News Details

PITTSBURGH--(BUSINESS WIRE)--Mar. 7, 2012-- American Eagle Outfitters, Inc. (NYSE:AEO) today announced earnings for the fourth quarter ended January 28, 2012 of $0.26 per diluted share. Adjusted earnings for the fourth quarter ended January 28, 2012 were $0.35 per diluted share, which excludes store impairment charges and executive transition costs of $0.07 and $0.02 per diluted share, respectively. This compares to earnings of $0.44 per diluted share last year.

The company also announced earnings for the fiscal year ended January 28, 2012 of $0.77 per diluted share. Adjusted earnings for the fiscal year ended January 28, 2012 were $0.86 per diluted share, which excludes store impairment charges and executive transition costs of $0.07 and $0.02 per diluted share, respectively. Adjusted income from continuing operations for the fiscal year ended January 29, 2011 was $1.02 per diluted share, which excluded a realized loss from the sale of investment securities of $0.12 per diluted share. Please see the following tables for a complete reconciliation of GAAP to non-GAAP earnings per diluted share from continuing operations for all periods.

Fourth Quarter Results
Total sales for the quarter increased 14% to $1.04 billion, compared to $916 million last year. Fourth quarter comparable store sales increased 10%, compared to a 7% decrease last year. Including AEO Direct sales, comparable store sales increased 11%. For additional comparable store sales information for the period, see the accompanying table.

Gross profit was $356 million, or 34.1% as a rate to sales, compared to $361 million, or 39.4% as a rate to sales, last year. The gross margin decline was due to a lower merchandise margin. Average unit cost increases, driven by higher product costs, resulted in approximately half of the 610 basis point decline in merchandise margin. Increased markdowns, required to drive sales during peak Holiday shopping periods, contributed the balance of the decline. Buying, occupancy and warehousing costs improved 80 basis points as a rate to sales, primarily due to top line growth driven by the 10% comparable store sales increase.

Selling, general and administrative expense was $220 million, compared to $194 million last year, and includes $6 million of executive transition costs. As a rate to sales, SG&A improved 10 basis points to 21.1%, compared to 21.2% last year. The increase in SG&A expense is due to variable expense related to the sales increase and a planned investment in advertising.

During the quarter, the company recorded asset impairment charges of $21 million primarily related to aerie stores.

Operating income for the quarter was $80 million, compared to $134 million last year.

Fiscal 2011 Results – Continuing Operations
Total sales for the year increased 6% to $3.16 billion, compared to $2.97 billion last year. Fiscal 2011 comparable store sales increased 3%, compared to a 1% decrease last year, and were driven by our key item promotional strategy that began in the second half of the year. Including AEO Direct sales, comparable store sales increased 4%. For additional comparable store sales information for the period, see the accompanying table.

Gross profit was $1.13 billion, or 35.7% as a rate to sales, compared to $1.17 billion, or 39.5% as a rate to sales, last year. The merchandise margin rate declined 360 basis points. For the year, higher product costs were the primary driver in the merchandise margin decrease with increased markdowns from promotions contributing to the balance of the decline. Buying, occupancy and warehousing costs increased 20 basis points, primarily due to an increase in rent.

Selling, general and administrative expense increased 3% to $736 million, compared to $713 million last year. As a rate to sales, SG&A improved 70 basis points to 23.3%, compared to 24.0% last year. Expense reduction efforts, offset by new store growth, variable expense related to the sales increase and a planned advertising investment contributed to the improvement in SG&A rate.

Operating income for the quarter was $231 million, compared to $317 million last year.

AEO Direct
In the fourth quarter, online sales increased 18%, compared to a 4% increase last year. For the year, sales increased 15% to $385 million, compared to $334 million last year. The company’s online business includes ae.com, aerie.com and 77kids.com.

Inventory
Total merchandise inventories at the end of the fourth quarter were $378 million, an increase of 24% on a cost per foot basis, due in part to a high single-digit increase in the average unit cost. First quarter ending inventory cost is expected to moderate as compared to the back half of 2011 and cost per foot is planned to increase in the mid teens.

Capital Expenditures
For the fourth quarter, capital expenditures were $3 million, compared to $19 million last year. Fiscal 2011 capital expenditures totaled $100 million, compared to $84 million last year. For Fiscal 2012, the company expects capital expenditures to be approximately $100 million.

Real Estate
For the year, total square footage increased 1% and is expected to decrease slightly in 2012, reflecting 15 store openings, offset by 20 to 30 store closures. For additional fourth quarter 2011 actual and 2012 real estate information, see the accompanying table.

Cash and Investments
The company ended the fourth quarter with total cash and investments of $746 million. During the year, the company repurchased 1.4 million shares for $15 million. Additionally, the company paid cash dividends of $86 million.

Future Outlook
For the year, the company is planning a modest sales increase, and margin improvement. Increased product costs will continue to pressure margins in the first half of the year and lower product costs should benefit margins in the second half. The company is also targeting lower markdowns driven by improved inventory productivity. The company expects to provide annual EPS guidance along with the first quarter earnings announcement in May.

February provided a solid start to the first quarter of 2012, with positive comps driven by well-balanced selling of spring product and clearance. However, the company’s outlook remains cautious with spring breaks and Easter still ahead. First quarter EPS guidance of $0.08 to $0.10 per diluted share assumes continued margin pressure from product costs, higher markdowns and the potential for increased promotions.

Conference Call Information
At 9:00 a.m. Eastern Time on March 7, 2012, the company’s management team will host a conference call to review the financial results. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com. Anyone unable to listen to the call can access a replay beginning March 7, 2012 at 12:00 p.m. Eastern Time through March 28, 2012. To listen to the replay, dial 1-877-870-5176, or internationally dial 1-858-384-5517, and reference confirmation code 372065. An audio replay of the conference call will also be available at www.ae.com.

Non-GAAP Measures
This press release includes information on non-GAAP earnings per diluted share (“non-GAAP” or “adjusted”). This measure is not based on any standardized methodology prescribed by U.S. generally accepted accounting principles ("GAAP") and is not necessarily comparable to similar measures presented by other companies. The company believes that this non-GAAP information is useful as an additional means for investors to evaluate the company's operating performance, when reviewed in conjunction with the company's GAAP financial statements. This amount is not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company's business and operations.

American Eagle Outfitters, Inc., through its subsidiaries, (“AEO, Inc.”) offers high-quality, on-trend clothing, accessories and personal care products at affordable prices. The American Eagle Outfitters^® brand targets 15 to 25 year old girls and guys, with 911 stores in the U.S. and Canada and online at www.ae.com. aerie^® by american eagle offers Dormwear^® and intimates collections for the AE^® girl, with 158 standalone stores in the U.S. and Canada and online at www.aerie.com. The latest brand, 77kids^® by american eagle^®, is available online at www.77kids.com, as well as at 21 stores across the nation. The 77kids brand offers “kid cool,” durable clothing and accessories for kids ages zero to 14. AE.COM^®, the online home of the brands of AEO, Inc. ships to 77 countries worldwide.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding fiscal 2012 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors beyond the company's control. Such factors include, but are not limited to the risk that the company’s operating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company's Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

Source: American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc.
Judy Meehan, 412-432-3300