AEO
$11.10
American Eagle Outfitters
($.04)
(.36%)
Earnings Details
1st Quarter April 2017
Wednesday, May 17, 2017 8:00:02 AM
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Summary

American Eagle Outfitters Misses

American Eagle Outfitters (AEO) reported 1st Quarter April 2017 earnings of $0.16 per share on revenue of $761.8 million. The consensus earnings estimate was $0.17 per share on revenue of $744.0 million. The Earnings Whisper number was $0.18 per share. Revenue grew 1.7% on a year-over-year basis.

The company said it expects second quarter earnings of $0.15 to $0.17 per share. The current consensus earnings estimate is $0.23 per share for the quarter ending July 31, 2017.

American Eagle Outfitters is an apparel and accessories retailer. The Company offers clothing, accessories and personal care products. The Company has company operated stores in the USA, Canada, Mexico, Hong Kong, China and the UK.

Results
Reported Earnings
$0.16
Earnings Whisper
$0.18
Consensus Estimate
$0.17
Reported Revenue
$761.8 Mil
Revenue Estimate
$744.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

American Eagle Outfitters Reports First Quarter Results, Comp Sales Increased 2%, Six Million Shares Repurchased

American Eagle Outfitters, Inc. (AEO) today reported EPS of $0.14 for the first quarter ended April 29, 2017. Excluding restructuring and related charges of $0.02 per diluted share, the company’s adjusted EPS was $0.16 for the first quarter.

Jay Schottenstein, Chief Executive Officer commented, "The first quarter results reflected mall traffic headwinds, especially early in the quarter, with improved trends over Easter and a strong digital business throughout. As we look ahead, we are taking the right steps to improve our results and adjust our business for today’s rapidly evolving retail environment. We are creating efficiencies across our organization, as we aim to continue capitalizing on the strength of our brands, product leadership and other competitive advantages. The six million shares repurchased this quarter reflects the company’s strong cash flow, healthy balance sheet and confidence in our brands and long-term strategic initiatives."

First Quarter 2017 Results

Total net revenue increased 2% to $762 million from $749 million last year.

Consolidated comparable sales were up 2%, following a 6% increase last year.

Gross profit decreased to $278 million from $293 million last year with a gross margin rate of 36.5% to revenue compared to 39.2% last year, a 270 basis point decline. The margin declined primarily due to increased promotional activity and higher shipping costs related to a strong digital business.

Selling, general and administrative expense declined 1% to $195 million compared to $196 million last year, and leveraged 60 basis points to a rate of 25.6% to revenue. Higher advertising expense was offset by lower compensation expense and favorability across a number of other expense categories.

Operating income of $37 million, which includes $5 million of restructuring charges, compared to $59 million last year. Adjusted operating income* of $42 million compared to $59 million last year with a rate of 5.6% to revenue compared to 7.8% last year.

The effective tax rate decreased to 32.4% compared to 36.4% last year, reflecting the impact of discrete items this quarter.

EPS of $0.14 compared to EPS of $0.22 last year. Adjusted EPS* of $0.16 compared to EPS of $0.22 last year.

* The preceding adjusted amounts are based on Non-GAAP results, as presented in the accompanying GAAP to Non-GAAP reconciliation.

Restructuring and Related Charges

In the first quarter, the company had charges totaling $5.4 million, approximately $0.02 per share, consisting primarily of severance and related charges corresponding to home office restructuring and the previously announced initiative to explore the closure or conversion of company owned and operated stores in Hong Kong, China, and the United Kingdom to licensed partnerships.

Shareholder Returns, Cash

During the first quarter, the company returned $110 million to shareholders through cash dividends and share repurchases. We paid dividends of $22 million and repurchased six million shares for $88 million. The remaining authorization under the current repurchase program is 19 million shares. We ended the quarter with total cash of $225 million compared to $239 million last year.

Inventory

Total ending inventories at cost increased 9% to $364 million. Ending units were flat compared to last year, while the average unit cost was up 9% to last year. The increase in average unit cost reflects a higher mix of AE bottoms and Aerie apparel, consistent with our merchandise strategy.

Capital Expenditures

In the first quarter, capital expenditures totaled $40 million. We continue to expect fiscal year 2017 capital expenditures in the range of $160 million to $170 million, with roughly half of the spend related to store remodeling projects and new openings, and the balance to support the e-commerce business, omni-channel tools and general corporate maintenance.

Store Information

In fiscal 2017, the company plans to open a total of 35 American Eagle Outfitters and Aerie stores throughout the U.S., Canada and Mexico. Management plans to close between 25 and 40 store locations in 2017. Internationally, the company plans to open 45 licensed stores and close 2 licensed locations. For additional store information, see the accompanying table.

Second Quarter Outlook

Based on anticipated comparable store sales in the range of flat to a low single digit decline, management expects second quarter 2017 EPS to be approximately $0.15 to $0.17. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.23 last year.

