EXHIBIT 99.1
AMERICAN EAGLE OUTFITTERS
REPORTS 37% INCREASEIN THIRD QUARTER EPS
SALESINCREASED 11%TO $910MILLIONON COMPARABLE STORE SALESGROWTHOF 10%
PITTSBURGH–November 28, 2012 - American Eagle Outfitters, Inc. (NYSE:AEO) today announced that income from continuing operations increased 37% to $0.41 per diluted share for the third quarter ended October 27, 2012, compared to $0.30 per diluted share for the comparable quarter last year. Due to the exit of the 77kids business, its results are presented as discontinued operations for all periods and are further discussed below. Net income for the third quarter, which includes a loss from discontinued operations, was $0.39 per diluted share, compared to $0.27 per diluted share last year.
Robert Hanson, chief executive officer stated, “Our third quarter reflected on-going business momentum, profitable sales growth, and a leading brand and product driven customer experience. We’re also pleased to see business strength carry into the fourth quarter and record results over Thanksgiving weekend. As we look forward, we are sharply focused on executing our strategy plan to drive future profitable growth and top tier shareholder returns.”
Third Quarter Results – Continuing Operations (Excluding 77kids)
• | Net sales increased 11% to a record $910 million, compared to $819 million last year. |
• | Comparable store sales, including AE Direct, increased 10%, compared to a 7% increase last year. |
• | Gross profit increased 21% to $379 million and increased 350 basis points to 41.6% as a rate to sales. Within gross margin, the merchandise margin improved 290 basis points primarily as a result of improved product costs and lower markdowns. Buying, occupancy and warehousing costs leveraged 60 basis points due to strong sales. |
• | Selling, general and administrative expense of $219 million increased 140 basis points to 24.1% as a rate to sales. The increase related to incremental incentive compensation and variable selling expenses due to strong business results and a planned incremental investment in advertising. |
• | Depreciation and amortization expense of $31 million decreased 80 basis points to 3.4% as a rate to sales. |
• | Operating income increased 39% to $129 million. The operating margin expanded 290 basis points to 14.1%, the company’s best margin rate since 2008. |
• | Other income of $3 million primarily relates to a settlement recovery from auction rate securities that were previously held. |
• | EPS from continuing operations of $0.41 compares to $0.30 last year, a 37% increase. |
77kids Update
On August 3, 2012, the company completed the sale of its children’s business, 77kids, which included store assets, the online business, inventory and a temporary license to use the 77kids name through January 15, 2013.
In conjunction with the sale, the company incurred total year-to-date after-tax losses of approximately $32 million, which includes both operational and exit costs, of which $4 million, or $0.02 per share, was incurred in the third quarter. 77kids results are presented as discontinued operations for all periods. All prior period inventory balances for 77kids have been recorded as an asset held for sale on the company’s consolidated balance sheets.
AEO Direct
In the third quarter, online sales increased 27%, compared to a 21% increase last year. The company’s online business includes ae.com and aerie.com.
Inventory
Total merchandise inventories at the end of the third quarter were $481 million compared to $555 million last year. At cost per foot, inventory decreased 11% compared to last year. Fourth quarter ending inventory cost per foot is expected to be down in the high single-digits.
Capital Expenditures
For the third quarter, capital expenditures were $23 million, compared to $30 million last year, bringing the year-to-date total to $71 million. For fiscal 2012, the company continues to expect capital expenditures to be approximately $100 million.
Real Estate
In the third quarter, total square footage increased slightly. The company opened four stores, closed four stores, and completed 8 remodels. For additional third quarter 2012 actual and fiscal 2012 projected real estate information, see the accompanying table.
Cash and Investments
The company ended the quarter with total cash and short-term investments of $545 million, compared to $481 million last year, after dividend payments totaling $317 million.
Future Outlook
For the fourth quarter, management now expects EPS to be in the range of $0.54 to $0.56 per diluted share, compared to an adjusted EPS from continuing operations of $0.39 last year, representing growth of 38% to 44%. For the year, management expects EPS from continuing operations of $1.38 to $1.40, compared to an adjusted EPS of $0.97 last year. For the fourth quarter, EPS guidance is based on comparable store sales growth in the mid-single digits and excludes the potential impact of store impairment charges.
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 towww.ae.com to access the webcast and audio replay. Also, a financial results presentation is posted on the company’s website.
