PITTSBURGH--(BUSINESS WIRE)--American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.23 for the second quarter ended July 30, 2016, a 35% increase from EPS of $0.17 for the comparable quarter last year. The EPS figures refer to diluted earnings per share.
Jay Schottenstein, Chief Executive Officer commented, “For the past few years, we have worked hard to lift our brands through merchandise leadership and innovation, strengthen our customer focus and invest in technology. Our efforts around these priorities are clearly paying off, as again evidenced by our strong earnings growth in the second quarter. As we enter the fall season, our execution, focus and market opportunities are greater than ever. In today’s evolving retail landscape, we are committed to offering the very best product and customer experience to position AEO’s brands as leaders in a new generation of successful retail brands.”
Second Quarter 2016 Results
- Total net revenue increased 3% to $823 million from $797 million last year.
- Consolidated comparable sales increased 3%, following an 11% increase last year.
- Gross profit increased 8% to $307 million and as a rate to revenue, expanded 160 basis points to 37.3%. The increase was driven by improved merchandise margin due to lower cost and higher realized selling prices. This was partially offset by increased delivery expense related to growth in digital sales.
- Selling, general and administrative expense of $200 million increased 2% compared to last year and improved 20 basis points as a rate to revenue to 24.3%. Investments in brand advertising and variable selling expense were partially offset by expense management efforts.
- Operating income increased 29% to $69 million from $53 million last year, and the operating margin expanded by 160 basis points to 8.3% as a rate to revenue.
- Other expense was comprised of $3 million related to currency loss on cash held in Canadian dollars. This compares to other expense of $2 million last year.
- EPS of $0.23 increased 35% from EPS of $0.17 last year.
Inventory
Total merchandise inventories at the end of the second quarter increased 3% to $422 million, due in part to accelerated receipts to support our marketing programs. Strong inventory management remains a key priority. Third quarter 2016 ending inventory at cost is expected to be up in the low-single digits.
Capital Expenditures
For the quarter, capital expenditures totaled $36 million and $61 million for the year to date period. The company now expects fiscal 2016 capital expenditures to be approximately $160 million, on the low end of the prior guidance of $160 to $170 million.
Cash and Investments
The company ended the quarter with total cash of $248 million compared to $327 million last year. Over the past year, we invested $227 million in share buybacks, returned $94 million in dividends and invested $135 million in capital expenditures, resulting in a lower cash balance.
Store Information
In the quarter, the company opened 5 stores and closed 7 stores. Internationally, the company opened 13 licensed stores. For additional second quarter actual and fiscal 2016 projected store information, see the accompanying table.
Third Quarter Outlook
Based on an anticipated low single digit increase in comparable sales, management expects third quarter 2016 EPS to be approximately $0.40 to $0.41. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.35 last year.
Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast at 9:00 am 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.
