EXHIBIT 99.1
AMERICAN EAGLE OUTFITTERS
Reports EPS of $0.45 for Third Quarter 2007
Provides November Sales Update and Fourth Quarter EPS Guidance
Declares Quarterly Dividend
PITTSBURGH, PA - November 27, 2007 - American Eagle Outfitters, Inc. (NYSE: AEO) today announced that earnings for the 13 weeks ended November 3, 2007 increased 2% to $0.45 per diluted share from $0.44 per diluted share for the 13 week period ended October 28, 2006.
"In the third quarter we delivered a strong operating margin of 20.3% even though sales were below our original plan. These results reflected the benefits from operational improvements, expense management and technologies that have become inherent in our business over the past several years. We are committed to driving future growth by building a portfolio of brands, while at the same time delivering a strong return on investment and profit improvements," said Jim O'Donnell, Chief Executive Officer.
November Sales Update and Fourth Quarter Guidance
The company's November month-to-date comp store sales are slightly positive. Management was pleased with the Thanksgiving weekend driven by positive traffic trends. At this time, the company is establishing fourth quarter earnings guidance of $0.67 to $0.70 per share, compared to $0.66 per share last year.
Third Quarter Results
Total sales for the 13 weeks ended November 3, 2007 increased 7% to $744.4 million compared to $696.3 million for the 13 week period ended October 28, 2006. Due to the 53rd week in fiscal 2006, third quarter comparable store sales are compared to the 13 week period ended November 4, 2006. On this basis, the company delivered a comparable store sales increase of 2%.
Gross profit for the third quarter increased to $352.9 million, or 47.4% as a percent to sales, down from 49.5% last year. Merchandise margin declined as a result of higher markdowns, partially offset by lower product and transportation costs. Buying, occupancy and warehousing costs increased as a percent to sales. This was driven primarily by rent expense relating to the opening of 60 stores in the second half of the year compared to 32 stores last year.
Third quarter selling, general and administrative expenses of $174.2 million leveraged 110 basis points as a rate to sales to 23.4%. Within SG&A, total compensation, professional fees and supplies leveraged, while advertising increased as a percent to sales. As a rate to sales, essentially all other operating expenses were flat to last year.
Operating income for the quarter decreased to $150.9 million from $152.5 million last year. As a percent to sales, operating income declined to 20.3% compared to 21.9% last year.
Net income decreased 2% to $99.4 million compared to $100.9 million last year. As a percent to sales net income was 13.4% compared to 14.5% last year.
Inventory
Total merchandise inventories at the end of the third quarter were $393.1 million, an increase of $44.4 million compared to last year. Inventory (excluding e-commerce) decreased 3% on a per square foot basis from a year ago. Looking ahead, the company expects the fourth quarter ending inventory to be down in the low single-digits.
Capital Expenditures
Through the end of the third quarter, year-to-date capital expenditures were approximately $190.5 million. For fiscal year 2007, management expects capital expenditures to be approximately $250 million. Of this amount, around one half relates to new and remodeled stores, 20% relates to home office, another 20% relates to distribution centers and the remaining 10% relates to IT initiatives. For fiscal year 2008, management expects capital expenditures to be in the range of $250 to $275 million. This supports a minimum of 10% square footage growth through the opening of approximately 135 new and 50 remodeled stores, primarily relating to AE and aerie. The 2008 capital spend also includes substantial and critical investments in supply chain, store technology and infrastructure to support AEO direct and new concept growth.
Stock Repurchase
During the quarter, the company completed the repurchase of 2.4 million shares of common stock for approximately $58.5 million. Subsequent to the third quarter, the company repurchased an additional 1.0 million shares for $21.5 million. Including the subsequent repurchase, year-to-date, the company has repurchased 9.9 million shares for approximately $264.7 million, leaving 20.1 million shares authorized for repurchase.
Real Estate
In the third quarter, American Eagle opened 14 new AE stores and remodeled 13 locations. Additionally, the company opened 27 new free-standing aerie stores and five new MARTIN + OSA stores. For 2007, the company is on-track to increase square footage by 10%. This includes approximately 30 new and 53 remodeled American Eagle stores, approximately 36 free-standing aerie stores and 14 MARTIN + OSA stores. In fiscal 2008, the company expects to grow square footage by an additional 10%, due primarily to new and remodeled AE stores and new aerie stores.
Dividend Declaration
On November 20th, the company's Board of Directors declared a quarterly cash dividend of $0.10 per share payable on January 11, 2008 to stockholders of record at the close of business on December 28, 2007.
