Exhibit 99.1
AMERICAN EAGLE OUTFITTERS
REPORTS STRONG THIRD QUARTER SALES AND EPS GROWTH
COMPARABLE SALES INCREASE 9%AND EPS RISES 59%TO $0.35
PITTSBURGH-December 2, 2015 - American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS from continuing operations of $0.35 for the third quarter ended October 31, 2015, a 59% increase from adjusted EPS of $0.22 for the comparable quarter last year. The EPS figures refer to diluted earnings per share.
Jay Schottenstein, chief executive officer commented, “We are extremely pleased with our third quarter results. Both the American Eagle and Aerie brands performed exceptionally well, delivering increased sales and profitability. It is gratifying to see positive momentum, which speaks volumes to the strength of our teams, brands and operations.”
“The holiday season is off to a solid start, and we are optimistic as we look ahead. We will continue executing on our priorities to further strengthen and grow our business, while delivering returns to shareholders,” he continued.
Third Quarter 2015 Results
The following discussion is based on Non-GAAP results, as presented in the accompanying GAAP to Non-GAAP reconciliation.
| • | Total net revenue increased 8% to a record $919 million from $854 million last year. |
| • | Consolidated comparable sales increased 9%, compared to a 5% decrease last year. |
| • | Gross profit increased 17% to $368 million and the gross margin rate leveraged 310 basis points to 40.0%. Approximately 250 basis points of margin improvement was due to lower markdowns as the company continued to reduce promotional activity. Buying, occupancy and warehousing leveraged 60 basis points reflecting rent leverage, partially offset by higher incentive costs. |
| • | Selling, general and administrative expense of $221 million increased 8% from $205 million last year. The increase in dollars was primarily the result of higher incentive costs related to strong sales and margin performance. Planned investments in digital marketing also contributed to the increase, and had a positive effect on AEO direct sales. As a rate to revenue, SG&A remained flat to last year at 24.0%. |
| • | Operating income increased to $109 million from $74 million last year, and the operating margin expanded 320 basis points to 11.9% as a rate to revenue. |
| • | EPS from continuing operations of $0.35 increased 59% from adjusted EPS of $0.22 last year. |
Inventory
Total merchandise inventories at the end of the third quarter increased 2% to $480 million compared to $469 million last year. Fourth quarter 2015 ending inventory at cost is expected to be up in the high single-digits. The increase is primarily due to earlier receipts, as the company laps last year’s delays caused by the port slow down.
Capital Expenditures
In the third quarter, capital expenditures totaled $30 million. For fiscal 2015, the company continues to expect capital expenditures of approximately $150 million. The company expects capital spending to be in the range of $150 to $175 million in 2016.
Store Information
In the quarter, the company opened 12 new stores, including six mainline, five factory and one aerie stand alone stores, and closed one AE store. Internationally, the company opened 13 licensed stores during the quarter, including the first stores in Chile and Greece. For additional third quarter 2015 actual and fiscal 2015 projected store information, see the accompanying table.
Cash, Share Repurchases
The company ended the quarter with total cash of $363 million, an increase of $83 million compared to $280 million last year. During the quarter, the company repurchased one million shares for $15 million. The remaining authorization under the current repurchase program is for 17.4 million shares, which expires on January 28, 2017.
Fourth Quarter Outlook
Based on an anticipated mid single-digit increase in comparable sales, management expects fourth quarter 2015 EPS to be approximately $0.40 to $0.42. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS from continuing operations of $0.36 last year.
Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast at 4:15 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go tohttp://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. 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.
