American Eagle Outfitters Reports Record First Quarter Revenue

Total Revenues Increase 8%, Comparable Sales Rise 6%

Strength Across Brands and Channels

$20 Million of Share Repurchases Completed

PITTSBURGH–(BUSINESS WIRE)–American Eagle Outfitters, Inc. (NYSE: AEO) today reported EPS of $0.23
for the quarter ended May 4, 2019, compared to $0.22 for the quarter
ended May 5, 2018. Excluding restructuring charges of $0.01, the
company’s adjusted EPS increased 4% to $0.24, compared to adjusted EPS
of $0.23 last year.

Jay Schottenstein, AEO’s Chairman and Chief Executive Officer commented,
“2019 is off to a positive start and we are especially pleased to
deliver first quarter sales and EPS growth ahead of our expectations.
American Eagle and Aerie continue to leverage strong brand equity,
compelling product, and leading customer engagement across stores and
digital, resulting in our 17th consecutive quarter of positive
comparable sales. AE’s ongoing market share gains are led by its
dominant jeans business, and Aerie’s consistent double-digit growth has
been fueled by the brand’s strong appeal to both existing and new
customers. Looking ahead, we see significant runway for each of our
brands. We are committed to improved profit flow through as we begin to
lap our 2018 investments, to support continued earnings growth and
attractive shareholder returns.”

Adjusted amounts are based on Non-GAAP results, as presented in the
accompanying GAAP to Non-GAAP reconciliation.

First Quarter 2019 Results

  • Total net revenue increased $63 million, or 8% to a record $886
    million compared to $823 million last year.
  • Consolidated comparable sales increased 6%, following a 9% comparable
    sales increase last year.
  • By brand, American Eagle’s comparable sales increased 4%, following a
    4% increase last year. Aerie’s comparable sales increased 14%,
    building on a 38% increase last year and marking the 18th consecutive
    quarter of double-digit comps.
  • Gross profit rose 7% to $325 million from $304 million. The gross
    margin rate of 36.7% compared to 37.0% last year. Rent leverage and
    improved product costs were offset by increases in markdowns and
    delivery expense.
  • Selling, general and administrative expense of $231 million increased
    50 basis points to 26.0% as a rate to revenue compared to 25.5% last
    year. Strategic investments in the stores organization, which began
    midway through 2018, led to increased compensation expense.
    Advertising and professional services also contributed to the 10%
    increase from $210 million last year.
  • Depreciation expense increased 7% to $45 million from $42 million last
    year and was flat as a rate to revenue at 5.1%.
  • Operating income of $48 million, which included $1.5 million of
    restructuring charges, compared to $51 million last year. Adjusted
    operating income of $49 million declined 6% when compared to the
    adjusted $52 million figure last year. The adjusted operating margin
    of 5.6% compared to 6.4% last year.
  • Other income of $4 million primarily consisted of interest income, as
    well as foreign currency fluctuations.
  • EPS of $0.23 compared to $0.22 last year. Excluding restructuring
    charges of $0.01, the company’s adjusted EPS increased 4% to $0.24,
    compared to adjusted EPS of $0.23 last year.

Restructuring Charges

In the first quarter of 2019, the company incurred restructuring charges
primarily related to severance and closure costs for company-owned and
operated stores in China, totaling $1.5 million, or approximately $0.01
per share. This compared to $1.6 million in charges in the first quarter
of 2018, or approximately $0.01 per share, which primarily related to
corporate severance.

Inventory

Total ending inventories at cost increased 13% to $456 million. Ending
inventory units were up 10%. The increase compared to the prior year
reflected strong demand and expanded collections for American Eagle
jeans and new store growth for Aerie. Additionally, the company ended
the quarter with 12 clearance stores, up from 5 stores last year, which
also contributed to the increase in ending inventory.

Capital Expenditures

In the first quarter, capital expenditures totaled $37 million,
primarily related to store remodeling projects and new openings, with
the balance primarily in support of the digital business and corporate
IT. We continue to expect annual capital expenditures to be in the range
of $200 to $215 million.

Shareholder Returns, Cash and Investments

During the first quarter, the company returned $44 million to
shareholders through cash dividends and share repurchases. We paid cash
dividends of $24 million and repurchased approximately 911,000 shares
for $20 million. At quarter-end, approximately 10.8 million shares
remained under the current repurchase authorization. As a result of
strong free cash flow, we ended the first quarter with total cash and
investments of $350 million compared to $310 million last year.

Store Information

During the quarter, the company opened 7 American Eagle stores and
closed 5, ending with 936 American Eagle stores, including 151 Aerie
side-by-side locations. Additionally, the company opened 4 Aerie
stand-alone stores, ending with 119 Aerie stand-alone stores.
Internationally, the company ended the quarter with 235 licensed stores
compared to 217 last year. For additional store information, see the
accompanying table.

Second Quarter Outlook

Based on an anticipated comparable sales increase in the low single
digits, management expects second quarter 2019 EPS to be approximately
$0.30 to $0.32. This guidance excludes potential asset impairment and
restructuring charges. Last year the company reported EPS of $0.34 for
the second quarter.

