PITTSBURGH--(BUSINESS WIRE)--American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.17 for the second quarter ended August 1, 2015, a significant increase from EPS of $0.03 for the comparable quarter last year, and above EPS guidance of $0.11 to $0.14. The EPS figures refer to diluted earnings per share.
Jay Schottenstein, Interim CEO commented, “I’m pleased to report another strong quarter, and to see positive momentum continue. The team is delivering exceptional execution, and our customers have taken notice of improvements to our merchandise and overall customer experience. Both American Eagle and Aerie delivered strong sales and earnings growth across channels. We have two of the best-positioned brands in the marketplace today, and we are well poised to capitalize on our strengths. We have vast opportunity for ongoing improvements and will strive to deliver continued growth and returns to our shareholders.”
Second Quarter 2015 Results
- Total net revenue increased 12% to a record $797 million from $711 million last year.
- Consolidated comparable sales increased 11%, compared to a 7% decrease last year.
- Gross profit increased 20% to $285 million and the gross margin rate rose 230 basis points to 35.7%. Buying, occupancy and warehousing costs leveraged 130 basis points, primarily due to strong sales, combined with our fleet rationalization. Reduced markdowns drove another 100 basis points of margin expansion.
- Selling, general and administrative expense of $196 million increased 3% from $190 million last year. As a rate to revenue, SG&A leveraged 220 basis points to 24.5% compared to 26.7% last year. Expense reduction initiatives partially offset increases in incentive and variable selling expense, driven by strong sales performance.
- Operating income increased to $53 million from $12 million last year, and the operating margin expanded 500 basis points to 6.7% as a rate to revenue.
- Other expense of $2.2 million is primarily comprised of currency losses related to cash held in Canadian dollars.
- The tax rate of 34.7% includes a benefit of approximately $2.5 million, primarily due to an income tax settlement.
- EPS of $0.17 increased significantly from EPS of $0.03 last year.
Inventory
Total merchandise inventories at the end of the
second quarter increased 4% to $409 million compared to $393 million
last year. At cost per foot, inventory increased 5%, consistent with our
guidance and below our sales growth rate. Third quarter 2015 ending
inventory at cost is expected to be approximately flat.
Capital Expenditures
In the second quarter, capital
expenditures totaled $37 million. For fiscal 2015, the company continues
to expect capital expenditures of approximately $150 million, which
includes the chain-wide roll-out of the point of sale system, supporting
technologies and the completion of our new fulfillment center, as well
as new and remodeled store investments.
Store Information
In the quarter, the company opened six new
stores, including four factory stores, and closed three locations,
including two AE and one aerie store. Seven international licensed
stores opened during the quarter, including the first stores in South
Korea and Singapore. For additional second quarter 2015 actual and
fiscal 2015 projected store information, see the accompanying table.
Cash and Investments
The company ended the quarter with
total cash and investments of $327 million, compared to $263 million
last year.
Third Quarter Outlook
Based on an anticipated mid
single-digit increase in comparable sales, management expects third
quarter 2015 EPS to be approximately $0.28 to $0.31. This guidance
excludes potential asset impairment and restructuring charges, and
compares to adjusted EPS of $0.22 last year.