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 more than 150 international stores operated by licensees. 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 2016 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) | ||||||||||||||||
| July 30, | January 30, | August 1, | ||||||||||||||
| 2016 | 2016 | 2015 | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 247,934 | $ | 260,067 | $ | 327,290 | ||||||||||
| Merchandise inventory | 422,151 | 305,178 | 408,541 | |||||||||||||
| Accounts receivable | 65,282 | 80,912 | 50,693 | |||||||||||||
| Prepaid expenses and other | 90,852 | 77,218 | 72,106 | |||||||||||||
| Total current assets | 826,219 | 723,375 | 858,630 | |||||||||||||
| Property and equipment, net | 700,270 | 703,586 | 715,650 | |||||||||||||
| Intangible assets, net | 50,761 | 51,832 | 47,154 | |||||||||||||
| Goodwill | 17,399 | 17,186 | 13,006 | |||||||||||||
| Non-current deferred income taxes | 44,370 | 64,927 | 74,140 | |||||||||||||
| Other assets | 54,169 | 51,340 | 51,629 | |||||||||||||
| Total Assets | $ | 1,693,188 | $ | 1,612,246 | $ | 1,760,209 | ||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
| Accounts payable | $ | 286,691 | $ | 182,789 | $ | 263,145 | ||||||||||
| Accrued compensation and payroll taxes | 35,908 | 79,302 | 37,851 | |||||||||||||
| Accrued rent | 78,621 | 77,482 | 77,127 | |||||||||||||
| Accrued income and other taxes | 10,250 | 22,223 | 14,654 | |||||||||||||
| Unredeemed gift cards and gift certificates | 31,532 | 48,274 | 30,502 | |||||||||||||
| Current portion of deferred lease credits | 12,810 | 12,711 | 13,240 | |||||||||||||
| Other current liabilities and accrued expenses | 42,719 | 40,901 | 55,625 | |||||||||||||
| Total current liabilities | 498,531 | 463,682 | 492,144 | |||||||||||||
| Deferred lease credits | 51,100 | 50,104 | 56,421 | |||||||||||||
| Non-current accrued income taxes | 4,795 | 4,566 | 5,441 | |||||||||||||
| Other non-current liabilities | 38,365 | 42,518 | 40,525 | |||||||||||||
| Total non-current liabilities | 94,260 | 97,188 | 102,387 | |||||||||||||
| Commitments and contingencies | - | - | - | |||||||||||||
| Preferred stock | - | - | - | |||||||||||||
| Common stock | 2,496 | 2,496 | 2,496 | |||||||||||||
| Contributed capital | 591,532 | 590,820 | 577,146 | |||||||||||||
| Accumulated other comprehensive income | (29,356 | ) | (29,868 | ) | (18,378 | ) | ||||||||||
| Retained earnings | 1,693,371 | 1,659,267 | 1,553,380 | |||||||||||||
| Treasury stock | (1,157,646 | ) | (1,171,339 | ) | (948,966 | ) | ||||||||||
| Total stockholders' equity | 1,100,397 | 1,051,376 | 1,165,678 | |||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,693,188 | $ | 1,612,246 | $ | 1,760,209 | ||||||||||
| Current Ratio | 1.66 | 1.56 | 1.74 | |||||||||||||
| AMERICAN EAGLE OUTFITTERS, INC. | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (Dollars and shares in thousands, except per share amounts) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| 13 Weeks Ended | ||||||||||||||||||||
| July 30, | % of | August 1, | % of | |||||||||||||||||
| 2016 | Revenue | 2015 | Revenue | |||||||||||||||||
| Total net revenue | $ | 822,594 | 100.0 | % | $ | 797,428 | 100.0 | % | ||||||||||||
| Cost of sales, including certain buying, | ||||||||||||||||||||
| occupancy and warehousing expenses | 515,499 | 62.7 | % | 512,389 | 64.3 | % | ||||||||||||||
| Gross profit | 307,095 | 37.3 | % | 285,039 | 35.7 | % | ||||||||||||||
| Selling, general and administrative expenses | 199,536 | 24.3 | % | 195,791 | 24.5 | % | ||||||||||||||
| Depreciation and amortization | 38,900 | 4.7 | % | 36,109 | 4.5 | % | ||||||||||||||
| Operating income | 68,659 | 8.3 | % | 53,139 | 6.7 | % | ||||||||||||||
