
|
53,630
|
|
|
|
47,977
|
|
|
|
56,551
|
|
|
Non-current accrued income taxes
|
|
|
7,326
|
|
|
|
7,269
|
|
|
|
4,655
|
|
|
Other non-current liabilities
|
|
|
27,773
|
|
|
|
29,055
|
|
|
|
33,523
|
|
|
Total non-current liabilities
|
|
|
88,729
|
|
|
|
84,301
|
|
|
|
94,729
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Common stock
|
|
|
2,496
|
|
|
|
2,496
|
|
|
|
2,496
|
|
|
Contributed capital
|
|
|
565,033
|
|
|
|
593,770
|
|
|
|
582,512
|
|
|
Accumulated other comprehensive income
|
|
|
(34,936
|
)
|
|
|
(30,795
|
)
|
|
|
(32,671
|
)
|
|
Retained earnings
|
|
|
1,904,190
|
|
|
|
1,883,592
|
|
|
|
1,774,315
|
|
|
Treasury stock
|
|
|
(1,229,402
|
)
|
|
|
(1,202,272
|
)
|
|
|
(1,208,779
|
)
|
|
Total stockholders' equity
|
|
|
1,207,381
|
|
|
|
1,246,791
|
|
|
|
1,117,873
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
1,730,914
|
|
|
$
|
1,816,313
|
|
|
$
|
1,633,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Ratio
|
|
|
2.01
|
|
|
|
2.00
|
|
|
|
1.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(Dollars and shares in thousands, except per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basis
|
|
|
|
13 Weeks Ended
|
|
|
|
May 5,
|
|
% of
|
|
April 29,
|
|
% of
|
|
|
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
822,961
|
|
100.0
|
%
|
|
$
|
761,836
|
|
100.0
|
%
|
|
Cost of sales, including certain buying, occupancy and warehousing
expenses
|
|
|
518,518
|
|
63.0
|
%
|
|
|
484,014
|
|
63.5
|
%
|
|
Gross profit
|
|
|
304,443
|
|
37.0
|
%
|
|
|
277,822
|
|
36.5
|
%
|
|
Selling, general and administrative expenses
|
|
|
210,234
|
|
25.5
|
%
|
|
|
194,979
|
|
25.6
|
%
|
|
Restructuring charges
|
|
|
1,568
|
|
0.2
|
%
|
|
|
5,448
|
|
0.7
|
%
|
|
Depreciation and amortization
|
|
|
41,935
|
|
5.1
|
%
|
|
|
40,446
|
|
5.3
|
%
|
|
Operating income
|
|
|
50,706
|
|
6.2
|
%
|
|
|
36,949
|
|
4.9
|
%
|
|
Other income, net
|
|
|
502
|
|
0.0
|
%
|
|
|
403
|
|
0.0
|
%
|
|
Income before income taxes
|
|
|
51,208
|
|
6.2
|
%
|
|
|
37,352
|
|
4.9
|
%
|
|
Provision for income taxes
|
|
|
11,279
|
|
1.4
|
%
|
|
|
12,116
|
|
1.6
|
%
|
|
Net income
|
|
$
|
39,929
|
|
4.8
|
%
|
|
$
|
25,236
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per basic share
|
|
$
|
0.23
|
|
|
|
$
|
0.14
|
|
|
|
Net income per diluted share
|
|
$
|
0.22
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
176,853
|
|
|
|
|
179,312
|
|
|
|
Weighted average common shares outstanding - diluted
|
|
|
178,273
|
|
|
|
|
181,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
GAAP TO NON-GAAP RECONCILIATION
|
(Dollars in thousands, except per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
May 5, 2018
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
income per
|
|
|
Operating
|
|
|
|
common
|
|
|
income
|
|
Net income
|
|
share
|
GAAP Basis
|
|
$
|
50,706
|
|
|
|
$
|
39,929
|
|
|
$
|
0.22
|
% of Revenue
|
|
|
6.2
|
%
|
|
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Add: Restructuring Charges(1):
|
|
|
1,568
|
|
|
|
|
1,188
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
Non-GAAP Basis
|
|
$
|
52,274
|
|
|
|
$
|
41,117
|
|
|
$
|
0.23
|
% of Revenue
|
|
|
6.4
|
%
|
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) - $1.6 million for pre-tax corporate restructuring charges,
primarily consisting of corporate severance charges
|
|
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
|
GAAP TO NON-GAAP RECONCILIATION
|
|
(Dollars in thousands, except per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
April 29, 2017
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
income per
|
|
|
Operating
|
|
|
|
common
|
|
|
income
|
|
Net income
|
|
share
|
GAAP Basis
|
|
$
|
36,949
|
|
|
$
|
25,236
|
|
|
$
|
0.14
|
% of Revenue
|
|
|
4.9
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
Add:Restructuring Charges(1): |
|
|
5,448
|
|
|
|
3,439
|
|
|
|
0.02
|
|
|
|
|
|
|
|
Non-GAAP Basis
|
|
$
|
42,397
|
|
|
$
|
28,675
|
|
|
$
|
0.16
|
% of Revenue
|
|
|
5.6
|
%
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
(1) - $5.4 million pre-tax restructuring charges for severance and
related charges, which includes corporate overhead reductions and
charges for the United Kingdom, Hong Kong, and China.
