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

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EX-99.2 - EX-99.2 - AMERICAN EAGLE OUTFITTERS INC	d299870dex992.htm
8-K - FORM 8-K - AMERICAN EAGLE OUTFITTERS INC	d299870d8k.htm

EXHIBIT 99.1

AMERICAN EAGLE OUTFITTERS

DELIVERS THIRD QUARTER RECORD REVENUE AND EPS GROWTH

COMPARABLE SALES INCREASE 2% AND EPS RISES TO $0.41

PITTSBURGH – November 30, 2016 – American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.41 for the third quarter ended October 29, 2016, a 17% increase from EPS from continuing operations of $0.35 for the comparable quarter last year. The EPS figures refer to diluted earnings per share.

“I’m pleased that we continued to deliver strong results in a tough retail climate, with the third quarter reaching record sales and marking the 9^th consecutive quarter of profit improvement,” said Chief Executive Officer, Jay Schottenstein. “We are sharply focused on delivering the best innovation, consistent quality and outstanding value to our customers day-in and day-out. The holiday season is off to a solid start and our brands are well-positioned. We will continue to leverage our leading capabilities to maintain momentum and build on the progress we’ve made over the past few years.”

Third Quarter 2016 Results

•

Total net revenue increased 2% to $941 million from $919 million last year.

•

Consolidated comparable sales increased 2%, following a 9% increase last year.

•

Total gross profit increased 3% to $378 million from $368 million last year. The gross margin rose 20 basis points to a rate of 40.2%. The increase was the result of an improved IMU, partially offset by a slight increase in markdowns. Buying, occupancy and warehousing costs were flat as a rate to sales.

•

Selling, general and administrative dollars were down slightly to $220 million and leveraged 60 basis points to a rate of 23.4%. Increased investments in advertising were offset by well-controlled expenses.

•

Operating income increased 8% to $118 million from $109 million last year, and the operating margin expanded by 70 basis points to 12.6% as a rate to revenue.

•

EPS of $0.41 increased 17% from EPS from continuing operations of $0.35 last year. Net income per share last year, which included a $0.03 EPS gain from discontinued operations, was $0.38.

Inventory

Total merchandise inventories at the end of the third quarter increased 3% to $493 million, with ending units down 5%. Fourth quarter 2016 ending inventory at cost is expected to be up in the high-single digits, with units expected to be down in the mid-single digits. Strong inventory management is driving units down, which is offset by an increase in the average unit cost due to product mix and continued investments in merchandise composition.

Capital Expenditures

For the quarter, capital expenditures totaled $47 million and $108 million for the year to date period. We continue to expect fiscal 2016 capital expenditures to be approximately $160 million, with nearly half related to store remodeling projects and new openings, and the remaining half supporting digital and omni-channel investments.

Cash and Investments

We ended the quarter with total cash of $292 million compared to $363 million last year. Lower cash was the result of $212 million in share buybacks in the fourth quarter last year. In addition, we returned $92 million in cash dividends and spent $152 million in capital expenditures over the past year.

Store Information

In the quarter, we opened 4 AE stores, 6 aerie stores and 1 Tailgate store. In the same period, 3 AE stores were closed. Additionally, we opened 8 licensed locations, while closing 3 licensed locations. For additional third quarter actual and fiscal 2016 projected store information, see the accompanying table.

Fourth Quarter Outlook

We are providing fourth quarter EPS guidance of $0.37 to $0.39 based on comparable sales in the range of flat to a low single digit increase. This guidance excludes potential asset impairment and restructuring charges. Last year’s fourth quarter reported EPS of $0.42 included approximately $0.07 of non-recurring items, including a gain on the sale of a distribution center and a lower tax rate related to income tax settlements, federal tax credits and tax strategies. Excluding these items, last year’s fourth quarter adjusted EPS was $0.35. See the accompanying table for the GAAP to Non-GAAP reconciliation.

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 our 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, 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 160 international locations 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 fourth 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.

CONTACT:

American Eagle Outfitters, Inc.

Kristen McGraw, 412-432-3300

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	October 29, 2016			January 30, 2016			October 31, 2015
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents	$	291,667		$	260,067		$	363,116
Merchandise inventory		492,602			305,178			479,729
Accounts receivable		74,812			80,912			63,775
Prepaid expenses and other		77,768			77,218			78,091

Total current assets		936,849			723,375			984,711

Property and equipment, net		708,488			703,586			709,261
Intangible assets, net		49,993			51,832			46,756
Goodwill		17,315			17,186			12,978
Non-current deferred income taxes		49,627			64,927			82,688
Other assets		60,268			51,340			51,442

Total Assets	$	1,822,540		$	1,612,246		$	1,887,836

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	314,111		$	182,789		$	304,989
Accrued compensation and payroll taxes		56,939			79,302			66,466
Accrued rent		79,255			77,482			77,892
Accrued income and other taxes		29,373			22,223			43,721
Unredeemed gift cards and gift certificates		30,130			48,274			28,259
Current portion of deferred lease credits		12,783			12,711			13,055
Other current liabilities and accrued expenses		40,288			40,901			43,761

Total current liabilities		562,879			463,682			578,143

Deferred lease credits		47,677			50,104			53,877
Non-current accrued income taxes		4,573			4,566			4,876
Other non-current liabilities		35,451			42,518			41,667

Total non-current liabilities		87,701			97,188			100,420

Commitments and contingencies		—			—			—
Preferred stock		—			—			—
Common stock		2,496			2,496			2,496
Contributed capital		597,919			590,820			588,293
Accumulated other comprehensive income		(31,160	)		(29,868	)		(19,797	)
Retained earnings		1,744,227			1,659,267			1,602,550
Treasury stock		(1,141,522	)		(1,171,339	)		(964,269	)