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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 North America, and ships to 77 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at approximately 48 international franchise stores in 13 countries. For more information, please visitwww.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, specifically regarding fourth quarter and fiscal 2012 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. | |
Judy Meehan, 412-432-3300 |
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 27, 2012 | January 28, 2012 | October 29, 2011 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 544,683 | $ | 719,545 | $ | 380,284 | ||||||
Short-term investments | — | 25,499 | 101,036 | |||||||||
Merchandise inventory | 481,208 | 367,514 | 554,900 | |||||||||
Assets held for sale | — | 10,912 | 16,851 | |||||||||
Accounts receivable | 47,432 | 40,310 | 41,138 | |||||||||
Prepaid expenses and other | 65,326 | 74,947 | 64,378 | |||||||||
Deferred income taxes | 59,203 | 48,761 | 47,254 | |||||||||
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Total current assets | 1,197,852 | 1,287,488 | 1,205,841 | |||||||||
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Property and equipment, net | 537,058 | 582,162 | 629,486 | |||||||||
Intangible assets, net | 38,459 | 39,832 | 40,088 | |||||||||
Goodwill | 11,492 | 11,469 | 11,511 | |||||||||
Non-current deferred income taxes | 23,199 | 13,467 | 8,833 | |||||||||
Other assets | 25,073 | 16,384 | 14,692 | |||||||||
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Total Assets | $ | 1,833,133 | $ | 1,950,802 | $ | 1,910,451 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Accounts payable | $ | 213,197 | $ | 183,783 | $ | 222,894 | ||||||
Accrued compensation and payroll taxes | 51,992 | 42,625 | 18,677 | |||||||||
Accrued rent | 76,769 | 76,921 | 74,888 | |||||||||
Accrued income and other taxes | 38,133 | 20,135 | 19,552 | |||||||||
Unredeemed gift cards and gift certificates | 23,089 | 44,970 | 22,456 | |||||||||
Current portion of deferred lease credits | 13,886 | 15,066 | 15,512 | |||||||||
Other current liabilities and accrued expenses | 26,432 | 21,901 | 22,570 | |||||||||
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Total current liabilities | 443,498 | 405,401 | 396,549 | |||||||||
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Deferred lease credits | 63,220 | 71,880 | 74,981 | |||||||||
Non-current accrued income taxes | 27,110 | 35,471 | 38,527 | |||||||||
Other non-current liabilities | 15,734 | 21,199 | 17,853 | |||||||||
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Total non-current liabilities | 106,064 | 128,550 | 131,361 | |||||||||
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Commitments and contingencies | — | — | — | |||||||||
Preferred stock | — | — | — | |||||||||
Common stock | 2,496 | 2,496 | 2,496 | |||||||||
Contributed capital | 599,343 | 552,797 | 550,167 | |||||||||
Accumulated other comprehensive income | 29,179 | 28,659 | 29,116 | |||||||||
Retained earnings | 1,522,805 | 1,771,464 | 1,744,280 | |||||||||
Treasury stock | (870,252 | ) | (938,565 | ) | (943,518 | ) | ||||||
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Total stockholders’ equity | 1,283,571 | 1,416,851 | 1,382,541 | |||||||||
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Total Liabilities and Stockholders’ Equity | $ | 1,833,133 | $ | 1,950,802 | $ | 1,910,451 | ||||||
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Current Ratio | 2.70 | 3.18 | 3.04 |
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
13 Weeks Ended | ||||||||||||||||
October 27, 2012 | % of Sales | October 29, 2011 | % of Sales | |||||||||||||
Net sales | $ | 910,374 | 100.0 | % | $ | 819,419 | 100.0 | % | ||||||||
Cost of sales, including certain buying, occupancy and warehousing expenses | 531,284 | 58.4 | % | 507,164 | 61.9 | % | ||||||||||
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Gross profit | 379,090 | 41.6 | % | 312,255 | 38.1 | % | ||||||||||
Selling, general and administrative expenses | 219,128 | 24.1 | % | 185,687 | 22.7 | % | ||||||||||
Depreciation and amortization | 31,421 | 3.4 | % | 34,415 | 4.2 | % | ||||||||||
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Operating income | 128,541 | 14.1 | % | 92,153 | 11.2 | % | ||||||||||
Other income (expense), net | 2,822 | 0.3 | % | (407 | ) | 0.0 | % | |||||||||
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Income before income taxes | 131,363 | 14.4 | % | 91,746 | 11.2 | % | ||||||||||
Provision for income taxes | 48,922 | 5.4 | % | 33,795 | 4.1 | % | ||||||||||
