Attached files
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| 8-K - FORM 8-K - AMERICAN EAGLE OUTFITTERS INC | d779913d8k.htm |
| EX-99.2 - EX-99.2 - AMERICAN EAGLE OUTFITTERS INC | d779913dex992.htm |
Exhibit 99.1
American Eagle Outfitters
Reports Second Quarter 2014 Results
PITTSBURGH – August 20, 2014 – American Eagle Outfitters, Inc. (NYSE:AEO) today reported earnings of $0.03 per diluted share for the second quarter ended August 2, 2014, compared to earnings of $0.10 per diluted share for the comparable quarter last year.
Jay Schottenstein, Interim CEO commented, “Although the second quarter results were slightly ahead of our expectations, they do not reflect our potential. We did, however make significant progress on our priorities to build a sustainable path to higher profitability. We successfully cleared through spring and summer merchandise and entered the second half of the year in a better inventory position. We made progress on merchandise improvements, which will ramp up through the holiday season. The teams also continued to implement omni-channel initiatives and strengthen the customer experience. We remain vigilant on expense management, while pursuing strategic initiatives crucial to our future success. We are confident that these efforts will position AEO to achieve stronger operating results and deliver increasing shareholder value.”
Second Quarter 2014 Results
| • | Total net revenue decreased 2% to $711 million from $727 million last year. Revenue from new store growth nearly offset the decline in comparable sales. |
| • | Consolidated comparable sales decreased 7%, following a 7% decrease last year. |
| • | Gross profit decreased 3% to $238 million and declined 40 basis points to 33.4% as a rate to revenue. Gross margin reflected the de-leverage of buying, occupancy and warehousing costs on negative comparable sales, which was largely offset by favorability in merchandise and design costs and a slight improvement in the markdown rate. |
| • | Selling, general and administrative expense of $190 million increased 2% or $3.7 million. As a rate to revenue, SG&A increased 110 basis points to 26.7%. Investments in advertising, international growth, factory stores and omni-channel initiatives drove the increase, and were partially offset by reductions in overhead and variable expenses. |
| • | Operating income decreased 59% to $12 million. The operating margin decreased 240 basis points to 1.7%. |
| • | EPS of $0.03 compares to EPS of $0.10 last year. |
Inventory
Total merchandise inventories at the end of the second quarter declined 15% to $393 million compared to $461 million last year. At cost per foot, inventory decreased 18%. Inventories reflect a change to ownership terms completed late last year, as we began taking ownership of inventory at the receiving port rather than the port of departure. Excluding the change in terms, inventory at cost per foot decreased in the mid single-digits. Clearance units were well below last year. Third quarter 2014 ending inventory at cost per foot is expected to decline in the low double-digits, or mid single-digits excluding the change in ownership terms.
Capital Expenditures
In the second quarter, capital expenditures totaled $74 million. For fiscal 2014, the company continues to expect capital expenditures of approximately $230 million, primarily related to new and remodeled stores, the Hazleton distribution center and information technology. In 2015, capital spending is expected to be approximately $150 million.
Real Estate
In the quarter, the company opened 20 new stores consisting of the following:
| • | 5 new North American mainline stores opened in underpenetrated markets, |
| • | 10 Factory stores, and |
| • | 3 stores in Mexico and 2 stores in China. |
The company closed 5 locations, including 2 aerie stores. Additionally, the company added 7 international licensed stores and ended the quarter with 84 licensed stores in 13 countries. For 2014, the company is planning to close approximately 50 AE and 25 aerie stores in North America. For additional second quarter 2014 actual and fiscal 2014 projected real estate information, see the accompanying table.
Cash and Investments
The company ended the quarter with total cash and investments of $263 million compared to $405 million last year.
Third Quarter Outlook
Based on a mid single-digit decline in comparable sales, management expects third quarter EPS to be approximately $0.17 to $0.19 compared to adjusted earnings of $0.19 per diluted share last year. The guidance excludes potential asset impairment and restructuring charges.
