American Eagle Outfitters (NASDAQ:AEOS)
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American Eagle Outfitters, Inc. (NASDAQ:AEOS) today announced that
earnings for the 14 weeks ended February 3, 2007 increased 40% to $0.66
per diluted share from $0.47 per diluted share for the 13 week period
ended January 28, 2006. For the 53 week period ended February 3, 2007,
earnings per share increased 35% to $1.70 from $1.26 per diluted share
for the 52 weeks ended January 28, 2006.
“Fiscal 2006 was a remarkable year, as it was
our third consecutive year of positive comparable store sales growth and
record operating margins,” stated CEO Jim O’Donnell.
“Our financial performance reflects the
strength of the AE brand, the depth of talent within our teams, and
company-wide commitment to disciplined operational execution. I am
particularly proud of our success this year in sustaining strong
profitability, while enhancing our core AE brand and launching key
growth vehicles, aerie and MARTIN + OSA. For 2007, we remain
focused on delivering profitable growth, while expanding our lifestyle
brands and investing in systems to drive further advances in
productivity.”
Fourth Quarter Results
Total sales for the 14 weeks ended February 3, 2007 increased 27% to
$973.4 million compared to $769.1 million for the 13 week period ended
January 28, 2006. Due to the 53rd week in
fiscal 2006, fourth quarter comparable store sales are compared to the
14 week period ended February 4, 2006. On this basis, the company
delivered a comparable store sales increase of 14%.
Gross profit for the fourth quarter increased to $466.5 million, or
47.9% as a percent to sales, from $356.5 million, or 46.3% as a percent
to sales last year. Gross profit as a percent to sales improved by 160
basis points, reflecting a higher merchandise margin and the leveraging
of rent.
Selling, general & administrative expenses reflect the company’s
investments in talent, brand building and the development of new
concepts. Fourth quarter SG&A expenses of $217.7 million were 22.4% as a
percent to sales. This compared to $164.2 million, or 21.3% as a percent
to sales last year. Incentive compensation, including stock option
expense of approximately 90 basis points, contributed to the increase in
SG&A as a percent to sales. Additionally, the company continued to
absorb incremental expenses related to MARTIN + OSA, representing
approximately 20 basis points of SG&A de-leveraging.
Operating income for the quarter increased 31% to $226.8 million from
$173.3 million last year. As a percent to sales, operating income
increased to 23.2%, a 70 basis points improvement compared to 22.5% last
year.
Other income for the fourth quarter was $16.1 million compared to $5.3
million last year. The increase reflected a larger investment balance,
as well as a higher yield compared to last year.
2006 Annual Results
Total sales for the 53 weeks ended February 3, 2007 increased 20% to
$2.794 billion from $2.322 billion for the 52 week period ended January
28, 2006. Due to the 53rd week in fiscal 2006,
annual comparable store sales are compared to the 53 week period ended
February 4, 2006. On this basis, comparable store sales increased 12%
for the year.
Gross profit for the year increased to $1.340 billion, or 48.0% as a
percent to sales, from $1.078 billion, or 46.4% as a percent to sales
last year. Gross profit as a percent to sales improved 160 basis points,
reflecting a higher merchandise margin and the leveraging of rent.
Selling, general & administrative expenses reflect the company’s
investments in talent, brand building and the development of new
concepts. For the year, SG&A expenses of $665.6 million were 23.8% as a
percent to sales. This compared to $540.3 million, or 23.2% as a percent
to sales last year. Incentive compensation, including stock option
expense of approximately 40 basis points, contributed to the increase in
SG&A as a percent to sales. Additionally, the company continued to
absorb incremental expenses related to MARTIN + OSA, representing
approximately 40 basis points of SG&A de-leveraging.
Operating income for the year increased 28% to $586.8 million from
$458.7 million last year. As a percent to sales, operating income
increased to 21.0%, a 120 basis point improvement compared to 19.8% last
year.
Other income for the year was $42.3 million compared to $18.3 million
last year. The increase reflected a larger investment balance, as well
as a higher yield compared to last year.