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Income from continuing operations | 82,441 | 9.0 | % | 57,951 | 7.1 | % | ||||||||||
Loss from discontinued operations, net of tax | (3,833 | ) | –0.4 | % | (5,524 | ) | –0.7 | % | ||||||||
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Net income | $ | 78,608 | 8.6 | % | $ | 52,427 | 6.4 | % | ||||||||
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Basic income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.42 | $ | 0.30 | ||||||||||||
Loss from discontinued operations | (0.02 | ) | (0.03 | ) | ||||||||||||
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Net income per basic share | $ | 0.40 | $ | 0.27 | ||||||||||||
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Diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.41 | $ | 0.30 | ||||||||||||
Loss from discontinued operations | (0.02 | ) | (0.03 | ) | ||||||||||||
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Net income per diluted share | $ | 0.39 | $ | 0.27 | ||||||||||||
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Weighted average common shares outstanding - basic | 197,173 | 194,378 | ||||||||||||||
Weighted average common shares outstanding - diluted | 201,967 | 195,985 | ||||||||||||||
39 Weeks Ended | ||||||||||||||||
October 27, 2012 | % of Sales | October 29, 2011 | % of Sales | |||||||||||||
Net sales | $ | 2,358,749 | 100.0 | % | $ | 2,091,623 | 100.0 | % | ||||||||
Cost of sales, including certain buying, occupancy and warehousing expenses | 1,428,182 | 60.5 | % | 1,309,371 | 62.6 | % | ||||||||||
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Gross profit | 930,567 | 39.5 | % | 782,252 | 37.4 | % | ||||||||||
Selling, general and administrative expenses | 579,792 | 24.6 | % | 504,052 | 24.1 | % | ||||||||||
Depreciation and amortization | 96,130 | 4.1 | % | 103,848 | 5.0 | % | ||||||||||
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Operating income | 254,645 | 10.8 | % | 174,352 | 8.3 | % | ||||||||||
Other income, net | 5,986 | 0.3 | % | 5,536 | 0.3 | % | ||||||||||
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Income before income taxes | 260,631 | 11.1 | % | 179,888 | 8.6 | % | ||||||||||
Provision for income taxes | 91,309 | 3.9 | % | 64,974 | 3.1 | % | ||||||||||
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Income from continuing operations | 169,322 | 7.2 | % | 114,914 | 5.5 | % | ||||||||||
Loss from discontinued operations, net of tax | (31,990 | ) | –1.4 | % | (14,493 | ) | –0.7 | % | ||||||||
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Net income | $ | 137,332 | 5.8 | % | $ | 100,421 | 4.8 | % | ||||||||
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Basic income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.86 | $ | 0.59 | ||||||||||||
Loss from discontinued operations | (0.16 | ) | (0.07 | ) | ||||||||||||
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Net income per basic share | $ | 0.70 | $ | 0.52 | ||||||||||||
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Diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.85 | $ | 0.58 | ||||||||||||
Loss from discontinued operations | (0.16 | ) | (0.07 | ) | ||||||||||||
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Net income per diluted share | $ | 0.69 | $ | 0.51 | ||||||||||||
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Weighted average common shares outstanding - basic | 196,177 | 194,659 | ||||||||||||||
Weighted average common shares outstanding - diluted | 200,041 | 196,430 |
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
39 Weeks Ended | ||||||||
October 27, 2012 | October 29, 2011 | |||||||
Operating activities: | ||||||||
Net income | $ | 137,332 | $ | 100,421 | ||||
Loss from discontinued operations | 31,990 | 14,493 | ||||||
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Income from continuing operations | 169,322 | 114,914 | ||||||
Adjustments to reconcile income from continuing operations to net cash from operating activities of continuing operations: | ||||||||
Depreciation and amortization | 97,720 | 105,787 | ||||||
Share-based compensation | 45,458 | 8,591 | ||||||
Provision for deferred income taxes | (21,233 | ) | 11,252 | |||||
Tax benefit from share-based payments | 5,072 | 293 | ||||||
Excess tax benefit from share-based payments | (4,365 | ) | (152 | ) | ||||
Foreign currency transaction loss (gain) | 24 | (277 | ) | |||||
Loss on impairment of assets | 449 | — | ||||||
Changes in assets and liabilities: | ||||||||
Merchandise inventory | (113,509 | ) | (261,138 | ) | ||||
Accounts receivable | (7,735 | ) | (3,209 | ) | ||||
