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American Eagle Outfitters Reports First Quarter Adjusted EPS of $0.18

May 22, 2013

PITTSBURGH--(BUSINESS WIRE)--May. 22, 2013-- American Eagle Outfitters, Inc. (NYSE:AEO) today reported adjusted earnings from continuing operations of $0.18 per diluted share for the first quarter ended May 4, 2013, compared to $0.22 per diluted share for the comparable quarter last year. GAAP earnings of $0.14 per share include asset write-offs and corporate charges of ($0.04) per share. The EPS figures refer to diluted earnings per share.

Robert Hanson , chief executive officer stated, “Our first quarter results reflected a tough macro-environment as well as cooler weather causing soft demand for seasonal merchandise, all against warmer-than-normal weather and a strong performance last year. Although disappointed with the decline to last year, we sustained a high level of profitability supported by strong inventory principles, fleet repositioning efforts and the growth of our online business. We remain confident in our strategic direction and made good progress on our initiatives to fortify our business, grow North America and lay the foundation for transformational global longer-term growth. Our focus is aimed at driving profitable revenue growth and delivering top tier returns to our shareholders.”

First Quarter 2013 Non-GAAP Results

The following discussion is based on Non-GAAP results, as presented in the accompanying GAAP to Non-GAAP reconciliations.

  • Total net revenue decreased 4% to $679 million, compared to $709 million last year.
  • Consolidated comparable sales, including AEO Direct, decreased 5%, compared to a 17% increase last year. First quarter 2013 comp sales are compared to the 13 weeks ended May 5, 2012.
  • Gross profit decreased 3% to $266 million and increased 30 basis points to 39.1% as a rate to revenue, driven by favorable product costs, sourcing and supply chain efficiencies. Improvements were partially offset by higher markdowns and negative comps.
  • Selling, general and administrative expense of $181 million increased 1% from last year and deleveraged 140 basis points.
  • Operating income decreased 11% to $57 million, resulting in rate of 8.4% compared to 9.1% last year.
  • Adjusted EPS of $0.18 compared to $0.22 last year, an 18% decrease.

Inventory

Total merchandise inventory at the end of the first quarter declined 7% to $341 million compared to $368 million last year. At cost per foot, inventory decreased 6%. Second quarter 2013 ending inventory cost per foot is expected to decline in the low single-digits.

Capital Expenditures

In first quarter 2013, capital expenditures totaled $46 million, with approximately half related to store investments and the balance to information technology and investments in e-commerce. For fiscal 2013, the company continues to expect capital expenditures of $250 million to $280 million. In addition to investments in store growth and maintenance projects, the company’s capital spending plan includes building a new distribution center to support omni-channel growth, upgraded technology which includes the implementation of a fully integrated global enterprise system which incorporates a new fleet-wide point-of-sale system and new planning tools.

Real Estate

In the first quarter, total square footage decreased 2% from last year. The company opened 7 new stores, of which 5 were factory stores, and closed 14 locations, including 10 aerie stores. Additionally the company had 57 international franchise locations in 14 countries. For additional first quarter 2013 actual and fiscal 2013 projected real estate information, see the accompanying table.

Future Outlook

Management is issuing second quarter EPS guidance of $0.19 to $0.21 per diluted share, based on flat comparable sales. For the year, EPS guidance is $1.42 to $1.45, based on second half comparable sales growth in the low-single digits.

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 www.ae.com to access the webcast and audio replay. Also, 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. 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. 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 North America, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 57 international franchise stores in 14 countries. For more information, please visit www.ae.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding second quarter and fiscal 2013 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.

     
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
 
May 4, February 2, April 28,
2013 2013 2012
(unaudited) (unaudited)
 
