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Share Name | Share Symbol | Market | Type |
---|---|---|---|
American Eagle Outfitters Inc | NYSE:AEO | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.17 | -0.69% | 24.30 | 24.88 | 24.24 | 24.71 | 2,920,240 | 01:00:00 |
American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the third quarter ended October 29, 2022.
“I’m pleased to deliver a third quarter that exceeded our expectations, with profit margins meaningfully improved from the first half of the year. Bold actions to rationalize inventory and reduce expenses are paying off. Our inventory is in good shape, up 8% to last year, with progress continuing into the fourth quarter. We are staying disciplined and focused on improving profitability and cash flow, while maintaining a healthy balance sheet,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer.
“As we navigate the current macro environment, we remain focused on our strategic initiatives — leading with innovation and judiciously investing in capabilities that will differentiate us in the long-run. Our organization is strong and I have tremendous confidence in the resilience of our brands. We are excited about upcoming merchandise collections and look forward to delivering an exceptional customer experience across brands and channels this holiday season,” Jay continued.
Third Quarter 2022 Results:
Inventory
Total ending inventory at cost increased 8% to $798 million compared to $740 million last year, with units up 7%. This reflects a meaningful improvement from last quarter’s increase of 36%, reflecting actions to bring receipts more in line with demand. Inventory is current for the holiday season. The company continues to expect fourth quarter ending inventory to be down to last year.
Capital Expenditures
Capital expenditures totaled $71 million in the third quarter and $199 million year-to-date. Management continues to expect full-year spend to approximate $250 million.
Quiet Platforms
The logistics subsidiary is providing significant operational efficiencies and needed capacity for our brands. The third party customer base is ramping up as other brands look to upgrade their supply chain operations and drive efficiencies across their business to better compete in the current retail environment. As we evaluate our plans for Quiet, we are exploring different options to support future growth.
Shareholder Returns
The quarterly cash dividend remains paused to support financial flexibility, while navigating the near-term macro environment. Year-to-date, the company has returned $265 million in cash to shareholders through dividends and share repurchases, reflecting its highest level of returns since 2015.
Outlook
For the fourth quarter, the company is guiding brand revenue down in the mid single digits, and expects brand comps to be consistent with the third quarter. The company is also guiding fourth quarter gross margin in the range of 32% to 33%, at the higher end of previous guidance. While significant progress has been made in right-sizing inventory, management is taking a cautious view given what is likely to be a highly promotional Holiday season.
Management continues to drive expense reductions across store payroll, corporate expense, professional services and advertising. The company remains on track to deliver $100 million in reductions to the original plan and expects SG&A dollars in the fourth quarter to be approximately flat to last year.
Conference Call and Supplemental Financial Information
Management will host a conference call and real time webcast today at 11:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.aeo-inc.com to access the webcast and audio replay. Additionally, a financial results presentation is posted on the company’s website.
* * * *
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® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, Hong Kong and Japan, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 260 international locations operated by licensees in 26 countries. In 2022, AEO released its first annual Building a Better World report, which outlines two decades of ESG achievements through the company’s Planet, People and Practices initiatives. For more information, please visit www.aeo-inc.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including fourth quarter and annual fiscal 2022 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," “potential,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results for fiscal 2022 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity.