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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 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 140 international stores operated by licensees in 22 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 2015 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 Zaccagnini, 412-432-3300
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| October 31, 2015 | January 31, 2015 | November 1, 2014 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 363,116 | $ | 410,697 | $ | 280,445 | ||||||
Merchandise inventory | 479,729 | 278,972 | 468,628 | |||||||||
Accounts receivable | 63,775 | 67,894 | 55,875 | |||||||||
Prepaid expenses and other | 78,091 | 70,477 | 73,095 | |||||||||
Deferred income taxes | 65,636 | 59,102 | 53,445 | |||||||||
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Total current assets | 1,050,347 | 887,142 | 931,488 | |||||||||
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Property and equipment, net | 709,261 | 698,227 | 714,166 | |||||||||
Intangible assets, net | 46,756 | 47,206 | 47,864 | |||||||||
Goodwill | 12,978 | 13,096 | 13,512 | |||||||||
Non-current deferred income taxes | 17,052 | 14,035 | 26,598 | |||||||||
Other assets | 51,442 | 37,202 | 38,444 | |||||||||
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Total Assets | $ | 1,887,836 | $ | 1,696,908 | $ | 1,772,072 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Accounts payable | $ | 304,989 | $ | 191,146 | $ | 309,348 | ||||||
Accrued compensation and payroll taxes | 66,466 | 44,884 | 49,562 | |||||||||
Accrued rent | 77,892 | 78,567 | 77,102 | |||||||||
Accrued income and other taxes | 43,721 | 33,110 | 27,472 | |||||||||
Unredeemed gift cards and gift certificates | 28,259 | 47,888 | 27,712 | |||||||||
Current portion of deferred lease credits | 13,055 | 12,969 | 13,392 | |||||||||
Other current liabilities and accrued expenses | 43,761 | 50,529 | 41,893 | |||||||||
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Total current liabilities | 578,143 | 459,093 | 546,481 | |||||||||
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Deferred lease credits | 53,877 | 54,516 | 58,988 | |||||||||
Non-current accrued income taxes | 4,876 | 10,456 | 11,312 | |||||||||
Other non-current liabilities | 41,667 | 33,097 | 35,044 | |||||||||
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Total non-current liabilities | 100,420 | 98,069 | 105,344 | |||||||||
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Commitments and contingencies | — | — | — | |||||||||
Preferred stock | — | — | — | |||||||||
Common stock | 2,496 | 2,496 | 2,496 | |||||||||
Contributed capital | 588,293 | 569,675 | 566,449 | |||||||||
Accumulated other comprehensive income | (19,797 | ) | (9,944 | ) | 10,876 | |||||||
Retained earnings | 1,602,550 | 1,543,085 | 1,506,519 | |||||||||
Treasury stock | (964,269 | ) | (965,566 | ) | (966,093 | ) | ||||||
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Total stockholders’ equity | 1,209,273 | 1,139,746 | 1,120,247 | |||||||||
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Total Liabilities and Stockholders’ Equity | $ | 1,887,836 | $ | 1,696,908 | $ | 1,772,072 | ||||||
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Current Ratio | 1.82 | 1.93 | 1.70 | |||||||||
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
| 13 Weeks Ended | ||||||||||||||||
| October 31, 2015 | % of Revenue | November 1, 2014 | % of Revenue | |||||||||||||
Total net revenue | $ | 919,072 | 100.0 | % | $ | 854,290 | 100.0 | % | ||||||||
Cost of sales, including certain buying, occupancy and warehousing expenses | 551,540 | 60.0 | % | 538,818 | 63.1 | % | ||||||||||
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Gross profit | 367,532 | 40.0 | % | 315,472 | 36.9 | % | ||||||||||
Selling, general and administrative expenses | 220,798 | 24.0 | % | 204,641 | 24.0 | % | ||||||||||
Loss on impairment of assets | — | 0.0 | % | 33,468 | 3.9 | % | ||||||||||
Restructuring charges | — | 0.0 | % | 17,752 | 2.1 | % | ||||||||||
Depreciation and amortization | 37,623 | 4.1 | % | 36,528 | 4.2 | % | ||||||||||
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Operating income | 109,111 | 11.9 | % | 23,083 | 2.7 | % | ||||||||||
Other income, net | 521 | 0.0 | % | 649 | 0.1 | % | ||||||||||
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Income before income taxes | 109,632 | 11.9 | % | 23,732 | 2.8 | % | ||||||||||
Provision for income taxes | 40,367 | 4.4 | % | 14,697 | 1.7 | % | ||||||||||
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Income from continuing operations | 69,265 | 7.5 | % | 9,035 | 1.1 | % | ||||||||||
Gain from discontinued operations, net of tax | 4,847 | 0.5 | % | — | 0.0 | % | ||||||||||
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Net income | $ | 74,112 | 8.0 | % | $ | 9,035 | 1.1 | % | ||||||||
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Basic income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.35 | $ | 0.05 | ||||||||||||
Gain from discontinued operations | 0.03 | — | ||||||||||||||
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Net income per basic share | $ | 0.38 | $ | 0.05 | ||||||||||||
Diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.35 | $ | 0.05 | ||||||||||||
Gain from discontinued operations | 0.03 | — | ||||||||||||||
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Net income per diluted share | $ | 0.38 | $ | 0.05 | ||||||||||||
Weighted average common shares outstanding - basic | 195,215 | 194,573 | ||||||||||||||
Weighted average common shares outstanding - diluted | 197,478 | 195,221 | ||||||||||||||
| 39 Weeks Ended | ||||||||||||||||
| October 31, 2015 | % of Revenue | November 1, 2014 | % of Revenue | |||||||||||||
Total net revenue | $ | 2,416,020 | 100.0 | % | $ | 2,211,014 | 100.0 | % | ||||||||
Cost of sales, including certain buying, occupancy and warehousing expenses | 1,501,237 | 62.1 | % | 1,432,150 | 64.8 | % | ||||||||||
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Gross profit | 914,783 | 37.9 | % | 778,864 | 35.2 | % | ||||||||||
Selling, general and administrative expenses | 601,680 | 24.9 | % | 579,777 | 26.2 | % | ||||||||||
Loss on impairment of assets | — | 0.0 | % | 33,468 | 1.5 | % | ||||||||||
Restructuring charges | — | 0.0 | % | 17,752 | 0.8 | % | ||||||||||
Depreciation and amortization | 108,861 | 4.5 | % | 104,312 | 4.7 | % | ||||||||||
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Operating income | 204,242 | 8.4 | % | 43,555 | 2.0 | % | ||||||||||
Other income, net | 4,254 | 0.2 | % | 2,185 | 0.1 | % | ||||||||||
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Income before income taxes | 208,496 | 8.6 | % | 45,740 | 2.1 | % | ||||||||||
Provision for income taxes | 76,915 | 3.2 | % | 27,027 | 1.2 | % | ||||||||||
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Income from continuing operations | 131,581 | 5.4 | % | 18,713 | 0.9 | % | ||||||||||
Gain from discontinued operations, net of tax | 4,847 | 0.2 | % | — | 0.0 | % | ||||||||||
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Net income | $ | 136,428 | 5.6 | % | $ | 18,713 | 0.9 | % | ||||||||
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Basic income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.67 | $ | 0.10 | ||||||||||||
Gain from discontinued operations | 0.02 | — | ||||||||||||||
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Net income per basic share | $ | 0.70 | $ | 0.10 | ||||||||||||
Diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.67 | $ | 0.10 | ||||||||||||
Gain from discontinued operations | 0.02 | — | ||||||||||||||
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Net income per diluted share | $ | 0.69 | $ | 0.10 | ||||||||||||
Weighted average common shares outstanding - basic | 195,308 | 194,381 | ||||||||||||||
Weighted average common shares outstanding - diluted | 197,017 | 194,934 | ||||||||||||||
AMERICAN EAGLE OUTFITTERS, INC.
GAAP to Non-GAAP EPS reconciliation
(unaudited)
| 13 Weeks Ended November 1, 2014 | 52 Weeks Ended January 31, 2015 | |||||||||||||||
| Operating income | Diluted income per common share | Operating income | Diluted income per common share | |||||||||||||
GAAP Basis from Continuing Operations | $ | 23,083 | $ | 0.05 | $ | 155,765 | $ | 0.46 | ||||||||
Add back: Asset Impairment and Corporate Overhead Reduction Charges(1): | 51,220 | 0.17 | 51,220 | 0.17 | ||||||||||||
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Non-GAAP Basis from Continuing Operations | $ | 74,303 | $ | 0.22 | $ | 206,985 | $ | 0.63 | ||||||||
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% of Total Net Revenue | 8.7 | % | 6.3 | % | ||||||||||||
| (1) | Non-GAAP adjustments consist of $33.5 million of corporate and store asset impairments and $17.7 million of severance and related employee costs and corporate charges. |
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
| Third Quarter Comparable Sales | ||||||||
| 2015 | 2014 | |||||||
American Eagle Outfitters, Inc.(1) | 9 | % | -5 | % | ||||
AE Total Brand(1) | 8 | % | -6 | % | ||||
aerie Total Brand(1) | 21 | % | 3 | % | ||||
| YTD Third Quarter Comparable Sales | ||||||||
| 2015 | 2014 | |||||||
American Eagle Outfitters, Inc.(1) | 9 | % | -7 | % | ||||
AE Total Brand(1) | 9 | % | -8 | % | ||||
aerie Total Brand(1) | 17 | % | 3 | % | ||||
| (1) | AEO Direct is included in consolidated and total brand comparable sales. |
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION
(unaudited)
| Third Quarter Fiscal 2015 | YTD Third Quarter Fiscal 2015 | Fiscal 2015 Guidance | ||||||||||
Consolidated stores at beginning of period | 1,057 | 1,056 | 1,056 | |||||||||
Consolidated stores opened during the period | ||||||||||||
AE Brand | 11 | 21 | 21 | |||||||||
aerie | 1 | 1 | 1 | |||||||||
Consolidated stores closed during the period | ||||||||||||
AE Brand | (1) | (6) | (27 - 31) | |||||||||
aerie | — | (4) | (7 - 10) | |||||||||
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Total consolidated stores at end of period | 1,068 | 1,068 | 1,037 - 1,044 | |||||||||
Stores remodeled and refurbished during the period | 5 | 20 | 25-30 | |||||||||
Total gross square footage at end of period | 6,712,312 | 6,712,312 | Not Provided | |||||||||
International license stores at end of period(1) | 126 | 126 | 143 | |||||||||
| (1) | International license stores are not included in the consolidated store data or the total gross square footage calculation. |