American Eagle Outfitters Delivers Record Second Quarter Revenue and Strong EPS Growth

Comparable Sales Increase 3% and EPS Rises 35% to $0.23

PITTSBURGH–(BUSINESS WIRE)–American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.23
for the second quarter ended July 30, 2016, a 35% increase from EPS of
$0.17 for the comparable quarter last year. The EPS figures refer to
diluted earnings per share.

Jay Schottenstein, Chief Executive Officer commented, “For the past few
years, we have worked hard to lift our brands through merchandise
leadership and innovation, strengthen our customer focus and invest in
technology. Our efforts around these priorities are clearly paying off,
as again evidenced by our strong earnings growth in the second quarter.
As we enter the fall season, our execution, focus and market
opportunities are greater than ever. In today’s evolving retail
landscape, we are committed to offering the very best product and
customer experience to position AEO’s brands as leaders in a new
generation of successful retail brands.”

Second Quarter 2016 Results

  • Total net revenue increased 3% to $823 million from $797 million last
    year.
  • Consolidated comparable sales increased 3%, following an 11% increase
    last year.
  • Gross profit increased 8% to $307 million and as a rate to revenue,
    expanded 160 basis points to 37.3%. The increase was driven by
    improved merchandise margin due to lower cost and higher realized
    selling prices. This was partially offset by increased delivery
    expense related to growth in digital sales.
  • Selling, general and administrative expense of $200 million increased
    2% compared to last year and improved 20 basis points as a rate to
    revenue to 24.3%. Investments in brand advertising and variable
    selling expense were partially offset by expense management efforts.
  • Operating income increased 29% to $69 million from $53 million last
    year, and the operating margin expanded by 160 basis points to 8.3% as
    a rate to revenue.
  • Other expense was comprised of $3 million related to currency loss on
    cash held in Canadian dollars. This compares to other expense of $2
    million last year.
  • EPS of $0.23 increased 35% from EPS of $0.17 last year.

Inventory

Total merchandise inventories at the end of the second quarter increased
3% to $422 million, due in part to accelerated receipts to support our
marketing programs. Strong inventory management remains a key priority.
Third quarter 2016 ending inventory at cost is expected to be up in the
low-single digits.

Capital Expenditures

For the quarter, capital expenditures totaled $36 million and $61
million for the year to date period. The company now expects fiscal 2016
capital expenditures to be approximately $160 million, on the low end of
the prior guidance of $160 to $170 million.

Cash and Investments

The company ended the quarter with total cash of $248 million compared
to $327 million last year. Over the past year, we invested $227 million
in share buybacks, returned $94 million in dividends and invested $135
million in capital expenditures, resulting in a lower cash balance.

Store Information

In the quarter, the company opened 5 stores and closed 7 stores.
Internationally, the company opened 13 licensed stores. For additional
second quarter actual and fiscal 2016 projected store information, see
the accompanying table.

Third Quarter Outlook

Based on an anticipated low single digit increase in comparable sales,
management expects third quarter 2016 EPS to be approximately $0.40 to
$0.41. This guidance excludes potential asset impairment and
restructuring charges, and compares to EPS of $0.35 last year.

Conference Call and Supplemental Financial Information

Today, management will host a conference call and real time webcast at
9:00 am Eastern Time. To listen to the call, dial 1-877-407-0789 or
internationally dial 1-201-689-8562 or go to http://investors.ae.com
to access the webcast and audio replay. Also, 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
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 more than 150 international stores operated by licensees.
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 third quarter 2016 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.

           
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
 
July 30, January 30, August 1,
2016 2016 2015
(unaudited) (unaudited)
 
ASSETS
Cash and cash equivalents $ 247,934 $ 260,067 $ 327,290
Merchandise inventory 422,151 305,178 408,541
Accounts receivable 65,282 80,912 50,693
Prepaid expenses and other 90,852   77,218   72,106  
Total current assets 826,219   723,375   858,630  
Property and equipment, net 700,270 703,586 715,650
Intangible assets, net 50,761 51,832 47,154
Goodwill 17,399 17,186 13,006
Non-current deferred income taxes 44,370 64,927 74,140
Other assets 54,169   51,340   51,629  
Total Assets $ 1,693,188   $ 1,612,246   $ 1,760,209  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $ 286,691 $ 182,789 $ 263,145
Accrued compensation and payroll taxes 35,908 79,302 37,851
Accrued rent 78,621 77,482 77,127
Accrued income and other taxes 10,250 22,223 14,654
Unredeemed gift cards and gift certificates 31,532 48,274 30,502
Current portion of deferred lease credits 12,810 12,711 13,240
Other current liabilities and accrued expenses 42,719   40,901   55,625  
Total current liabilities 498,531   463,682   492,144  
Deferred lease credits 51,100 50,104 56,421
Non-current accrued income taxes 4,795 4,566 5,441
Other non-current liabilities 38,365   42,518   40,525  
Total non-current liabilities 94,260   97,188   102,387  
Commitments and contingencies
Preferred stock
Common stock 2,496 2,496 2,496
Contributed capital 591,532 590,820 577,146
Accumulated other comprehensive income (29,356 ) (29,868 ) (18,378 )
Retained earnings 1,693,371 1,659,267 1,553,380
Treasury stock (1,157,646 ) (1,171,339 ) (948,966 )
Total stockholders’ equity 1,100,397   1,051,376   1,165,678  
Total Liabilities and Stockholders’ Equity $ 1,693,188   $ 1,612,246   $ 1,760,209  
 