Growth Strategies Advance
In January, the company announced that it will accelerate the expansion
of aerie by American Eagle with the opening of at least 15
stand-alone locations in 2007. Launched in September, the new intimates
sub-brand, featuring a full line of undies, bras and dorm-wear, is
designed to be sweetly-sexy. The brand has been met with strong customer
acceptance. The company’s expansion plans are
based on the positive results of three aerie stand-alone test
stores. If new stores continue to perform as well as the test stores, aerie
could be a 350+ store chain by 2012.
In the fourth quarter, American Eagle opened eight new AE stores and
remodeled 20 locations. In 2006, 42 new AE stores opened and 65 remodels
were completed. Together with five new MARTIN + OSA stores, and three
new aerie stand-alone test stores, total gross square footage
increased 8% for the year.
In 2007, the company plans to open 45 to 50 AE stores, at least 15 aerie
stand-alone stores and approximately 12 new MARTIN + OSA stores.
Additionally, approximately 45 AE store remodels are planned, which
combined with new store openings will generate total 2007 square footage
growth of approximately 10%.
Capital Expenditures
For fiscal 2006, capital expenditures totaled $226 million, which
included investments in new and remodeled stores, new Pittsburgh
headquarters, a new data center and the expansion of the company’s
Kansas distribution center. For fiscal year 2007, management expects
capital expenditures to be approximately $240 million, related to
continued real estate expansion and upgrades, new headquarters,
investments in information technology, including a new point of sale
system, as well as the completion of its Kansas distribution facility.
Stock Repurchase
During the quarter, the company completed the repurchase of 2.3 million
shares of common stock for approximately $70.2 million. For the year,
the company repurchased 5.3 million shares of common stock for
approximately $146.5 million.
On March 6th, 2007, the company’s Board of
Directors authorized an additional 7 million shares for its repurchase
program.
First Quarter Guidance
At this time, management is establishing first quarter earnings guidance
of $0.31 to $0.33 cents per share, compared to $0.28 per share last year.
February Sales
In a separate release this morning, the company announced a February
comparable store sales increase of 6%. To listen to the recorded sales
commentary, please call 800-642-1687, conference code 3282124#.
Conference Call Information
At 9:00 a.m. Eastern Time, on March 7, 2007, the company’s
management team will host a conference call to review the financial
results. To listen to the call, dial 1-877-601-0864 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 March 7, 2007 at 12:00 p.m. Eastern Time through
March 21, 2007. To listen to the replay, dial 1-800-642-1687 and
reference confirmation code 4821967#. An audio replay of the conference
call will also be available at www.ae.com.
About American Eagle Outfitters:
American Eagle Outfitters, Inc. (Nasdaq:AEOS) is a leading retailer that
operates under the American Eagle Outfitters and MARTIN + OSA 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. AE's original collection
includes standards like jeans and graphic Ts as well as essentials like
accessories, outerwear, footwear, basics and swimwear. American Eagle
currently operates 834 stores in 50 states, the District of Columbia and
Puerto Rico, and 72 AE stores in Canada. American Eagle also operates
ae.com, which offers additional sizes and styles of favorite AE
merchandise and ships around the world. The American Eagle brand also
includes a new collection of dormwear and intimates, “aerie
by American Eagle.” aerie is available
in American Eagle stores across the country and at aerie.com. It
includes bras, undies, camis, hoodies, robes, boxers, sweats and
leggings for the AE girl. Designed to be sweetly sexy, comfortable and
cozy, aerie offers AE customers a new way to express their
personal style everyday, from the dormroom to the coffee shop to the
classroom.
