AMERICAN EAGLE OUTFITTERS INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - AMERICAN EAGLE OUTFITTERS INC	d74199d8k.htm
EX-99.2 - EX-99.2 - AMERICAN EAGLE OUTFITTERS INC	d74199dex992.htm

EXHIBIT 99.1

American Eagle Outfitters

Reports Record Second Quarter Sales And Strong EPS Growth

Comparable Sales Increase 11% and EPS Rises to $0.17 from $0.03 Last Year

PITTSBURGH – August 19, 2015 – 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.


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

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	August 1, 2015			January 31, 2015			August 2, 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, 2015			% of Revenue			August 2, 2014		% of 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, 2015		% of Revenue			August 2, 2014		% of 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)


	Second Quarter Fiscal 2015	YTD Second Quarter 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.

AMERICAN EAGLE OUTFITTERS INC - FORM 8-K - EX-99.1 - August 21, 2015

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AMERICAN EAGLE OUTFITTERS INC Reports