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
|
|
|
|
GAAP TO NON-GAAP RECONCILIATION
|
|
|
|
|
(Dollars in thousands, except per share amounts)
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
|
|
|
July 29, 2017
|
|
|
|
|
|
|
Diluted income per
|
|
|
|
|
|
|
common share
|
|
|
|
|
GAAP Basis
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
Add: Restructuring Related Charges(1): |
|
|
0.04
|
|
|
|
|
Add: Joint Business Venture Charges(2): |
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Basis
|
|
$
|
0.19
|
|
|
|
|
|
|
|
(1)- $11.4 million pre-tax restructuring related charges, consisting
of:
|
|
•
|
|
Inventory charges related to the restructuring of the United
Kingdom, Hong Kong, and China ($1.7M), recorded as a reduction of
Gross Profit
|
|
•
|
|
Lease buyouts, store closure charges and severance and related
charges ($9.7M), which includes charges for the United Kingdom,
Hong Kong, and China and corporate overhead reductions, recorded
within Restructuring Charges.
|
|
|
|
|
(2)- $9.3 million pre-tax charges for the charges related to the
planned exit of a joint business venture, recorded within Other
(expense) income, net.
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
COMPARABLE SALES RESULTS BY BRAND
|
(unaudited)
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Comparable Sales
|
|
|
2018
|
|
2017
|
American Eagle Outfitters, Inc. (1) |
|
9
|
%
|
|
2
|
%
|
|
|
|
|
|
AE Total Brand (1) |
|
4
|
%
|
|
-1
|
%
|
aerie Total Brand (1) |
|
38
|
%
|
|
25
|
%
|
|
|
|
|
|
|
(1) AEO Direct is included in consolidated and total brand
comparable sales.
|
|
|
|
|
|
|
|
|
AMERICAN EAGLE OUTFITTERS, INC.
|
STORE INFORMATION
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Fiscal 2018
|
|
|
|
|
2018
|
|
Guidance
|
Consolidated stores at beginning of period
|
|
1,047
|
|
|
1,047
|
|
|
Consolidated stores opened during the period
|
|
|
|
|
|
|
|
|
AE Brand
|
|
4
|
|
|
15 - 20
|
|
|
|
Aerie stand-alone
|
|
1
|
|
|
10 - 15
|
|
|
|
Tailgate Clothing Co.
|
|
0
|
|
|
1
|
|
|
|
Todd Snyder
|
|
0
|
|
|
1
|
|
|
Consolidated stores closed during the period
|
|
|
|
|
|
|
|
|
AE Brand
|
|
(2)
|
|
|
(10) - (15)
|
|
|
|
Aerie stand-alone
|
|
(1)
|
|
|
(5) - (10)
|
|
Total consolidated stores at end of period
|
|
1,049
|
|
|
1,049 - 1,069
|
|
|
|
|
|
|
|
|
|
|
Stores remodeled and refurbished during the period
|
|
23
|
|
|
60 - 70
|
|
Total gross square footage at end of period
|
|
6,598
|
|
|
Not Provided
|
|
|
|
|
|
|
|
|
|
International license locations at end of period (1) |
|
217
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
Aerie side-by-side stores (2) |
|
|
|
|
|
|
|
|
New AE store
|
|
0
|
|
|
5 - 10
|
|
|
|
Remodeled AE store
|
|
2
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
International license locations are not included in the
consolidated store data or the total gross square footage
calculation.
|
|
|
|
(2)
|
|
Aerie side-by-side stores are included in the AE Brand store count
as they are considered part of the AE Brand store to which they
are attached.
|
|
|
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180531005289/en/
American Eagle Outfitters, Inc.
Olivia Messina, 412-432-3300
LineMedia@ae.com
Source: American Eagle Outfitters, Inc.