Conference Call and Supplemental Financial Information
Today,
management will host a conference call and real time webcast at 11:00
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. 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. 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 the United
States, Canada, Mexico, China, Hong Kong and the United Kingdom, and
ships to 81 countries worldwide through its websites. American Eagle
Outfitters and Aerie merchandise also is available at 116 international
stores operated by licensees in 19 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, including third quarter 2015 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 |
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|
(Dollars in thousands) |
||||||||||||||
| August 1, | January 31, | August 2, | ||||||||||||
| 2015 | 2015 | 2014 | ||||||||||||
| (unaudited) |
(unaudited) |
|||||||||||||
|
ASSETS |
||||||||||||||
| Cash and cash equivalents | $ | 327,290 | $ | 410,697 | $ | 262,628 | ||||||||
| Merchandise inventory | 408,541 | 278,972 | 393,316 | |||||||||||
| Accounts receivable | 50,693 | 67,894 | 47,028 | |||||||||||
| Prepaid expenses and other | 75,477 | 73,848 | 89,426 | |||||||||||
| Deferred income taxes | 60,974 | 59,102 | 41,646 | |||||||||||
| Total current assets | 922,975 | 890,513 | 834,044 | |||||||||||
| Property and equipment, net | 712,279 | 694,856 | 729,463 | |||||||||||
| Intangible assets, net | 47,154 | 47,206 | 48,510 | |||||||||||
| Goodwill | 13,006 | 13,096 | 13,616 | |||||||||||
| Non-current deferred income taxes | 13,166 | 14,035 | 13,534 | |||||||||||
| Other assets | 51,629 | 37,202 | 40,894 | |||||||||||
| Total Assets | $ |
1,760,209 |
$ | 1,696,908 | $ |
1,680,061 |
||||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||
| Accounts payable | $ | 263,145 | $ | 191,146 | $ | 254,802 | ||||||||
| Accrued compensation and payroll taxes | 37,851 | 44,884 | 25,917 | |||||||||||
| Accrued rent | 77,127 | 78,567 | 75,649 | |||||||||||
| Accrued income and other taxes | 14,654 | 33,110 | 6,225 | |||||||||||
| Unredeemed gift cards and gift certificates | 30,502 | 47,888 | 29,092 | |||||||||||
| Current portion of deferred lease credits | 13,240 | 12,969 | 13,635 | |||||||||||
| Other current liabilities and accrued expenses | 55,625 | 50,529 | 34,469 | |||||||||||
| Total current liabilities | 492,144 | 459,093 | 439,789 | |||||||||||
| Deferred lease credits | 56,421 | 54,516 | 62,779 | |||||||||||
| Non-current accrued income taxes | 5,441 | 10,456 | 11,089 | |||||||||||
| Other non-current liabilities | 40,525 | 33,097 | 32,557 | |||||||||||
| Total non-current liabilities | 102,387 | 98,069 | 106,425 | |||||||||||
| Commitments and contingencies | - | - | - | |||||||||||
| Preferred stock | - | - | - | |||||||||||
| Common stock | 2,496 | 2,496 | 2,496 | |||||||||||
| Contributed capital | 577,146 | 569,675 | 559,694 | |||||||||||
| Accumulated other comprehensive income | (18,378 | ) | (9,944 | ) | 15,949 | |||||||||
| Retained earnings | 1,553,380 | 1,543,085 | 1,522,856 | |||||||||||
| Treasury stock | (948,966 | ) | (965,566 | ) | (967,148 | ) | ||||||||
| Total stockholders' equity | 1,165,678 | 1,139,746 | 1,133,847 | |||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,760,209 | $ | 1,696,908 | $ | 1,680,061 | ||||||||
| Current Ratio | 1.88 | 1.94 | 1.90 | |||||||||||
| AMERICAN EAGLE OUTFITTERS, INC. | ||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| (Dollars and shares in thousands, except per share amounts) | ||||||||||||||
| (unaudited) | ||||||||||||||
| 13 Weeks Ended | ||||||||||||||
| August 1, | % of | August 2, | % of | |||||||||||
| 2015 | Revenue | 2014 | Revenue | |||||||||||
| Total net revenue | $ | 797,428 | 100.0 | % | $ | 710,595 | 100.0 | % | ||||||
| Cost of sales, including certain buying, | ||||||||||||||
| occupancy and warehousing expenses | 512,389 | 64.3 | % | 473,048 | 66.6 | % | ||||||||
| Gross profit | 285,039 | 35.7 | % | 237,547 | 33.4 | % | ||||||||
| Selling, general and administrative expenses | 195,791 | 24.5 | % | 190,078 | 26.7 | % | ||||||||
| Depreciation and amortization | 36,109 | 4.5 | % | 35,422 | 5.0 | % | ||||||||
| Operating income | 53,139 | 6.7 | % | 12,047 | 1.7 | % | ||||||||
