Aerie’s momentum continues, posting 34% revenue growth
and record profits Digital revenue increased 29%, with Aerie
growing 83% and AE up 11% Gross profit rate expanded, fueled
by greater full-price selling across brands Positive cash flow
further strengthened financial health, ending with $692 million
in cash AEO well-positioned for holiday season
American Eagle Outfitters, Inc. (NYSE: AEO) today reported
operating income of $96 million for the 13 weeks ended October 31,
2020, compared to $103 million for the 13 weeks ended November 2,
2019. Adjusted operating income of $103 million this year excluded
$7 million of expenses primarily related to COVID-19 protocols.
Reported EPS of $0.32 compared to $0.48 last year. Adjusted EPS
of $0.35 this year excluded $0.02 of expenses primarily related to
COVID-19 protocols and $0.01 of non-cash interest expense on the
company’s convertible notes. The adjusted EPS decline to last year
reflected a higher tax rate and the impact from higher interest
expense and diluted shares outstanding related to convertible
debt.
Jay Schottenstein, AEO’s Executive Chairman of the Board and
Chief Executive Officer commented, “The third quarter exceeded our
expectations thanks to the exceptional execution, numerous
accomplishments and dedication of our teams and the support of our
global partners. Once again, Aerie delivered outstanding results,
demonstrating the power of this incredible brand and the massive
opportunity ahead. Across AE and Aerie, higher full-price selling
led to strong margins, reflecting merchandise quality, inventory
optimization and our enduring brands.”
“We are very pleased with early holiday trends in November and
the strong response to our assortments. We have significant
business ahead of us and are well-positioned and ready to serve our
customers. I’m also very encouraged by our overall performance this
year, especially in the midst of an unprecedented crisis. Our teams
really stepped up to accelerate initiatives that will enable us to
emerge from 2020 as a stronger organization with momentum and
tremendous growth potential.”
Adjusted amounts represent Non-GAAP results, as described in the
accompanying GAAP to Non-GAAP reconciliations.
Third Quarter 2020 Results
- Total net revenue for the 13 weeks ended October 31, 2020
decreased $35 million, or 3% to $1.03 billion, compared to $1.07
billion for the 13 weeks ended November 2, 2019. The decline to
last year largely reflected mall traffic declines related to
COVID-19, offset by strong online sales.
- By brand, American Eagle revenue decreased 11%, following a 2%
increase last year. Aerie’s revenue increased 34%, following a 26%
increase last year.
- AEO’s digital reported revenue increased 29%. Aerie digital
revenue rose 83% and AE increased 11%.
- Gross profit of $415 million compared to $407 million last
year. As a rate to revenue, gross margin of 40.2% expanded from
38.2% last year. The increase in rate reflected significantly
higher merchandise margins, primarily due to higher full-priced
sales, lower promotions and inventory optimization initiatives.
Lower product costs and improved rent expense also benefited the
gross margin. This was partly offset by higher delivery and
distribution center costs, due to a strong digital business and
higher cost per shipment.
- Selling, general and administrative expense of $273 million
increased $14 million from $259 million last year, due to higher
performance-based incentive compensation.
- Depreciation and amortization expense of $39 million decreased
$6 million from $45 million last year, due to asset impairments
taken in recent quarters, as well as lower capital spending.
- Operating income of $96 million compared to $103 million last
year. Adjusted operating income of $103 million this year excluded
$7 million of expenses primarily related to COVID-19
protocols.
- Net interest expense of $8 million compared to net interest
income of $1 million last year. Adjusted interest expense of $4
million excluded $4 million of non-cash interest expense on the
company’s convertible notes. The increase in adjusted net interest
expense reflected cash interest expense associated with convertible
notes and lower interest income this year.
- The effective tax rate of 35% compared to 24% last year,
primarily due to a change to our expected full year tax rate and
the impact of the CARES Act.
- Average shares outstanding of 184 million compared to 169
million last year. The increase reflected 16 million shares of
unrealized dilution associated with the company’s convertible
notes.
- EPS of $0.32 compared to EPS of $0.48 last year. Adjusted EPS
of $0.35 excluded $0.02 of expenses primarily related to COVID-19
protocols and $0.01 of non-cash interest on the company’s
convertible notes. The adjusted EPS decline to last year reflected
a higher tax rate and the impact from higher interest expense and
diluted shares outstanding related to convertible debt.
COVID-19 Expenses and Restructuring Charges
In the third quarter of 2020, the company incurred incremental
expenses primarily related to COVID-19 protocols of approximately
$7 million pre-tax, or $0.02 per share after-tax.
Inventory
Total ending inventory at cost decreased $87 million or 13% to
$560 million. The decline reflected AE’s inventory optimization
initiatives aimed at streamlining assortments and better aligning
to sales plans, partly offset by higher inventory at Aerie to
support strong demand.