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 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 the United States, Canada, Mexico, China, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 86 licensed international franchise stores in 13 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 regarding third quarter 2014 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.
| CONTACT: | American Eagle Outfitters, Inc. | |
| Kristen Zaccagnini, 412-432-3300 |
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| August 2, 2014 |
February 1, 2014 |
August 3, 2013 |
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| (unaudited) | (unaudited) | |||||||||||
| ASSETS |
||||||||||||
| Cash and cash equivalents |
$ | 262,628 | $ | 418,933 | $ | 345,188 | ||||||
| Short-term investments |
— | 10,002 | 59,678 | |||||||||
| Merchandise inventory |
393,316 | 291,541 | 461,080 | |||||||||
| Accounts receivable |
47,028 | 73,882 | 45,965 | |||||||||
| Prepaid expenses and other |
86,055 | 83,724 | 115,595 | |||||||||
| Deferred income taxes |
41,646 | 45,478 | 41,807 | |||||||||
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| Total current assets |
830,673 | 923,560 | 1,069,313 | |||||||||
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| Property and equipment, net |
732,834 | 637,417 | 598,548 | |||||||||
| Intangible assets, net |
48,510 | 49,271 | 44,658 | |||||||||
| Goodwill |
13,616 | 13,530 | 13,814 | |||||||||
| Non-current deferred income taxes |
13,534 | 24,835 | 25,441 | |||||||||
| Other assets |
40,894 | 45,551 | 28,311 | |||||||||
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| Total Assets |
$ | 1,680,061 | $ | 1,694,164 | $ | 1,780,085 | ||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Accounts payable |
$ | 254,802 | $ | 203,872 | $ | 292,120 | ||||||
| Accrued compensation and payroll taxes |
25,917 | 23,560 | 20,496 | |||||||||
| Accrued rent |
75,649 | 76,397 | 74,052 | |||||||||
| Accrued income and other taxes |
6,225 | 5,778 | 9,614 | |||||||||
| Unredeemed gift cards and gift certificates |
29,092 | 47,194 | 26,389 | |||||||||
| Current portion of deferred lease credits |
13,635 | 13,293 | 14,104 | |||||||||
| Other current liabilities and accrued expenses |
34,469 | 45,384 | 28,024 | |||||||||
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| Total current liabilities |
439,789 | 415,478 | 464,799 | |||||||||
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| Deferred lease credits |
62,779 | 59,510 | 67,461 | |||||||||
| Non-current accrued income taxes |
11,089 | 16,543 | 19,722 | |||||||||
| Other non-current liabilities |
32,557 | 36,455 | 24,430 | |||||||||
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| Total non-current liabilities |
106,425 | 112,508 | 111,613 | |||||||||
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| Commitments and contingencies |
— | — | — | |||||||||
| Preferred stock |
— | — | — | |||||||||
| Common stock |
2,496 | 2,496 | 2,496 | |||||||||
| Contributed capital |
559,694 | 573,008 | 587,905 | |||||||||
| Accumulated other comprehensive income |
15,949 | 12,157 | 24,397 | |||||||||
| Retained earnings |
1,522,856 | 1,569,851 | 1,588,094 | |||||||||
| Treasury stock |
(967,148 | ) | (991,334 | ) | (999,219 | ) | ||||||
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| Total stockholders’ equity |
1,133,847 | 1,166,178 | 1,203,673 | |||||||||
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| Total Liabilities and Stockholders’ Equity |
$ | 1,680,061 | $ | 1,694,164 | $ | 1,780,085 | ||||||
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| Current Ratio |
1.89 | 2.22 | 2.30 | |||||||||
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
| 13 Weeks Ended | ||||||||||||||||
| August 2, 2014 |
% of Revenue |
August 3, 2013 |
% of Revenue |
|||||||||||||
| Total net revenue |
$ | 710,595 | 100.0 | % | $ | 727,313 | 100.0 | % | ||||||||
| Cost of sales, including certain buying, occupancy and warehousing expenses |
473,048 | 66.6 | % | 481,818 | 66.2 | % | ||||||||||
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| Gross profit |
237,547 | 33.4 | % | 245,495 | 33.8 | % | ||||||||||
| Selling, general and administrative expenses |
190,078 | 26.7 | % | 186,336 | 25.6 | % | ||||||||||
| Depreciation and amortization |
35,422 | 5.0 | % | 29,734 | 4.1 | % | ||||||||||
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| Operating income |
12,047 | 1.7 | % | 29,425 | 4.1 | % | ||||||||||
| Other income, net |
850 | 0.1 | % | 1,149 | 0.1 | % | ||||||||||
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| Income before income taxes |
