AEO
$18.77
American Eagle Outfitters
($.02)
(.11%)
Earnings Details
3rd Quarter October 2017
Wednesday, December 06, 2017 8:00:02 AM
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Summary

American Eagle Outfitters Misses

American Eagle Outfitters (AEO) reported 3rd Quarter October 2017 earnings of $0.37 per share on revenue of $960.4 million. The consensus earnings estimate was $0.39 per share on revenue of $964.8 million. The Earnings Whisper number was $0.40 per share. Revenue grew 2.1% on a year-over-year basis.

The company said it expects fourth quarter earnings of $0.42 to $0.44 per share. The current consensus earnings estimate is $0.39 per share for the quarter ending January 31, 2018.

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
$0.37
Earnings Whisper
$0.40
Consensus Estimate
$0.39
Reported Revenue
$960.4 Mil
Revenue Estimate
$964.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

American Eagle Outfitters Reports Record Third Quarter Sales, Comp Sales Increased 3%

Holiday Sales Start Strong

American Eagle Outfitters, Inc. (AEO) today reported EPS of $0.36 for the third quarter ended October 28, 2017. Excluding restructuring and related charges of $0.01 per diluted share, the company’s Adjusted EPS* was $0.37 for the third quarter. Included in our GAAP and Adjusted EPS is a discrete charge to reserve against a receivable of $14 million, or $0.05 per diluted share, which is recorded in Other Expense.

Jay Schottenstein, Chief Executive Officer commented, "The third quarter produced record sales, sequential margin improvement and marked eleven straight quarters of comp sales growth. Digital sales continued to grow at a rapid pace, while we also saw store sales strengthen. These results validate our investments in product leadership, innovation, quality and brand equity. I’m very pleased to see strong momentum continue into the fourth quarter, positioning us well for the next few critical weeks of the holiday season."

Third Quarter 2017 Results

Total net revenue increased 2% to $960 million from $941 million last year.

Consolidated comparable sales were up 3%, following a 2% increase last year.

Gross profit of $375 million compared to $378 million last year with a gross margin rate of 39.0% to revenue compared to 40.2% last year, a 120 basis point decline. The reduction in margin rate was due to higher promotions and increased shipping costs associated with a strong digital business.

Selling, general and administrative expense declined $3 million, or 1% to $217 million compared to $220 million last year. Positive sales combined with lower expenses drove 80 basis points of leverage to a rate of 22.6% to revenue. Lower incentives and expense discipline were partially offset by higher wages.

Operating income of $111 million includes $4 million of restructuring charges related to severance and a lease buy-out. Adjusted operating income* of $115 million compared to $118 million last year with a rate of 11.9% to revenue compared to 12.6% last year.

Other expense of $13 million includes a discrete charge of $14 million to reserve against a receivable.

EPS of $0.36 and Adjusted EPS* of $0.37 both include a discrete charge of $0.05 per diluted share compared to EPS of $0.41 last year.

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

Shareholder Returns, Cash

The company ended the quarter with total cash of $258 million compared to $292 million last year. Over the past 12 months, we returned $88 million in share buybacks, $89 million in dividends and invested $189 million in capital expenditures, resulting in a lower cash balance.

Inventory

Total ending inventories at cost increased 8% to $534 million, reflecting investments in bottoms, women’s tops and Aerie apparel to support strong sales trends.

Capital Expenditures

In the third quarter, capital expenditures totaled $48 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 projects.

Store Information

This quarter we opened 4 new AE stores, with 1 in Mexico, 1 in Canada and 2 in the U.S. Additionally, we opened 1 new Aerie location in Canada. We also opened 11 international licensed stores and closed 1. The company is on track to close a total of 25 to 30 stores this year. For additional store information, see the accompanying table.