Prepaid expenses and other | 8,896 | (10,398 | ) | |||||
Other assets | (9,574 | ) | 3,936 | |||||
Accounts payable | 36,713 | 56,569 | ||||||
Unredeemed gift cards and gift certificates | (21,908 | ) | (18,607 | ) | ||||
Deferred lease credits | (6,896 | ) | (5,714 | ) | ||||
Accrued compensation and payroll taxes | 9,461 | (16,329 | ) | |||||
Accrued income and other taxes | 9,642 | (12,105 | ) | |||||
Accrued liabilities | 13,280 | 7,560 | ||||||
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Total adjustments | 41,495 | (133,941 | ) | |||||
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Net cash provided by (used for) operating activities from continuing operations | $ | 210,817 | $ | (19,027 | ) | |||
Investing activities: | ||||||||
Capital expenditures for property and equipment | (71,223 | ) | (86,228 | ) | ||||
Acquisition of intangible assets | (958 | ) | (33,886 | ) | ||||
Purchase of available-for-sale securities | (10,069 | ) | (186,328 | ) | ||||
Sale of available-for-sale securities | 36,415 | 157,994 | ||||||
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Net cash used for investing activities from continuing operations | $ | (45,835 | ) | $ | (148,448 | ) | ||
Financing activities: | ||||||||
Payments on capital leases | (2,515 | ) | (2,343 | ) | ||||
Repurchase of common stock as part of publicly announced programs | — | (15,160 | ) | |||||
Repurchase of common stock from employees | (4,125 | ) | (2,189 | ) | ||||
Net proceeds from stock options exercised | 43,914 | 2,680 | ||||||
Excess tax benefit from share-based payments | 4,365 | 152 | ||||||
Cash dividends paid | (360,498 | ) | (64,273 | ) | ||||
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Net cash used for financing activities from continuing operations | $ | (318,859 | ) | $ | (81,133 | ) | ||
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Effect of exchange rates on cash | 264 | 872 | ||||||
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Cash flows of discontinued operations | ||||||||
Net cash used for operating activities | (20,481 | ) | (29,056 | ) | ||||
Net cash used for investing activities | (768 | ) | (10,517 | ) | ||||
Net cash used for financing activities | — | — | ||||||
Effect of exchange rate on cash | — | — | ||||||
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Net cash used for discontinued operations | $ | (21,249 | ) | $ | (39,573 | ) | ||
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Net decrease in cash and cash equivalents | $ | (174,862 | ) | $ | (287,309 | ) | ||
Cash and cash equivalents - beginning of period | 719,545 | 667,593 | ||||||
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Cash and cash equivalents - end of period | $ | 544,683 | $ | 380,284 | ||||
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AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE STORE SALES RESULTS BY BRAND
(unaudited)
Third Quarter Comparable Store Sales (1) | ||||||||
2012 | 2011 | |||||||
American Eagle Outfitters, Inc.(2) | 10 | % | 7 | % | ||||
AE Brand | 8 | % | 5 | % | ||||
aerie | 5 | % | 8 | % | ||||
AEO Direct(2) | 27 | % | 21 | % | ||||
YTD Third Quarter Comparable Store Sales (1) | ||||||||
2012 | 2011 | |||||||
American Eagle Outfitters, Inc.(2) | 12 | % | 1 | % | ||||
AE Brand | 10 | % | –1 | % | ||||
aerie | 12 | % | Flat | |||||
AEO Direct(2) | 26 | % | 13 | % |
(1) | Comparable store sales are from continuing operations and exclude 77kids. |
(2) | AEO Direct is comprised of ae.com and aerie.com. AEO Direct is included in consolidated comparable store sales. |
AMERICAN EAGLE OUTFITTERS, INC.
REAL ESTATE INFORMATION
(unaudited)
Third Quarter Fiscal 2012 | YTD Third Quarter Fiscal 2012 | Fiscal 2012 Guidance | ||||||||
Consolidated stores at beginning of period(1) | 1,063 | 1,069 | 1,069 | |||||||
Consolidated stores opened during the period | ||||||||||
AE Brand | 4 | 13 | 16 | |||||||
Consolidated stores closed during the period | ||||||||||
AE Brand | (3 | ) | (15 | ) | (25) - (30) | |||||
aerie | (1 | ) | (4 | ) | (5) - (10) | |||||
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Total consolidated stores at end of period | 1,063 | 1,063 | 1045 - 1055 | |||||||
Stores remodeled and refurbished during the period | 8 | 46 | 48 - 50 | |||||||
Total gross square footage at end of period | 6,300,662 | 6,300,662 | Not Provided | |||||||
International franchise stores at end of period(2) | 44 | 44 | 49 |
(1)- Consolidated store data and total gross square footage exclude all 77kids store locations.
(2)- International franchise stores are not included in the consolidated store data or the total gross square footage calculation.