12,897 | 1.8 | % | 30,574 | 4.2 | % | ||||||||||
| Provision for income taxes |
7,084 | 1.0 | % | 10,980 | 1.5 | % | ||||||||||
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| Net income |
$ | 5,813 | 0.8 | % | $ | 19,594 | 2.7 | % | ||||||||
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| Net income per basic share |
$ | 0.03 | $ | 0.10 | ||||||||||||
| Net income per diluted share |
$ | 0.03 | $ | 0.10 | ||||||||||||
| Weighted average common shares outstanding – basic |
194,511 | 192,731 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
194,747 | 195,951 | ||||||||||||||
| 26 Weeks Ended | ||||||||||||||||
| August 2, 2014 |
% of Revenue |
August 3, 2013 |
% of Revenue |
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| Total net revenue |
$ | 1,356,724 | 100.0 | % | $ | 1,406,790 | 100.0 | % | ||||||||
| Cost of sales, including certain buying, occupancy and warehousing expenses |
893,332 | 65.8 | % | 897,686 | 63.8 | % | ||||||||||
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| Gross profit |
463,392 | 34.2 | % | 509,104 | 36.2 | % | ||||||||||
| Selling, general and administrative expenses |
375,136 | 27.7 | % | 368,589 | 26.2 | % | ||||||||||
| Depreciation and amortization |
67,784 | 5.0 | % | 65,273 | 4.6 | % | ||||||||||
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| Operating income |
20,472 | 1.5 | % | 75,242 | 5.4 | % | ||||||||||
| Other income, net |
1,536 | 0.1 | % | 467 | 0.0 | % | ||||||||||
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| Income before income taxes |
22,008 | 1.6 | % | 75,709 | 5.4 | % | ||||||||||
| Provision for income taxes |
12,329 | 0.9 | % | 28,139 | 2.0 | % | ||||||||||
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| Net income |
9,679 | 0.7 | % | 47,570 | 3.4 | % | ||||||||||
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| Net income per basic share |
$ | 0.05 | $ | 0.25 | ||||||||||||
| Net income per diluted share |
$ | 0.05 | $ | 0.24 | ||||||||||||
| Weighted average common shares outstanding – basic |
194,285 | 192,720 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
194,751 | 196,451 | ||||||||||||||
AMERICAN EAGLE OUTFITTERS, INC.
GAAP to Non-GAAP EPS reconciliation
(unaudited)
| 13 Weeks Ended November 2, 2013 |
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| GAAP Diluted EPS |
$ | 0.13 | ||
| Add back: Non-cash asset impairment charges, net of tax (1) |
0.06 | |||
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| Non-GAAP Diluted EPS |
$ | 0.19 | ||
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| (1) | Non-GAAP adjustments consist of $19.3 million of pre-tax asset impairments ($11.9 million after-tax) related to the Warrendale Distribution Center. |
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
| Second Quarter Comparable Sales |
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| 2014 | 2013 | |||||||
| American Eagle Outfitters, Inc. (1) |
-7 | % | -7 | % | ||||
| AE Total Brand (1) |
-8 | % | -8 | % | ||||
| aerie Total Brand (1) |
9 | % | -2 | % | ||||
| YTD Second Quarter Comparable Store Sales |
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| 2014 | 2013 | |||||||
| American Eagle Outfitters, Inc. (1) |
-9 | % | -6 | % | ||||
| AE Total Brand (1) |
-9 | % | -7 | % | ||||
| aerie Total Brand (1) |
2 | % | 1 | % | ||||
| (1) | AEO Direct is included in consolidated and total brand comparable sales. |
AMERICAN EAGLE OUTFITTERS, INC.
REAL ESTATE INFORMATION
(unaudited)
| Second Quarter Fiscal 2014 |
YTD Second Quarter Fiscal 2014 |
Fiscal 2014 Guidance |
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| Consolidated stores at beginning of period |
1,057 | 1,066 | 1,066 | |||||||||
| Consolidated stores opened during the period |
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| AE Brand |
20 | 31 | 50 – 60 | |||||||||
| Consolidated stores closed during the period |
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| AE Brand |
(3 | ) | (9 | ) | (50 | ) | ||||||
| aerie |
(2 | ) | (16 | ) | (25 | ) | ||||||
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| Total consolidated stores at end of period |
1,072 | 1,072 | 1,041 – 1,051 | |||||||||
| Stores remodeled and refurbished during the period |
13 | 35 | 45 | |||||||||
| Total gross square footage at end of period |
6,632,056 | 6,632,056 | Not Provided | |||||||||
| International franchise stores at end of period (1) |
84 | 84 | 106 | |||||||||
| (1) | International franchise stores are not included in the consolidated store data or the total gross square footage calculation. |