| Other (expense) income, net | (2,237 | ) | -0.3 | % | 850 | 0.1 | % | |||||||
| Income before income taxes | 50,902 | 6.4 | % | 12,897 | 1.8 | % | ||||||||
| Provision for income taxes | 17,637 | 2.2 | % | 7,084 | 1.0 | % | ||||||||
| Net income | $ | 33,265 | 4.2 | % | $ | 5,813 | 0.8 | % | ||||||
| Net income per basic share | $ | 0.17 | $ | 0.03 | ||||||||||
| Net income per diluted share | $ | 0.17 | $ | 0.03 | ||||||||||
| Weighted average common shares | ||||||||||||||
| outstanding - basic | 195,508 | 194,511 | ||||||||||||
| Weighted average common shares | ||||||||||||||
| outstanding - diluted | 196,885 | 194,747 | ||||||||||||
| 26 Weeks Ended | ||||||||||||||
| August 1, | % of | August 2, | % of | |||||||||||
| 2015 | Revenue | 2014 | Revenue | |||||||||||
| Total net revenue | $ | 1,496,948 | 100.0 | % | $ | 1,356,724 | 100.0 | % | ||||||
| Cost of sales, including certain buying, | ||||||||||||||
| occupancy and warehousing expenses | 949,697 | 63.4 | % | 893,332 | 65.8 | % | ||||||||
| Gross profit | 547,251 | 36.6 | % | 463,392 | 34.2 | % | ||||||||
| Selling, general and administrative expenses | 380,882 | 25.4 | % | 375,136 | 27.7 | % | ||||||||
| Depreciation and amortization | 71,237 | 4.8 | % | 67,784 | 5.0 | % | ||||||||
| Operating income | 95,132 | 6.4 | % | 20,472 | 1.5 | % | ||||||||
| Other income, net | 3,733 | 0.2 | % | 1,536 | 0.1 | % | ||||||||
| Income before income taxes | 98,865 | 6.6 | % | 22,008 | 1.6 | % | ||||||||
| Provision for income taxes | 36,547 | 2.4 | % | 12,329 | 0.9 | % | ||||||||
| Net income | $ | 62,318 | 4.2 | % | $ | 9,679 | 0.7 | % | ||||||
| Net income per basic share | $ | 0.32 | $ | 0.05 | ||||||||||
| Net income per diluted share | $ | 0.32 | $ | 0.05 | ||||||||||
| Weighted average common shares | ||||||||||||||
| outstanding - basic | 195,241 | 194,285 | ||||||||||||
| Weighted average common shares | ||||||||||||||
| outstanding - diluted | 196,532 | 194,751 | ||||||||||||
| AMERICAN EAGLE OUTFITTERS, INC. | ||||
| GAAP to Non-GAAP EPS reconciliation | ||||
| (unaudited) | ||||
|
13 Weeks Ended |
||||
| November 1, 2014 | ||||
| GAAP Diluted EPS |
$ |
0.05 |
||
|
Add back: Asset Impairment and Corporate Overhead Reduction Charges(1): |
0.17 | |||
| Non-GAAP Diluted EPS |
$ |
0.22 |
||
| (1) Non-GAAP adjustments consist of $33.5 million of corporate and store asset impairments and $17.7 million of severance and related employee costs and corporate charges. |
| AMERICAN EAGLE OUTFITTERS, INC. | |||||||
| COMPARABLE SALES RESULTS BY BRAND | |||||||
| (unaudited) | |||||||
| Second Quarter | |||||||
| Comparable Sales | |||||||
| 2015 | 2014 | ||||||
| American Eagle Outfitters, Inc. (1) | 11 | % | -7 | % | |||
| AE Total Brand (1) | 10 | % | -8 | % | |||
| aerie Total Brand (1) | 18 | % | 9 | % | |||
| YTD Second Quarter | |||||||
| Comparable Sales | |||||||
| 2015 | 2014 | ||||||
|
American Eagle Outfitters, Inc. (1) |
9 | % | -9 | % | |||
| AE Total Brand (1) | 9 | % | -9 | % | |||
| aerie Total Brand (1) | 15 | % | 2 | % | |||
| (1) AEO Direct is included in consolidated and total brand comparable sales. | |||||||
| AMERICAN EAGLE OUTFITTERS, INC. | |||||||||
| STORE INFORMATION | |||||||||
| (unaudited) | |||||||||
|
|
YTD |
|
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|
Second Quarter |
Second Quarter |
Fiscal 2015 |
|||||||
| Fiscal 2015 | Fiscal 2015 | Guidance | |||||||
| Consolidated stores at beginning of period | 1,054 | 1,056 | 1,056 | ||||||
| Consolidated stores opened during the period | |||||||||
| AE Brand | 6 | 10 | 20 | ||||||
| aerie | - | - | 2 | ||||||
| Consolidated stores closed during the period | |||||||||
| AE Brand | (2) | (5) | (45-50) | ||||||
| aerie | (1) | (4) | (20-25) | ||||||
|
Total consolidated stores at end of period |
1,057 | 1,057 | 1,003 - 1,013 | ||||||
| Stores remodeled and refurbished during the period | 5 | 15 | 25-30 | ||||||
| Total gross square footage at end of period | 6,643,357 | 6,643,357 | Not Provided | ||||||
|
International license stores at end of period (1) |
114 | 114 | 141 | ||||||
| (1) International license stores are not included in the consolidated store data or the total gross square footage calculation. | |||||||||