ASSETS
Cash and cash equivalents $ 383,175 $ 509,119 $ 713,443
Short-term investments 113,041 121,873 8,587
Merchandise inventory 340,508 332,452 367,695
Assets held for sale 4,528 9,499 19,039
Accounts receivable 55,193 46,321 37,472
Prepaid expenses and other 97,512 73,805 75,433
Deferred income taxes 42,649 58,230 48,358
Total current assets 1,036,606 1,151,299 1,270,027
Property and equipment, net 522,269 500,134 562,058
Intangible assets, net 37,931 38,136 39,556
Goodwill 11,434 11,484 11,544
Non-current deferred income taxes 23,325 31,282 16,579
Other assets 35,479 23,718 16,688
Total Assets $ 1,667,044 $ 1,756,053 $ 1,916,452
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 161,778 $ 176,874 $ 133,861
Accrued compensation and payroll taxes 27,993 65,533 21,970
Accrued rent 74,034 77,873 76,550
Accrued income and other taxes 7,948 29,155 14,333
Unredeemed gift cards and gift certificates 33,435 46,458 30,783
Current portion of deferred lease credits 14,219 13,381 14,945
Other current liabilities and accrued expenses 27,728 26,628 25,779
Total current liabilities 347,135 435,902 318,221
Deferred lease credits 69,399 59,571 73,350
Non-current accrued income taxes 19,321 19,011 31,806
Other non-current liabilities 24,064 20,382 22,544
Total non-current liabilities 112,784 98,964 127,700
Commitments and contingencies - - -
Preferred stock - - -
Common stock 2,496 2,496 2,496
Contributed capital 583,795 627,065 567,700
Accumulated other comprehensive income 28,795 29,297 30,532
Retained earnings 1,592,706 1,553,058 1,774,205
Treasury stock (1,000,667) (990,729) (904,402)
Total stockholders' equity 1,207,125 1,221,187 1,470,531
Total Liabilities and Stockholders' Equity $ 1,667,044 $ 1,756,053 $ 1,916,452
 
Current Ratio 2.99 2.64 3.99
 
       
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
 
GAAP Basis
13 Weeks Ended
May 4, % of April 28, % of
2013   Revenue     2012   Revenue
 
Total net revenue $ 679,477 100.0% $ 708,695 100.0%
Cost of sales, including certain buying,
occupancy and warehousing expenses 415,868   61.2% 433,782   61.2%
Gross profit 263,609 38.8% 274,913 38.8%
Selling, general and administrative expenses 182,253 26.8% 178,539 25.2%
Depreciation and amortization 35,539   5.3% 32,066   4.5%
Operating income 45,817 6.7% 64,308 9.1%
Other (expense) income, net (682)   -0.1% 3,507   0.5%
Income before income taxes 45,135 6.6% 67,815 9.6%
Provision for income taxes 17,159   2.5% 23,780   3.4%
Income from continuing operations 27,976 4.1% 44,035 6.2%
Loss from discontinued operations, net of tax -   0.0% (4,338)   -0.6%
Net income $ 27,976   4.1% $ 39,697   5.6%
 
Basic income per common share:
Income from continuing operations $ 0.14 $ 0.22
Loss from discontinued operations 0.00   (0.02)
Net income per basic share $ 0.14 $ 0.20
 
Diluted income per common share:
Income from continuing operations $ 0.14 $ 0.22
Loss from discontinued operations 0.00   (0.02)
Net income per diluted share $ 0.14 $ 0.20
 
Weighted average common shares
outstanding - basic 192,710 194,890
Weighted average common shares
outstanding - diluted 196,718 197,252
 
         
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
 
13 Weeks Ended

May 4, 2013

American Eagle Outfitters,
Inc.
(GAAP Basis)

   

Asset Write-offs
and
Corporate Charges(1)

 

American Eagle Outfitters,
Inc.
(Non-GAAP Basis)

% of % of
      Revenue           Revenue
 
Total net revenue $ 679,477 100.0% $ - $ 679,477 100.0%
Cost of sales, including certain buying, occupancy and warehousing expenses   415,868   61.2%   2,425   413,443   60.9%
Gross profit 263,609 38.8% (2,425) 266,034 39.1%
Selling, general and administrative expenses 182,253 26.8% 1,512 180,741 26.6%
Depreciation and amortization   35,539   5.3%   7,606   27,933   4.1%
Operating income (loss) 45,817 6.7% (11,543) 57,360 8.4%
Other expense, net   (682)   -0.1%   -   (682)   -0.1%
Income (loss) before income taxes 45,135 6.6% (11,543) 56,678 8.3%
Provision (benefit) for income taxes   17,159   2.5%   (4,375)   21,534   3.2%
Income (loss) from continuing operations 27,976 4.1% (7,168) 35,144 5.1%
Loss from discontinued operations, net of tax   -   0.0%   -   -   0.0%
Net income (loss) $ 27,976   4.1% $ (7,168) $ 35,144   5.1%
 
Basic income per common share
Income from continuing operations $ 0.14 $ (0.04) $ 0.18
Loss from discontinued operations $ 0.00   $ 0.00 $ 0.00
Basic income per common share $ 0.14 $ (0.04) $ 0.18
 
Diluted income per common share
Income from continuing operations $ 0.14 $ (0.04) $ 0.18
Loss from discontinued operations $ 0.00   $ 0.00 $ 0.00
Diluted income per common share $ 0.14 $ (0.04) $ 0.18
 
Weighted average common shares
outstanding - basic 192,710 192,710 192,710
Weighted average common shares
outstanding - diluted 196,718 196,718 196,718
 

(1)- Non-GAAP Items consist of $10.1 million of pre-tax corporate and store asset write-offs and $1.4 million of pre-tax severance and related employee costs.