Capital Expenditures
In the third quarter of 2020, capital expenditures totaled $31
million. On a year-to-date basis, capital expenditures were $93
million. For fiscal 2020, the company continues to expect capital
expenditures to be in the range of $100 to $125 million,
prioritizing strategic customer-facing and supply chain
investments. This compares to $210 million for the full-year fiscal
2019.
Cash Flow and Balance Sheet
The company generated positive operating cash flow during the
third quarter and ended the period with total cash and short-term
investments of $692 million, an increase from $265 million last
year. The quarter-end cash balance included $406 million in
proceeds from the April 2020 convertible notes offering. During the
third quarter, the company repaid the remaining $200 million
balance on its revolving credit facility.
Shareholder Returns
As previously announced, the company suspended its dividend in
June 2020 and at this point does not anticipate declaring a
dividend for the rest of this year. The company’s first quarter
cash dividend was deferred until 2021 and will be payable on April
23, 2021, to stockholders of record at the close of business on
April 9, 2021.
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 1-201-689-8563 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.
Investor Meeting
The company will host a virtual Investor Meeting on Thursday,
January 21, 2021. Additional details about the event will be
included in a subsequent announcement.
Non-GAAP Measures
This press release includes information on non-GAAP financial
measures (“non-GAAP” or “adjusted”), including earnings per share
information and the consolidated results of operations excluding
non-GAAP items. 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. Management
believes that this non-GAAP information is useful for an alternate
presentation of the company’s 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.
* * * *
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, and Hong
Kong, and ships to 81 countries worldwide through its websites.
American Eagle and Aerie merchandise also is available at more than
200 international locations operated by licensees in 25 countries.
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 2020 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 the company’s Annual Report on Form 10-K for the
fiscal year ended February 1, 2020 and in any subsequently-filed
Quarterly Reports on Form 10-Q filed 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 the fourth quarter 2020 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 impact that the COVID-19 pandemic, the 2020
U.S. Presidential election and disruption related to social unrest
will have on our operations and financial results, which is
difficult to accurately predict; 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 changes in global economic 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 31,
February 1,
November 2,
2020
2020
2019
ASSETS Cash and cash equivalents $
692,356
$
361,930
$
214,514
Short-term investments
-
55,000
50,000
Merchandise inventory
559,961
446,278
647,329
Accounts receivable
124,560
119,064
112,304
Prepaid expenses and other
130,909
65,658
54,427
Total current assets
1,507,786
1,047,930
1,078,574
Property and equipment, net
650,397
735,120
764,350
Operating lease right-of-use assets
1,243,311
1,418,916
1,486,133
Intangible assets, including goodwill
50,864
53,004
55,466
Non-current deferred income taxes
12,774
22,724
16,833
Other assets
33,083
50,985
50,896
Total Assets $
3,498,215
$
3,328,679
$
3,452,252
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$
304,552
$
285,746
$
366,676
Current portion of operating lease liabilities
346,321
299,161
292,312
Accrued income and other taxes
15,503
9,514
18,421
Accrued compensation and payroll taxes
117,736
43,537
43,473
Dividends payable
22,843
-
-
Unredeemed gift cards and gift certificates
39,794
56,974
32,411
Other current liabilities and accrued expenses
47,587
56,824
56,859
Total current liabilities
894,336
751,756
810,152
Long-term debt, net
321,081
-
-
Non-current operating lease liabilities
1,196,755
1,301,735
1,353,819
Other non-current liabilities
17,846
27,335
27,896
Total non-current liabilities
1,535,682
1,329,070
1,381,715
Commitments and contingencies
-
-
-
Preferred stock
-
-
-
Common stock
2,496
2,496
2,496
Contributed capital
655,891
577,856
574,391
Accumulated other comprehensive loss
(44,673
)
(33,168
)
(35,861
)
Retained earnings
1,865,370
2,108,292
2,127,312
Treasury stock
(1,410,887
)
(1,407,623
)
(1,407,953
)
Total stockholders' equity
1,068,197
1,247,853
1,260,385
Total Liabilities and Stockholders' Equity $
3,498,215
$
3,328,679
$
3,452,252
Current Ratio
1.69
1.39
1.33
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars and shares in thousands,
except per share amounts) (unaudited)
GAAP Basis
13 Weeks Ended
October 31,
% of
November 2,