Conference Call Information
At 9:00 a.m. Eastern Time on November 27, 2007, the company's management team will host a conference call to review the financial results. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com or www.streetevents.com. Anyone unable to listen to the call can access a replay beginning November 27, 2007 at 12:00 p.m. Eastern Time through December 11, 2007. To listen to the replay, dial 1-877-660-6853, or internationally dial 1-201-612-7415, and reference account 3055 and confirmation code 261121. An audio replay of the conference call will also be available at www.ae.com.
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About American Eagle Outfitters:
American Eagle Outfitters, Inc. (NYSE: AEO) is a leading retailer that operates under the American Eagle Outfitters® and MARTIN + OSATM brands.
American Eagle Outfitters designs, markets and sells its own brand of laidback, current clothing targeting 15 to 25 year-olds, providing high-quality merchandise at affordable prices. The original collection includes standards like jeans and graphic Ts as well as essentials like accessories, outerwear, footwear, basics and swimwear. American Eagle currently operates 855 stores in 50 states, the District of Columbia and Puerto Rico, and 75 AE stores in Canada. American Eagle also operates ae.com®, which offers additional sizes and styles of favorite AE® merchandise and ships to more than forty countries around the world. The American Eagle® brand also includes a Dormwear® collection, aerie$trade;, which is available in 38 standalone stores, American Eagle stores and at aerie.com. The collection includes bras, undies, camis, hoodies, robes, boxers, sweats and leggings for the AE girl. Designed to be sweetly sexy, comfortable and cozy, the aerie brand offers AE customers a new way to express their personal style everyday, from the dormroom to the coffee shop to the classroom.
MARTIN + OSA, a concept targeting 28 to 40 year-old women and men, offers refined casual clothing and accessories, designed to be valuable, irresistible, inspiring, authentic and adventurous. MARTIN + OSA currently operates 19 stores. For additional information and updates, visit www.martinandosa.com.
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"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, specifically regarding fourth quarter sales and earnings, inventory, real estate, aerie and MARTIN + OSA. 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 fourth quarter sales, markdowns and/or earnings expectations may not be achieved, real estate, aerie and MARTIN + OSA growth may not occur as planned and those other risks described in the Risk Factor Section of the Company's Form 10-K for the year ended February 3, 2007 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.
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| AMERICAN EAGLE OUTFITTERS, INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Dollars in thousands) |
| | November 3, | | February 3, | | October 28, |
| | 2007 | | 2007 | | 2006 |
| | (Unaudited) | | | | (Unaudited) |
| | | | | | |
| ASSETS | | | | | | |
| Cash and cash equivalents | $ | 104,877 | $ | 59,737 | $ | 121,216 |
| Short-term investments | | 535,905 | | 767,376 | | 636,711 |
| Merchandise inventory | | 393,068 | | 263,644 | | 348,631 |
| Accounts and note receivable | | 33,603 | | 26,045 | | 25,762 |
| Prepaid expenses and other | | 39,468 | | 33,720 | | 34,414 |
| Deferred income taxes | | 48,935 | | 51,886 | | 46,188 |
| Total current assets | | 1,155,856 | | 1,202,408 | | 1,212,922 |
| Property and equipment, net | | 597,948 | | 481,645 | | 440,868 |
| Goodwill, net | | 11,722 | | 9,950 | | 9,950 |
| Long-term investments | | 146,244 | | 251,644 | | 146,140 |
| Non-current deffered income taxes | | 50,401 | | 30,340 | | 22,210 |
| Other assets, net | | 20,652 | | 15,651 | | 12,292 |
| Total Assets | $ | 1,982,823 | $ | 1,991,638 | $ | 1,844,382 |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
| Accounts payable | $ | 207,481 | $ | 171,150 | $ | 213,049 |
| Accrued compensation and payroll taxes | | 35,003 | | 58,371 | | 46,716 |
| Accrued rent | | 58,731 | | 57,543 | | 52,033 |
| Accrued income and other taxes | | 41,324 | | 91,934 | | 32,261 |