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
1-201-689-8562 (international) and provide the Conference ID 13689506 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® and Aerie® brands. The company operates more than 1,000 stores in
the United States, Canada, Mexico and Hong Kong, and ships to 81
countries worldwide through its websites. American Eagle and Aerie
merchandise also is available at more than 200 international locations
operated by licensees in 24 countries. For more information, please
visit www.aeo-inc.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 2019 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 2, 2019 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 2019 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 4, February 2, May 5,
2019 2019 2018
 
ASSETS
Cash and cash equivalents $ 304,671 $ 333,330 $ 289,700
Short-term investments 45,000 92,135 20,000
Merchandise inventory 456,160 424,404 404,264
Accounts receivable 73,836 93,477 72,800
Prepaid expenses and other 70,936   102,907   87,832  
Total current assets 950,603   1,046,253   874,596  
Property and equipment, net 744,670 742,149 732,179
Operating lease right-of-use assets 1,444,225
Intangible assets, including goodwill 57,221 58,167 60,928
Non-current deferred income taxes 20,951 14,062 9,105
Other assets 37,683   42,747   54,106  
Total Assets $ 3,255,353   $ 1,903,378   $ 1,730,914  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $ 231,760 $ 240,671 $ 207,774
Current portion of operating lease liabilities 266,819
Accrued income and other taxes 25,146 20,064 22,048
Accrued compensation and payroll taxes 29,425 82,173 27,904
Unredeemed gift cards and gift certificates 42,025 53,997 39,918
Other current liabilities and accrued expenses 54,622   145,740   137,160  
Total current liabilities 649,797   542,645   434,804  
Non-current operating lease liabilities 1,328,663
Other non-current liabilities 35,142   73,178   88,729  
Total non-current liabilities 1,363,805   73,178   88,729  
Commitments and contingencies
Preferred stock
Common stock 2,496 2,496 2,496
Contributed capital 570,443 574,929 565,033
Accumulated other comprehensive income (35,354 ) (34,832 ) (34,936 )
Retained earnings 2,028,627 2,054,654 1,904,190
Treasury stock (1,324,461 ) (1,309,692 ) (1,229,402 )
Total stockholders’ equity 1,241,751   1,287,555   1,207,381  
Total Liabilities and Stockholders’ Equity $ 3,255,353   $ 1,903,378   $ 1,730,914  
 
Current Ratio 1.46 1.93 2.01

The Company adopted ASC 842, Leases as of February 3, 2019 under
the modified retrospective approach and has not revised comparative
periods.

       
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 May 5, % of
2019   Revenue     2018   Revenue
 
Total net revenue $ 886,290 100.0% $ 822,961 100.0%

Cost of sales, including certain buying, occupancy and warehousing
expenses

561,369   63.3% 518,518   63.0%
Gross profit 324,921 36.7% 304,443 37.0%
Selling, general and administrative expenses 230,741 26.0% 210,234 25.5%
Restructuring charges 1,543 0.2% 1,568 0.2%
Depreciation and amortization 44,791   5.1% 41,935   5.1%
Operating income 47,846 5.4% 50,706 6.2%
Other income, net 4,182   0.5% 502   0.0%
Income before income taxes 52,028 5.9% 51,208 6.2%
Provision for income taxes 11,276   1.3% 11,279   1.4%
Net income $ 40,752   4.6% $ 39,929   4.8%
 
Net income per basic share $ 0.24 $ 0.23
Net income per diluted share $ 0.23 $ 0.22
 

Weighted average common shares outstanding – basic

172,598 176,853

Weighted average common shares outstanding – diluted

174,073 178,273
 
     
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
 
13 Weeks Ended
  May 4, 2019
Diluted
income per
Operating common
income share
GAAP Basis $ 47,846 $ 0.23
% of Revenue 5.4%
 

Add:Restructuring Charges(1):

1,543 0.01
 
Non-GAAP Basis $ 49,389 $ 0.24
% of Revenue 5.6%

(1) – $1.5 million for pre-tax corporate restructuring charges,
primarily consisting of severance and closure costs for our
company-owned and operated stores in China

     
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 share
GAAP Basis $ 50,706 $ 0.22
% of Revenue 6.2%
 
Add:Restructuring Charges(1): 1,568 0.01
 
Non-GAAP Basis $ 52,274 $ 0.23
% of Revenue 6.4%

(1) – $1.6 million for pre-tax corporate restructuring charges,
primarily consisting of corporate severance charges

   
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
 
First Quarter
Comparable Sales
2019 2018
American Eagle Outfitters, Inc. (1) 6% 9%
 
AE Total Brand (1) 4% 4%

Aerie Total Brand (1)

14% 38%

(1) AEO Direct is included in consolidated and total brand comparable
sales.

     
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION
(unaudited)
   
First Quarter Fiscal 2019
2019 Guidance
Consolidated stores at beginning of period 1,055 1,055
Consolidated stores opened during the period
AE Brand 7 15 – 20
Aerie stand-alone 4 35 – 40
Tailgate Clothing Co. 0 0
Todd Snyder 0 0
Consolidated stores closed during the period
AE Brand

(5)

 

(10) – (15)
Aerie stand-alone   0     (5) – (10)
Total consolidated stores at end of period 1,061 1,080 – 1,100
AE Brand 936
Aerie stand-alone 119
Aerie side-by-side(2) 151
Tailgate Clothing Co. 5
Todd Snyder 1
 
Stores remodeled and refurbished during the period 23 40 – 50
Total gross square footage at end of period (in ‘000)   6,662     Not Provided
 
International license locations at end of period (1) 235 261
 
Aerie Openings
Aerie stand-alone 4 35 – 40
Aerie side-by-side stores (2)
New AE store 2 10 – 15
Remodeled AE store 2     15 – 20
Total side-by-side 4     25 – 35
Total Aerie Openings 8     60 – 75
(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.

Contacts

Olivia Messina
412-432-3300
LineMedia@ae.com

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