| Other expense, net | (3,134 | ) | -0.3 | % | (2,237 | ) | -0.3 | % | ||||||||||||
| Income before income taxes | 65,525 | 8.0 | % | 50,902 | 6.4 | % | ||||||||||||||
| Provision for income taxes | 23,933 | 2.9 | % | 17,637 | 2.2 | % | ||||||||||||||
| Net income | 41,592 | 5.1 | % | 33,265 | 4.2 | % | ||||||||||||||
| Net income per basic share | $ | 0.23 | $ | 0.17 | ||||||||||||||||
| Net income per diluted share | $ | 0.23 | $ | 0.17 | ||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||
| outstanding - basic | 181,048 | 195,508 | ||||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||
| outstanding - diluted | 183,413 | 196,885 | ||||||||||||||||||
| 26 Weeks Ended | ||||||||||||||||||||
| July 30, | % of | August 1, | % of | |||||||||||||||||
| 2016 | Revenue | 2015 | Revenue | |||||||||||||||||
| Total net revenue | $ | 1,572,010 | 100.0 | % | $ | 1,496,948 | 100.0 | % | ||||||||||||
| Cost of sales, including certain buying, | ||||||||||||||||||||
| occupancy and warehousing expenses | 971,463 | 61.8 | % | 949,697 | 63.4 | % | ||||||||||||||
| Gross profit | 600,547 | 38.2 | % | 547,251 | 36.6 | % | ||||||||||||||
| Selling, general and administrative expenses | 395,529 | 25.2 | % | 380,882 | 25.4 | % | ||||||||||||||
| Depreciation and amortization | 77,683 | 4.9 | % | 71,236 | 4.8 | % | ||||||||||||||
| Operating income | 127,335 | 8.1 | % | 95,133 | 6.4 | % | ||||||||||||||
| Other income, net | 1,801 | 0.1 | % | 3,733 | 0.2 | % | ||||||||||||||
| Income before income taxes | 129,136 | 8.2 | % | 98,866 | 6.6 | % | ||||||||||||||
| Provision for income taxes | 47,068 | 3.0 | % | 36,548 | 2.4 | % | ||||||||||||||
| Net income | 82,068 | 5.2 | % | 62,318 | 4.2 | % | ||||||||||||||
| Net income per basic share | $ | 0.45 | $ | 0.32 | ||||||||||||||||
| Net income per diluted share | $ | 0.45 | $ | 0.32 | ||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||
| outstanding - basic | 180,872 | 195,241 | ||||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||
| outstanding - diluted | 182,922 | 196,532 | ||||||||||||||||||
| AMERICAN EAGLE OUTFITTERS, INC. | ||||||
| COMPARABLE SALES RESULTS BY BRAND | ||||||
| (unaudited) | ||||||
| Second Quarter | ||||||
| Comparable Sales | ||||||
| 2016 | 2015 | |||||
| American Eagle Outfitters, Inc. (1) | 3 | % | 11 | % | ||
| AE Total Brand (1) | 1 | % | 10 | % | ||
| aerie Total Brand (1) | 24 | % | 18 | % | ||
| YTD Second Quarter | ||||||
| Comparable Sales | ||||||
| 2016 | 2015 | |||||
| American Eagle Outfitters, Inc. (1) | 5 | % | 9 | % | ||
| AE Total Brand (1) | 3 | % | 9 | % | ||
| aerie Total Brand (1) | 28 | % | 15 | % | ||
| (1) AEO Direct is included in consolidated and total brand comparable sales. | ||||||
| AMERICAN EAGLE OUTFITTERS, INC. | ||||||||
| STORE INFORMATION | ||||||||
| (unaudited) | ||||||||
| Second Quarter | YTD Second Quarter | Fiscal 2016 | ||||||
| 2016 | 2016 | Guidance | ||||||
| Consolidated stores at beginning of period | 1,046 | 1,047 |
1,047 |
|||||
| Consolidated stores opened during the period | ||||||||
| AE Brand | 4 | 6 | 15 - 20 | |||||
| aerie | 0 | 1 | 10 - 15 | |||||
| Tailgate Clothing Co. | 1 | 1 | 3 | |||||
| Consolidated stores closed during the period | ||||||||
| AE Brand | (3) | (4) | (20) - (25) | |||||
| aerie | (4) | (7) | (10) | |||||
| Total consolidated stores at end of period | 1,044 | 1,044 |
1,045 - 1,050 |
|||||
| Stores remodeled and refurbished during the period | 25 | 37 | 55 - 65 | |||||
| Total gross square footage at end of period | 6,598,956 | 6,598,956 | Not Provided | |||||
| International license locations at end of period (1) | 158 | 158 | 181 | |||||
| (1) International license locations are not included in the consolidated store data or the total gross square footage calculation. | ||||||||