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited) October 29, 2022 January 29, 2022 October 30, 2021 Assets Current assets: Cash and cash equivalents $82,133
$
434,770
$
740,668
Merchandise inventory
797,731
553,458
739,808
Accounts receivable, net
250,879
286,683
228,461
Prepaid expenses and other
146,362
122,013
66,593
Total current assets
1,277,105
1,396,924
1,775,530
Operating lease right-of-use assets
1,148,832
1,193,021
1,148,108
Property and equipment, at cost, net of accumulated depreciation
789,809
728,272
665,408
Goodwill, net
271,209
271,416
16,389
Intangible assets, net
96,530
102,701
52,943
Non-current deferred income taxes
34,135
44,167
57,753
Other assets
54,857
50,142
33,884
Total assets $
3,672,477
$
3,786,643
$
3,750,015
Liabilities and Stockholders' Equity Current liabilities: Accounts payable $
188,448
$
231,782
$
314,561
Current portion of operating lease liabilities
332,160
311,005
299,693
Unredeemed gift cards and gift certificates
47,531
71,365
42,070
Accrued compensation and payroll taxes
36,436
141,817
123,588
Accrued income taxes and other
13,056
16,274
33,570
Other current liabilities and accrued expenses
67,799
70,628
56,090
Total current liabilities
685,430
842,871
869,572
Non-current liabilities: Non-current operating lease liabilities
1,089,710
1,154,481
1,123,681
Long-term debt, net
411,911
341,002
336,249
Other non-current liabilities
22,894
24,617
23,816
Total non-current liabilities
1,524,515
1,520,100
1,483,746
Commitments and contingencies
-
-
-
Stockholders' equity: Preferred stock
-
-
-
Common stock
2,496
2,496
2,496
Contributed capital
389,726
636,355
627,264
Accumulated other comprehensive loss
(41,267
)
(40,845
)
(39,049
)
Retained earnings2,080,852
2,203,772
2,185,393
Treasury stock
(969,275
)
(1,378,106
)
(1,379,407
)
Total stockholders' equity1,462,532
1,423,672
1,396,697
Total liabilities and stockholders' equity $
3,672,477
$
3,786,643
$
3,750,015
Current ratio
1.86
1.66
2.04
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share amounts) (unaudited) GAAP Basis 13 Weeks Ended
October 29,
2022
% of
Revenue
October 30,
2021
% of
Revenue
Total net revenue $1,240,583
100.0
%
$1,274,078
100.0
%
Cost of sales, including certain buying, occupancy andwarehousing expenses760,810
61.3
%
709,554
55.7
%
Gross profit479,773
38.7
%
564,524
44.3
%
Selling, general and administrative expenses311,101
25.1
%
313,890
24.6
%
Depreciation and amortization expense51,124
4.1
%
40,947
3.2
%
Operating income117,548
9.5
%
209,687
16.5
%
Interest expense, net3,878
0.3
%
8,612
0.7
%
Other expense (income), net782
0.1
%
(3,130
)
-0.2
%
Income before income taxes112,888
9.1
%
204,205
16.0
%
Provision for income taxes31,616
2.5
%
51,981
4.1
%
Net income $81,272
6.6
%
$152,224
11.9
%
Net income per basic share $0.44
$
0.91
Net income per diluted share $
0.42
$
0.74
Weighted average common shares outstanding - basic
186,305
167,637
Weighted average common shares outstanding - diluted
195,776
205,013
GAAP Basis 39 Weeks Ended
October 29,
2022
% of
Revenue
October 30,
2021
% of
Revenue
Total net revenue $3,493,745
100.0
%
$3,502,848
100.0
%
Cost of sales, including certain buying, occupancy andwarehousing expenses2,255,929
64.5
%
1,999,743
57.1
%
Gross profit1,237,816
35.5
%
1,503,105
42.9
%
Selling, general and administrative expenses917,687
26.3
%
872,320
24.9
%
Depreciation and amortization expense146,664
4.2
%
119,674
3.4
%
Operating income173,465
5.0
%
511,111
14.6
%
Debt related charges60,066
1.7
%
-
0.0
%
Interest expense, net11,887
0.3
%
26,038
0.7
%
Other income, net(5,501
)
-0.2
%
(6,354
)
-0.2
%
Income before income taxes107,013
3.2
%
491,427
14.1
%
Provision for income taxes36,466
1.2
%
122,226
3.6
%
Net income $70,547
2.0
%
$369,201
10.5
%
Net income per basic share $0.39
$
2.20
Net income per diluted share $
0.36
$
1.78
Weighted average common shares outstanding - basic
178,637
168,062
Weighted average common shares outstanding - diluted
207,499
207,032