| Unredeemed gift cards and gift certificates | | 30,355 | | 54,554 | | 25,672 |
| Current portion of deferred lease credits | | 12,861 | | 12,803 | | 10,408 |
| Other current liabilities | | 17,357 | | 18,263 | | 18,987 |
| Total current liabilities | | 403,112 | | 464,618 | | 399,126 |
| Deferred lease credits | | 68,393 | | 65,114 | | 65,174 |
| Non-current accrued income taxes | | 52,256 | | - | | - |
| Other non-current liabilities | | 44,138 | | 44,594 | | 47,295 |
| Total non-current liabilities | | 164,787 | | 109,708 | | 112,469 |
| Commitments and contingencies | | - | | - | | - |
| Preferred stock | | - | | - | | - |
| Common stock | | 2,481 | | 2,461 | | 2,453 |
| Contributed capital | | 486,576 | | 453,418 | | 433,524 |
| Accumulated other comprehensive income | | 42,037 | | 21,714 | | 26,025 |
| Retained earnings | | 1,482,907 | | 1,302,345 | | 1,171,184 |
| Treasury Stock | | (599,077) | | (362,626) | | (300,399) |
| Total stockholders' equity | | 1,414,924 | | 1,417,312 | | 1,332,787 |
| Total Liabilities and Stockholders' Equity | $ | 1,982,823 | $ | 1,991,638 | $ | 1,844,382 |
| | | | | | |
| Current Ratio | | 2.87 | | 2.59 | | 3.04 |
| AMERICAN EAGLE OUTFITTERS, INC. |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Dollars and shares in thousands, except per share amounts) |
| (Unaudited) |
| | 13 Weeks Ended |
| | November 3, | | % of | | October 28, | | % of |
| | 2007 | | Sales | | 2006 | | Sales |
| | | | | | | | |
| Net sales | $ | 744,443 | | 100.0% | $ | 696,290 | | 100.0% |
| Cost of sales, including certain buying, | | | | | | | | |
| occupancy and warehousing expenses | | 391,526 | | 52.6% | | 351,966 | | 50.5% |
| Gross profit | | 352,917 | | 47.4% | | 344,324 | | 49.5% |
| Selling, general and administrative expenses | | 174,161 | | 23.4% | | 170,431 | | 24.5% |
| Depreciation and amortization | | 27,867 | | 3.7% | | 21,392 | | 3.1% |
| Operating income | | 150,889 | | 20.3% | | 152,501 | | 21.9% |
| Other income, net | | 6,905 | | 0.9% | | 9,080 | | 1.3% |
| Income before income taxes | | 157,794 | | 21.2% | | 161,581 | | 23.2% |
| Provision for income taxes | | 58,368 | | 7.8% | | 60,636 | | 8.7% |
| Net income | $ | 99,426 | | 13.4% | $ | 100,945 | | 14.5% |
| | | | | | | | |
| Net income per basic common share | $ | 0.46 | | | $ | 0.45 | | |
| | | | | | | | |
| Net income per diluted common share | $ | 0.45 | | | $ | 0.44 | | |
| | | | | | | | |
| Weighted average common shares | | | | | | | �� | |
| outstanding - basic | | 214,719 | | | | 222,797 | | |
| Weighted average common shares | | | | | | | | |
| outstanding - diluted | | 218,786 | | | | 228,401 | | |
| | | | | | | | |
| | | | | | | | |
| | 39 Weeks Ended |
| | November 3, | | % of | | October 28, | | % of |
| | 2007 | | Sales | | 2006 | | Sales |
| | | | | | | | |
| Net sales | $ | 2,060,018 | | 100.0% | $ | 1,821,044 | | 100.0% |
| Cost of sales, including certain buying, | | | | | | | | |
| occupancy and warehousing expenses | | 1,092,195 | | 53.0% | | 947,090 | | 52.0% |
| Gross profit | | 967,823 | | 47.0% | | 873,954 | | 48.0% |
| Selling, general and administrative expenses | | 497,536 | | 24.2% | | 447,872 | | 24.6% |
| Depreciation and amortization | | 80,724 | | 3.9% | | 66,062 | | 3.6% |
| Operating income | | 389,563 | | 18.9% | | 360,020 | | 19.8% |
| Other income, net | | 26,972 | | 1.3% | | 26,144 | | 1.4% |
| Income before income taxes | | 416,535 | | 20.2% | | 386,164 | | 21.2% |
| Provision for income taxes | | 156,995 | | 7.6% | | 148,964 | | 8.2% |
| Net income | $ | 259,540 | | 12.6% | $ | 237,200 | | 13.0% |
| | | | | | | | |
| Net income per basic common share | $ | 1.19 | | | $ | 1.06 | | |
| | | | | | | | |
| Net income per diluted common share | $ | 1.17 | | | $ | 1.04 | | |
| | | | | | | | |
| Weighted average common shares | | | | | | | | |
| outstanding - basic | | 217,933 | | | | 222,888 | | |
| Weighted average common shares | | | | | | | | |
| outstanding - diluted | | 222,312 | | | | 228,276 | | |
| | | | | | | | |
| | | | | | | | | |
| Total gross square footage at end of period: | | 5,618,474 | | | | 5,064,771 | | |
| | | | | | | | |
| Store count at end of period: | | 974 | | | | 883 | | |
| | | | | | | | | |
CONTACT: |
| American Eagle Outfitters, Inc. |
| Judy Meehan, 412-432-3300 |
| |