   
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
13 Weeks Ended
May 4, April 28,
2013 2012
Operating activities:
Net income $ 27,976 $ 39,697
Loss from discontinued operations - 4,338
Income from continuing operations 27,976 44,035

Adjustments to reconcile income from continuing operations to net cash from operating
activities of continuing operations:

Depreciation and amortization 35,926 32,591
Share-based compensation 5,289 21,299
Provision for deferred income taxes 23,446 (2,772)
Tax benefit from share-based payments 7,890 4,422
Excess tax benefit from share-based payments (8,101) (2,643)
Foreign currency transaction loss (gain) 640 (145)
Changes in assets and liabilities:
Merchandise inventory (8,375) 426
Accounts receivable (8,942) 2,570
Prepaid expenses and other (20,497) (379)
Other assets (12,524) (426)
Accounts payable (15,811) (46,766)
Unredeemed gift cards and gift certificates (12,981) (14,260)
Deferred lease credits 10,752 1,149
Accrued compensation and payroll taxes (37,537) (20,577)
Accrued income and other taxes (24,103) (9,527)
Accrued liabilities (1,732) 9,327
Total adjustments (66,660) (25,711)

Net cash (used for) provided by operating activities from continuing operations

$ (38,684) $ 18,324
Investing activities:
Capital expenditures for property and equipment (45,657) (24,054)
Acquisition of intangible assets (295) (220)
Purchase of available-for-sale securities (15,217) (3,051)
Sale of available-for-sale securities 23,778 20,119
Net cash used for investing activities from continuing operations $ (37,391) $ (7,206)
Financing activities:
Payments on capital leases (2,564) (923)
Repurchase of common stock as part of publicly announced programs (33,051) -
Repurchase of common stock from employees (23,291) (4,100)
Net proceeds from stock options exercised 1,523 12,165
Excess tax benefit from share-based payments 8,101 2,643
Cash dividends paid - (21,524)
Net cash used for financing activities from continuing operations $ (49,282) $ (11,739)
Effect of exchange rates on cash (587) 960
 
Cash flows of discontinued operations
Net cash used for operating activities - (5,664)
Net cash used for investing activities - (777)
Net cash used for financing activities - -
Effect of exchange rate on cash - -
Net cash used for discontinued operations $ - $ (6,441)
 
Net decrease in cash and cash equivalents $ (125,944) $ (6,102)
Cash and cash equivalents - beginning of period 509,119 719,545
Cash and cash equivalents - end of period $ 383,175 $ 713,443
 
   
AMERICAN EAGLE OUTFITTERS, INC.

COMPARABLE SALES RESULTS BY BRAND

(unaudited)
 
First Quarter

Comparable Sales (1)

2013 2012
American Eagle Outfitters, Inc. (2) -5% 17%
 
AE Total Brand (2) -6% 17%
aerie Total Brand (2) 4% 22%
AEO Direct 24% 22%
 
(1) First quarter 2013 comp sales are compared to the 13 weeks ended May 5, 2012.
(2) AEO Direct is included in consolidated and total brand comparable sales.
   
AMERICAN EAGLE OUTFITTERS, INC.
REAL ESTATE INFORMATION
(unaudited)
   
First Quarter Fiscal 2013
Fiscal 2013 Guidance
Consolidated stores at beginning of period 1,044 1,044
Consolidated stores opened during the period
AE Brand 7 50 - 55
Consolidated stores closed during the period
AE Brand (4) (20) - (30)
aerie   (10)   (15) - (20)
Total consolidated stores at end of period 1,037 1049 - 1059
 
Stores remodeled and refurbished during the period 22 50 - 65
Total gross square footage at end of period 6,191,638 Not Provided
 
International franchise stores at end of period (1) 57 64
 
(1)- International franchise stores are not included in the consolidated store data or the total gross square footage calculation.

Source: American Eagle Outfitters Inc.

American Eagle Outfitters Inc.
Kristen Zaccagnini, 412-432-3300

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