The company introduced MARTIN + OSA, a new sportswear concept targeting
25 to 40 year-old women and men. MARTIN + OSA carries apparel,
accessories and footwear, using denim and sport inspiration to design
fun and sport back into sportswear. MARTIN + OSA currently operates six
stores. For additional information and updates, visit martinandosa.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 first quarter sales and earnings, 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 first 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 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
February 3,
January 28,
2007
2006
(Unaudited)
ASSETS
Cash, cash equivalents and short-term investments
$
827,113
$
751,518
Merchandise inventory
263,644
210,739
Other current assets
107,497
102,341
Assets held for sale
-
12,183
Total current assets
1,198,254
1,076,781
Property and equipment, net
481,645
345,518
Goodwill, net
9,950
9,950
Long-term investments
251,644
145,774
Other assets, net
45,991
27,626
Total Assets
$
1,987,484
$
1,605,649
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
$
171,150
$
139,197
Accrued compensation and payroll taxes
58,371
48,050
Accrued rent
57,543
52,506
Accrued income and other taxes
87,780
43,273
Unredeemed stored value cards and gift certificates
54,554
43,045
Current portion of deferred lease credits
12,803
10,406
Other current liabilities
18,263
15,010
Total current liabilities
460,464
351,487
Deferred lease credits
65,114
60,087
Other non-current liabilities
44,594
38,523
Total non-current liabilities
109,708
98,610
Total stockholders' equity
1,417,312
1,155,552
Total Liabilities and Stockholders' Equity
$
1,987,484
$
1,605,649
Current Ratio
2.60
3.06
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
Three Months Ended
February 3,
% of
January 28,
% of
2007
Sales
2006
Sales
(Unaudited)
(Unaudited)
Net sales
$
973,365
100.0%
$
769,070
100.0%
Cost of sales, including certain buying, occupancy and warehousing
expenses
506,890
52.1%
412,616
53.7%
Gross profit
466,475
47.9%
356,454
46.3%
Selling, general and administrative expenses
217,735
22.4%
164,202
21.3%
Depreciation and amortization
21,970
2.3%
18,996
2.5%
Operating income
226,770
23.2%
173,256
22.5%
Other income, net
16,133
1.7%
5,348
0.7%
Income before income taxes
242,903
24.9%
178,604
23.2%
Provision for income taxes
92,744
9.5%
71,468
9.3%
Income from continuing operations, net of tax
150,159
15.4%
107,136
13.9%
Income from discontinued operations, net of tax
-
0.0%
405
0.1%
Net income
$
150,159
15.4%
$
107,541
14.0%
Basic per common share amounts:
Income from continuing operations
$
0.68
$
0.48
Income from discontinued operations
-
-
Net income per basic common share
$
0.68
$
0.48
Diluted per common share amounts:
Income from continuing operations
$
0.66
$
0.47
Income from discontinued operations
-
-
Net income per diluted common share
$
0.66
$
0.47
Weighted average common shares outstanding - basic
221,470
222,168
Weighted average common shares outstanding - diluted
227,955
227,192
Twelve Months Ended
February 3,
% of
January 28,
% of
2007
Sales
2006
Sales
(Unaudited)
Net sales
$
2,794,409
100.0%
$
2,321,962
100.0%
Cost of sales, including certain buying, occupancy and warehousing
expenses
1,453,980
52.0%
1,244,213
53.6%
Gross profit
1,340,429
48.0%
1,077,749
46.4%
Selling, general and administrative expenses
665,606
23.8%
540,332
23.2%
Depreciation and amortization
88,033
3.2%
78,728
3.4%
Operating income
586,790
21.0%
458,689
19.8%
Other income, net
42,277
1.5%
18,278
0.8%
Income before income taxes
629,067
22.5%
476,967
20.6%
Provision for income taxes
241,708
8.6%
183,256
7.9%
Income from continuing operations, net of tax
387,359
13.9%
293,711
12.7%
Income from discontinued operations, net of tax
-
0.0%
442
0.0%
Net income
$
387,359
13.9%
$
294,153
12.7%
Basic per common share amounts:
Income from continuing operations
$
1.74
$
1.29
Income from discontinued operations
-
-
Net income per basic common share
$
1.74
$
1.29
Diluted per common share amounts:
Income from continuing operations
$
1.70
$
1.26
Income from discontinued operations
-
-
Net income per diluted common share
$
1.70
$
1.26
Weighted average common shares outstanding - basic
222,662
227,406
Weighted average common shares outstanding - diluted
228,384
233,031
Total gross square footage at end of period:
5,173,065
4,772,487
Store count at end of period:
911
869