Current Ratio 1.66 1.56 1.74
 
                   
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
 
 
13 Weeks Ended
July 30, % of August 1, % of
2016       Revenue       2015       Revenue
 
Total net revenue $ 822,594 100.0 % $ 797,428 100.0 %
Cost of sales, including certain buying,
occupancy and warehousing expenses 515,499     62.7 % 512,389     64.3 %
Gross profit 307,095 37.3 % 285,039 35.7 %
Selling, general and administrative expenses 199,536 24.3 % 195,791 24.5 %
Depreciation and amortization 38,900     4.7 % 36,109     4.5 %
Operating income 68,659 8.3 % 53,139 6.7 %
Other expense, net (3,134 )   -0.3 % (2,237 )   -0.3 %
Income before income taxes 65,525 8.0 % 50,902 6.4 %
Provision for income taxes 23,933     2.9 % 17,637     2.2 %
Net income 41,592     5.1 % 33,265     4.2 %
 
Net income per basic share $ 0.23 $ 0.17
Net income per diluted share $ 0.23 $ 0.17
 
Weighted average common shares
outstanding – basic 181,048 195,508
Weighted average common shares
outstanding – diluted 183,413 196,885
 
 
26 Weeks Ended
July 30, % of August 1, % of
2016       Revenue       2015       Revenue
 
Total net revenue $ 1,572,010 100.0 % $ 1,496,948 100.0 %
Cost of sales, including certain buying,
occupancy and warehousing expenses 971,463     61.8 % 949,697     63.4 %
Gross profit 600,547 38.2 % 547,251 36.6 %
Selling, general and administrative expenses 395,529 25.2 % 380,882 25.4 %
Depreciation and amortization 77,683     4.9 % 71,236     4.8 %
Operating income 127,335 8.1 % 95,133 6.4 %
Other income, net 1,801     0.1 % 3,733     0.2 %
Income before income taxes 129,136 8.2 % 98,866 6.6 %
Provision for income taxes 47,068     3.0 % 36,548     2.4 %
Net income 82,068     5.2 % 62,318     4.2 %
 
Net income per basic share $ 0.45 $ 0.32
Net income per diluted share $ 0.45 $ 0.32
 
Weighted average common shares
outstanding – basic 180,872 195,241
Weighted average common shares
outstanding – diluted 182,922 196,532
 
   
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE SALES RESULTS BY BRAND
(unaudited)
 
Second Quarter
Comparable Sales
2016 2015
American Eagle Outfitters, Inc. (1) 3 % 11 %
 
AE Total Brand (1) 1 % 10 %
aerie Total Brand (1) 24 % 18 %
 
YTD Second Quarter
Comparable Sales
2016 2015
American Eagle Outfitters, Inc. (1) 5 % 9 %
 
AE Total Brand (1) 3 % 9 %
aerie Total Brand (1) 28 % 15 %
 
(1) AEO Direct is included in consolidated and total brand
comparable sales.
 
     
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION
(unaudited)
   
Second Quarter YTD Second Quarter Fiscal 2016
2016 2016 Guidance
Consolidated stores at beginning of period 1,046 1,047

1,047

Consolidated stores opened during the period
AE Brand 4 6 15 – 20
aerie 0 1 10 – 15
Tailgate Clothing Co. 1 1 3
Consolidated stores closed during the period
AE Brand (3) (4) (20) – (25)
aerie   (4)   (7)   (10)
Total consolidated stores at end of period 1,044 1,044

1,045 – 1,050

 
Stores remodeled and refurbished during the period 25 37 55 – 65
Total gross square footage at end of period 6,598,956 6,598,956 Not Provided
 
International license locations at end of period (1) 158 158 181
 
(1) International license locations are not included in the
consolidated store data or the total gross square footage
calculation.
 

Contacts

American Eagle Outfitters, Inc.
Deb Wagner, 412-432-3300