Fourth Quarter Outlook

Based on an anticipated comparable store sales increase in the mid-single digits, management expects fourth quarter 2017 EPS to be approximately $0.42 to $0.44. This guidance excludes potential asset impairment and restructuring charges. Last year’s fourth quarter reported EPS of $0.30 included approximately $0.09 per share of asset impairment, restructuring and related charges. Excluding these items, last year’s fourth quarter adjusted EPS was $0.39. 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 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 and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at more than 200 international locations operated by licensees in 24 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 fourth 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)
October 28,
January 28,
October 29,
2017
2017
2016
(unaudited)
(unaudited)
ASSETS
Cash and cash equivalents
$
257,527
$
378,613
$
291,667
Merchandise inventory
534,019
358,446
492,602
Accounts receivable, net
77,113
86,634
74,812
Prepaid expenses and other
61,553
77,536
77,768
Total current assets
930,212
901,229
936,849
Property and equipment, net
726,168
707,797
708,488
Intangible assets, net
46,979
49,373
49,993
Goodwill
14,972
14,887
17,315
Non-current deferred income taxes
29,025
49,250
49,627
Other assets
54,424
60,124
60,268
Total Assets
$
1,801,780
$
1,782,660
$
1,822,540
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
$
330,716
$
246,204
$
314,111
Accrued compensation and payroll taxes
43,561
54,184
56,939
Accrued rent
80,580
78,619
79,255
Accrued income and other taxes
17,262
12,220
29,373
Unredeemed gift cards and gift certificates
29,475
52,966
30,130
Current portion of deferred lease credits
12,887
12,780
12,783
Other current liabilities and accrued expenses
38,359
36,810
40,288
Total current liabilities
552,840
493,783
562,879
Deferred lease credits
50,439
45,114
47,677
Non-current accrued income taxes
4,590
4,537
4,573
Other non-current liabilities
30,712
34,657
35,451
Total non-current liabilities
85,741
84,308
87,701
Commitments and contingencies
-
-
-
Preferred stock
-
-
-
Common stock
2,496
2,496
2,496
Contributed capital
588,978
603,890
597,919
Accumulated other comprehensive income
(34,798)
(36,462)
(31,160)
Retained earnings
1,812,821
1,775,775
1,744,227
Treasury stock
(1,206,298)
(1,141,130)
(1,141,522)
Total stockholders’ equity
1,163,199
1,204,569
1,171,960
Total Liabilities and Stockholders’ Equity
$
1,801,780
$
1,782,660
$
1,822,540
Current Ratio
1.68
1.83
1.66
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
GAAP Basis
13 Weeks Ended
October 28,
% of
October 29,
% of
2017
Revenue
2016
Revenue
Total net revenue
$
960,433
100.0%
$
940,609
100.0%
Cost of sales, including certain buying,
585,520
61.0%
562,793
59.8%
occupancy and
warehousing expenses
Gross profit
374,913
39.0%
377,816
40.2%
Selling, general and administrative expenses
217,146
22.6%
219,912
23.4%
Restructuring charges
3,695
0.4%
-
0.0%
Depreciation and amortization
43,149
4.5%
39,636
4.2%
Operating income
110,923
11.5%
118,268
12.6%
Other (expense) income, net
(13,243)
-1.4%
603
0.0%
Income before income taxes
97,680
10.1%
118,871
12.6%
Provision for income taxes
33,947
3.5%
43,111
4.6%
Net income
$
63,733
6.6%
$
75,760
8.0%
Net income per basic share
$
0.36
$
0.42
Net income per diluted share
$
0.36
$
0.41
Weighted average common shares
outstanding - basic
177,288
181,819
Weighted average common shares
outstanding - diluted
179,132
184,615
GAAP Basis
39 Weeks Ended
October 28,
% of
October 29,
% of
2017
Revenue
2016
Revenue
Total net revenue
$
2,566,826
100.0%
$
2,512,619
100.0%
Cost of sales, including certain buying,
1,621,441
63.2%
1,534,194
61.1%
occupancy and
warehousing expenses
Gross profit
945,385
36.8%
978,425
38.9%
Selling, general and administrative expenses
615,842
24.0%
615,503
24.5%
Restructuring charges
18,888
0.8%
-
0.0%
Depreciation and amortization