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 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. (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(R) and Aerie(R) 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 170 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 second quarter 2017 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)
April 29,
January 28,
April 30,
2017
2017
2016
(unaudited)
(unaudited)
ASSETS
Cash and cash equivalents
$
225,197
$
378,613
$
238,976
Merchandise inventory
364,274
358,446
334,301
Accounts receivable
79,432
86,634
73,283
Prepaid expenses and other
94,769
77,536
82,767
Total current assets
763,672
901,229
729,327
Property and equipment, net
710,500
707,797
706,221
Intangible assets, net
48,462
49,373
51,432
Goodwill
14,772
14,887
17,520
Non-current deferred income taxes
33,408
49,250
38,903
Other assets
62,379
60,124
52,893
Total Assets
$
1,633,193
$
1,782,660
$
1,596,296
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
$
208,857
$
246,204
$
202,692
Accrued compensation and payroll taxes
31,106
54,184
34,838
Accrued rent
78,018
78,619
77,477
Accrued income and other taxes
12,446
12,220
6,915
Unredeemed gift cards and gift certificates
39,744
52,966
38,508
Current portion of deferred lease credits
12,743
12,780
12,850
Other current liabilities and accrued expenses
37,677
36,810
45,206
Total current liabilities
420,591
493,783
418,486
Deferred lease credits
56,551
45,114
54,738
Non-current accrued income taxes
4,655
4,537
4,675
Other non-current liabilities
33,523
34,657
41,089
Total non-current liabilities
94,729
84,308
100,502
Commitments and contingencies
-
-
-
Preferred stock
-
-
-
Common stock
2,496
2,496
2,496
Contributed capital
582,512
603,890
583,689
Accumulated other comprehensive income
(32,671 )
(36,462 )
(24,484 )
Retained earnings
1,774,315
1,775,775
1,675,031
Treasury stock
(1,208,779 )
(1,141,130 )
(1,159,424 )
Total stockholders’ equity
1,117,873
1,204,569
1,077,308
Total Liabilities and Stockholders’ Equity
$
1,633,193
$
1,782,660
$
1,596,296
Current Ratio
1.82
1.83
1.74
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
GAAP Basis
13 Weeks Ended
April 29,
% of
April 30,
% of
2017
Revenue
2016
Revenue
Total net revenue
$
761,836
100.0 %
$
749,416
100.0 %
Cost of sales, including certain buying, occupancy and warehousing
484,014
63.5 %
455,964
60.8 %
expenses
Gross profit
277,822
36.5 %
293,452
39.2 %
Selling, general and administrative expenses
194,979
25.6 %
195,993
26.2 %
Restructuring charges
5,448
0.7 %
-
0.0 %
Depreciation and amortization
40,446
5.3 %
38,783
5.1 %
Operating income
36,949
4.9 %
58,676
7.8 %
Other income (expense), net
403
0.0 %
4,935
0.7 %
Income before income taxes
37,352
4.9 %
63,611
8.5 %
Provision for income taxes
12,116
1.6 %
23,135
3.1 %
Net income
$
25,236
3.3 %
$
40,476
5.4 %
Net income per diluted share
$
0.14
$
0.22
Weighted average common shares outstanding - basic
179,312
180,697
Weighted average common shares outstanding - diluted
181,678
182,927
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
13 Weeks Ended
April 29, 2017
Operating income
Diluted income
(loss)
Net income
per common share
GAAP Basis
$ 36,949
$ 25,236
$
0.14
% of Revenue
4.9 %
3.3 %
Add:Restructuring Charges (1):
5,448
3,439
0.02
Non-GAAP Basis
$ 42,397
$ 28,675
$
0.16
% of Revenue
5.6 %
3.7 %

(1) $5.4 million pre-tax restructuring charges for severance and related charges, which includes corporate overhead reductions and charges for the United Kingdom, Hong Kong, and China.

AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
First Quarter
Comparable Sales
2017
2016
American Eagle Outfitters, Inc. (1)
2 %
6 %
AE Total Brand (1)
-1 %
4 %
aerie Total Brand (1)
25 %
32 %
(1) AEO Direct is included in consolidated and total
brand comparable sales.
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION
(unaudited)
First Quarter
Fiscal 2017
2017
Guidance
Consolidated stores at beginning of period
1,050
1,050
Consolidated stores opened during the period
AE Brand
3
15-20
aerie
2
15
Tailgate Clothing Co.
0
1
Todd Snyder
1
1
Consolidated stores closed during the period
AE Brand
(2)
(20) - (30)
aerie
(1)
(5) - (10)
Total consolidated stores at end of period
1,053
1,042 - 1,062
Stores remodeled and refurbished during the period
14
50
Total gross square footage at end of period
6,637,435
Not Provided
International license locations at end of period (1)
189
221
(1) International license locations are not included in
the consolidated store data or the total gross square footage
calculation.

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SOURCE: American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc.
Kristen McGraw, 412-432-3300