AMERICAN EAGLE OUTFITTERS, INC. BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION (Dollars and shares in thousands) (unaudited) 13 Weeks Ended 39 Weeks Ended Numerator: October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 Net income and numerator for basic EPS
$
81,272
$
152,224
$
70,547
$
369,201
Add: Interest expense, net of tax, related to the 2025 Notes (1)
529
-
4,897
-
Numerator for diluted EPS$
81,801
$
152,224
$
75,444
$
369,201
Denominator: Denominator for basic EPS - weighted average shares
186,305
167,637
178,637
168,062
Add: Dilutive effect of the 2025 Notes (1)
8,418
33,687
27,280
34,616
Add: Dilutive effect of stock options and non-vested restricted stock
1,053
3,689
1,582
4,354
Denominator for diluted EPS - adjusted weighted average shares
195,776
205,013
207,499
207,032
(1) During the 39 weeks ended October 29, 2022, the Company adopted ASU 2020-06 under the modified retrospective method, which requires the Company to utilize the "if-converted" method of calculated diluted EPS. AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended October 30, 2021 Interest expense, net Net income Diluted earnings per common share GAAP Basis$
8,612
$
152,224
$
0.74
% of Revenue
0.7
%
11.9
%
Less: Convertible debt (1)
4,569
3,330
0.02
Non-GAAP Basis$
4,043
$
155,554
$
0.76
% of Revenue
0.3
%
12.2
%
(1) Amortization of the non-cash discount on the Company's convertible notes AMERICAN EAGLE OUTFITTERS, INC. RESULTS BY SEGMENT (Dollars in thousands) (unaudited) American Eagle Aerie Corporate and Other (1) Total 13 weeks ended October 29, 2022 Total net revenue$
837,575
$
349,712
$
53,296
$
1,240,583
Operating income (loss)
$
174,129
$
56,487
$
(113,068
)
$
117,548
% of revenue
20.8
%
16.2
%
9.5
%
Capital expenditures$
20,477
$
24,404
$
26,626
$
71,507
13 weeks ended October 30, 2021 Total net revenue
$
940,992
$
315,049
$
18,037
$
1,274,078
Operating income (loss)
$
261,225
$
52,021
$
(103,559
)
$
209,687
% of revenue
27.8
%
16.5
%
16.5
%
Capital expenditures$
13,298
$
24,867
$
20,036
$
58,201
American Eagle Aerie Corporate and Other (1) Total 39 Weeks Ended October 29, 2022 Total net revenue
$
2,301,051
$
1,043,129
$
149,565
$
3,493,745
Operating income (loss)
$
387,213
$
111,414
$
(325,162
)
$
173,465
% of revenue
16.8
%
10.7
%
5.0
%
Capital expenditures$
55,000
$
85,663
$
58,701
$
199,364
39 Weeks Ended October 30, 2021 Total net revenue
$
2,513,700
$
947,851
$
41,297
$
3,502,848
Operating income (loss)
$
611,650
$
191,341
$
(291,880
)
$
511,111
% of revenue
24.3
%
20.2
%
14.6
%
Capital expenditures$
36,093
$
48,164
$
60,148
$
144,405
(1) Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and Quiet Platforms (net of intersegment eliminations), which have been identified as operating segments but are not material to disclose as separate reportable segments. Corporate operating costs represents certain costs that are not directly attributable to another reportable segment. AMERICAN EAGLE OUTFITTERS, INC. STORE INFORMATION (unaudited) Third Quarter YTD Third Quarter
2022
2022
Consolidated stores at beginning of period
1,160
1,133
Consolidated stores opened during the period AE Brand (2)
8
19
Aerie (incl. OFFL/NE) (3)
16
51
Todd Snyder
-
1
Unsubscribed
-
1
Consolidated stores closed during the period AE Brand (2)
(5
)
(23
)
Aerie (incl. OFFL/NE) (3)-
(3
)
Total consolidated stores at end of period1,179
1,179
AE Brand (2)
876
Aerie (incl. OFFL/NE) (3)
292
Todd Snyder
6
Unsubscribed
5
Total gross square footage at end of period (in '000)
7,309
7,309
International license locations at end of period (1)
261
261
(1) International license locations (retail stores and concessions) are not included in the consolidated store data or the total gross square footage calculation. (2) AE Brand includes AE stand alone locations, AE/Aerie side-by side locations, AE/OFFL/NE side-by-side locations, and AE/Aerie/OFFL/NE side-by-side locations. (3) Aerie (incl. OFFL/NE) includes Aerie stand alone locations, OFFL/NE stand alone locations, and Aerie/OFFL/NE side-by-side locations.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221121005868/en/
Olivia Messina 412-432-3300 LineMedia@ae.com
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