123,878
4.8%
117,319
4.6%
Operating income
186,777
7.2%
245,603
9.8%
Other (expense) income, net
(19,574)
-0.8%
2,403
0.1%
Income before income taxes
167,203
6.4%
248,006
9.9%
Provision for income taxes
56,997
2.2%
90,179
3.6%
Net income
$
110,206
4.2%
$
157,827
6.3%
Net income per basic share
$
0.62
$
0.87
Net income per diluted share
$
0.61
$
0.86
Weighted average common shares
178,272
181,196
outstanding - basic
Weighted average common shares
outstanding - diluted
180,260
183,651
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
13 Weeks Ended
October 28, 2017
Operating income
Net income
Diluted income
per common
share
GAAP Basis
$ 110,923
$ 63,733
$
0.36
% of Revenue
11.5 %
6.6 %
Add: Restructuring Related Charges(1):
3,695
2,065
0.01
3,695
2,065
Non-GAAP Basis
$ 114,618
$ 65,798
$
0.37
% of Revenue
11.9 %
6.8 %
(1) - $3.7 million pre-tax restructuring related charges,
consisting of:
? Corporate severance and related charges of ($2.4M) and corporate
lease buyout charges of ($1.3M)
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
39 Weeks Ended
October 28, 2017
Gross profit
Operating
Other
Net income
Diluted income
income
(expense)
per common
income
share
GAAP Basis
$ 945,385
$ 186,777
$ (19,574 )
$ 110,206
$
0.61
% of Revenue
36.8 %
7.2 %
-0.8 %
4.2 %
Add: Restructuring Related Charges(1):
1,669
20,557
-
12,961
0.08
Add: Joint Business Venture Charges(2):
-
-
9,311
5,870
0.03
1,669
20,557
9,311
18,831
0.11
Non-GAAP Basis
$ 947,054
$ 207,334
$ (10,263 )
$ 129,037
$
0.72
% of Revenue
36.9 %
8.1 %
-0.4 %
5.0 %
(1) - $20.6 million pre-tax restructuring related charges,
consisting of:
? Inventory charges related to the restructuring of the United
Kingdom, Hong Kong, and China ($1.7M), recorded as a reduction of
Gross Profit
? Lease buyouts, store closure charges and severance and related
charges ($18.9M), which includes charges for the United Kingdom,
Hong Kong, and China and corporate overhead reductions, recorded
within Restructuring Charges.
(2) - $9.3 million pre-tax charges for the charges related to the
planned exit of a joint business venture, recorded within Other
(expense) income, net.
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
(unaudited)
13 Weeks Ended
January 28, 2017
Diluted income
per common share
GAAP Basis
$
0.30
% of Revenue
Add: Asset Impairment and Restructuring Charges(1):
0.07
Add: Tax (2):
0.02
Non-GAAP Basis
$
0.39
% of Revenue
(1) - $21.2 million pre-tax asset impairments and restructuring
charges relating to our wholly-owned businesses in the United
Kingdom and Asia.
(2) - GAAP tax rate included impact of valuation allowances on asset
impairment and restructuring charges. Excluding the impact of those
items resulted in a 33.9% tax rate for the quarter.
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
Third Quarter
Comparable Sales
2017
2016
American Eagle Outfitters, Inc. (1)
3%
2%
AE Total Brand (1)
1%
0.4%
aerie Total Brand (1)
19%
21%
YTD Third Quarter
Comparable Sales
2017
2016
American Eagle Outfitters, Inc. (1)
2%
4%
AE Total Brand (1)
0%
2%
aerie Total Brand (1)
23%
25%
(1) AEO Direct is included in consolidated and total brand
comparable sales.
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION
(unaudited)
Third Quarter
YTD Third Quarter
Fiscal 2017
2017
2017
Guidance
Consolidated stores at beginning of period
1,057
1,050
1,050
Consolidated stores opened during the period
AE Brand
4
13
15-20
aerie
1
12
15
Tailgate Clothing Co.
0
0
0
Todd Snyder
0
1
1
Consolidated stores closed during the period
AE Brand
(3)
(13)
(20) - (23)
aerie
0
(4)
(4) - (7)
Todd Snyder
(1)
(1)
(1)
Total consolidated stores at end of period
1,058
1,058
1,050 - 1,061
Stores remodeled and refurbished during the period
14
43
50
Total gross square footage at end of period (in ’000)
6,641
6,641
Not Provided
International license locations at end of period (1)
205
205
227
(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.
Olivia Messina, 412-432-3300