Total stockholders' equity		1,171,960			1,051,376			1,209,273

Total Liabilities and Stockholders' Equity	$	1,822,540		$	1,612,246		$	1,887,836

Current Ratio		1.66			1.56			1.70

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

(unaudited)


	13 Weeks Ended
	October 29, 2016		% of Revenue			October 31, 2015		% of Revenue
Total net revenue	$	940,609		100.0	%	$	919,072		100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses		562,793		59.8	%		551,540		60.0	%

Gross profit		377,816		40.2	%		367,532		40.0	%
Selling, general and administrative expenses		219,912		23.4	%		220,798		24.0	%
Depreciation and amortization		39,636		4.2	%		37,623		4.1	%

Operating income		118,268		12.6	%		109,111		11.9	%
Other expense, net		603		0.0	%		521		0.0	%

Income before income taxes		118,871		12.6	%		109,632		11.9	%
Provision for income taxes		43,111		4.6	%		40,367		4.4	%

Income from continuing operations		75,760		8.0	%		69,265		7.5	%

Gain from discontinued operations, net of tax		—		0.0	%		4,847		0.5	%

Net income	$	75,760		8.0	%	$	74,112		8.0	%


Basic income per common share:
Income from continuing operations	$	0.42				$	0.35
Gain from discontinued operations		—					0.03

Net income per basic share	$	0.42				$	0.38

Diluted income per common share:
Income from continuing operations	$	0.41				$	0.35
Gain from discontinued operations		—					0.03

Net income per diluted share	$	0.41				$	0.38

Weighted average common shares outstanding – basic		181,819					195,215
Weighted average common shares outstanding – diluted		184,615					197,478

	39 Weeks Ended
	October 29, 2016		% of Revenue			October 31, 2015		% of Revenue
Total net revenue	$	2,512,619		100.0	%	$	2,416,020		100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses		1,534,194		61.1	%		1,501,237		62.1	%

Gross profit		978,425		38.9	%		914,783		37.9	%
Selling, general and administrative expenses		615,503		24.5	%		601,680		24.9	%
Depreciation and amortization		117,319		4.6	%		108,861		4.5	%

Operating income		245,603		9.8	%		204,242		8.5	%
Other income, net		2,403		0.1	%		4,254		0.1	%

Income before income taxes		248,006		9.9	%		208,496		8.6	%
Provision for income taxes		90,179		3.6	%		76,915		3.2	%

Net income		157,827		6.3	%		131,581		5.4	%

Gain (loss) from discontinued operations, net of tax		—		0.0	%		4,847		0.2	%

Net income	$	157,827		6.3	%	$	136,428		5.6	%


Basic income per common share:
Income from continuing operations	$	0.87				$	0.67
Gain from discontinued operations		—					0.02

Net income per basic share	$	0.87				$	0.69

Diluted income per common share:
Income from continuing operations	$	0.86				$	0.67
Gain from discontinued operations		—					0.02

Net income per diluted share	$	0.86				$	0.69

Weighted average common shares outstanding – basic		181,196					195,308
Weighted average common shares outstanding – diluted		183,651					197,017

AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)


	13 Weeks Ended January 30, 2016
	Selling, general & administrative expenses			Operating income (loss)			Net income			Diluted income per common share
GAAP Basis	$	233,020		$	115,636		$	81,706		$	0.42
% of Revenue		21.1	%		10.5	%		7.4	%
Gain on Sale of Warrendale DC ⁽¹⁾:		9,422			(9,422	)		(6,793	)		(0.03	)
Tax ⁽²⁾:		—			—			(7,443	)		(0.04	)

Non-GAAP Basis	$	242,442		$	106,214		$	67,470		$	0.35
% of Revenue		21.9	%		9.6	%		6.1	%

(1) – $9.4 million pre-tax gain on sale of previously closed Warrendale Distribution center.

(2) – GAAP tax rate included income tax settlements, higher federal tax credits, and tax strategies. Excluding the impact of these items would have resulted in a 35.1% tax rate versus reported rate of 27.9%.

AMERICAN EAGLE OUTFITTERS, INC.

COMPARABLE SALES RESULTS BY BRAND

(unaudited)


	Third Quarter Comparable Sales
	2016			2015
American Eagle Outfitters, Inc. ⁽¹⁾		2	%		9	%
AE Total Brand ⁽¹⁾		0.4	%		8	%
aerie Total Brand ⁽¹⁾		21	%		21	%
	YTD Third Quarter Comparable Sales
	2016			2015
American Eagle Outfitters, Inc. ⁽¹⁾		4	%		9	%
AE Total Brand ⁽¹⁾		2	%		9	%
aerie Total Brand ⁽¹⁾		25	%		17	%

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

AMERICAN EAGLE OUTFITTERS, INC.

STORE INFORMATION

(unaudited)


	Third Quarter 2016			YTD Third Quarter 2016			Fiscal 2016 Guidance
Consolidated stores at beginning of period		1,044			1,047			1,047
Consolidated stores opened during the period
AE Brand		4			10			10 - 15
aerie		6			7			10 - 15
Tailgate Clothing Co.		1			2			3
Consolidated stores closed during the period
AE Brand		(3	)		(7	)		(15) -(20)
aerie		0			(7	)		(8) - (10)

Total consolidated stores at end of period		1,052			1,052			1,047 - 1,050

Stores remodeled and refurbished during the period		21			58			55 - 65
Total gross square footage at end of period		6,638,008			6,638,008			Not Provided

International license locations at end of period ⁽¹⁾		163			163			178

(1)	International license locations 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 - December 2, 2016

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AMERICAN EAGLE OUTFITTERS INC Reports