% of
2020
Revenue
2019
Revenue
Total net revenue $
1,031,617
100.0
%
$
1,066,412
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
616,840
59.8
%
659,350
61.8
%
Gross profit
414,777
40.2
%
407,062
38.2
%
Selling, general and administrative expenses
273,297
26.5
%
258,973
24.3
%
Impairment, restructuring, and COVID-19 related charges
6,955
0.6
%
-
0.0
%
Depreciation and amortization expense
38,974
3.8
%
44,987
4.2
%
Operating income
95,551
9.3
%
103,102
9.7
%
Interest expense (income), net
7,924
0.8
%
(1,238
)
-0.1
%
Other income, net
(2,223
)
-0.2
%
(1,339
)
-0.1
%
Income before income taxes
89,850
8.7
%
105,679
9.9
%
Provision for income taxes
31,742
3.1
%
24,918
2.3
%
Net income $
58,108
5.6
%
$
80,761
7.6
%
Net income per basic share $
0.35
$
0.48
Net income per diluted share $
0.32
$
0.48
Weighted average common shares outstanding - basic
166,185
167,912
Weighted average common shares outstanding - diluted
184,397
168,693
GAAP Basis
39 Weeks Ended
October 31,
% of
November 2,
% of
2020
Revenue
2019
Revenue
Total net revenue $
2,466,819
100.0
%
$
2,993,581
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
1,758,537
71.3
%
1,879,027
62.8
%
Gross profit
708,282
28.7
%
1,114,554
37.2
%
Selling, general and administrative expenses
685,206
27.8
%
742,764
24.8
%
Impairment, restructuring, and COVID-19 related charges
177,186
7.1
%
4,272
0.1
%
Depreciation and amortization
120,818
4.9
%
134,648
4.5
%
Operating (loss) income
(274,928
)
-11.1
%
232,870
7.8
%
Interest expense (income), net
16,617
0.7
%
(4,797
)
-0.2
%
Other income, net
(793
)
0.0
%
(5,952
)
-0.1
%
(Loss) income before income taxes
(290,752
)
-11.8
%
243,619
8.1
%
(Benefit) provision for income taxes
(77,943
)
-3.2
%
57,125
1.9
%
Net (loss) income $
(212,809
)
-8.6
%
$
186,494
6.2
%
Net (loss) income per basic share $
(1.28
)
$
1.09
Net (loss) income per diluted share $
(1.28
)
$
1.09
Weighted average common shares outstanding - basic
166,385
170,463
Weighted average common shares outstanding - diluted
166,385
171,697
AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP
RECONCILIATION (Dollars in thousands, except per share amounts)
(unaudited)
13 Weeks Ended
October 31, 2020
Operating
Income
Interest
Expense, net
Diluted
Earnings per
Common Share
GAAP Basis
$ 95,551
$ 7,924.00
$ 0.32
% of Revenue
9.3
%
0.8
%
Incremental COVID-19 related expenses and restructuring(1):
6,955
-
$ 0.02
Convertible debt(2):
-
(4,113
)
$ 0.01
Non-GAAP Basis
$ 102,506
$ 3,811
$ 0.35
% of Revenue
9.9
%
0.4
%
(1)
$7.0 million Incremental COVID-19
related expenses and restructuring charges:
- $6.0 million of incremental
COVID-19 related expenses consisting of personal protective
equipment and supplies for our associates and customers
- $1.0 million of corporate
severance charges
(2)
Amortization of the non-cash
discount on the Company's convertible notes
AMERICAN EAGLE OUTFITTERS, INC. Earnings Before
Interest, Taxes, Depreciation and Amortization GAAP TO
NON-GAAP RECONCILIATION (Dollars in thousands) (unaudited)
13 Weeks Ended
October 31,
November 2,
2020
2019
Net Income
$ 58,108
$ 80,761
Add: Provision for income taxes
31,742
24,918
Add: Depreciation and amortization
38,974
44,987
Add: Interest expense (income), net
7,924
(1,238
)
EBITDA
$ 136,748
$ 149,428
Add: Incremental COVID-19 related expenses and restructuring(1)
6,955
-
Adjusted EBITDA
$ 143,703
$ 149,428
(1)
$7.0 million Incremental COVID-19
related expenses and restructuring charges:
- $6.0 million of incremental
COVID-19 related expenses consisting of personal protective
equipment and supplies for our associates and customers
- $1.0 million of corporate
severance charges
AMERICAN EAGLE OUTFITTERS, INC. STORE
INFORMATION (unaudited)
Third Quarter
YTD Third Quarter
2020
2020
Consolidated stores at beginning of period
1,098
1,095
Consolidated stores opened during the period
AE Brand
3
6
Aerie stand-alone(3)
7
22
Todd Snyder
0
1
Consolidated stores closed during the period
AE Brand
(3)
(15)
Aerie stand-alone
0
(3)
Tailgate Clothing Co.
0
(1)
Total consolidated stores at end of period
1,105
1,105
AE Brand
931
Aerie stand-alone(3)
167
Aerie side-by-side(2)
177
Tailgate Clothing Co.
4
Todd Snyder
3
Stores remodeled and refurbished during the period
8
12
Total gross square footage at end of period (in '000)
6,858
6,858
International license locations at end of period (1)
225
225
Aerie Openings
Aerie stand-alone(3)
7
22
Total Aerie side-by-side stores (2)
2
5
Total Aerie Openings
9
27
(1)
International license locations
are not included in the consolidated store data or the total gross
square footage calculation.
(2)
Aerie side-by-side stores are
included in the AE Brand store count as they are considered part of
the AE Brand store to which they are attached.
(3)
Aerie stand alone stores include
an Offline store opening in Q3 and an Unsubscribed store opening in
Q2.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201124005895/en/
Olivia Messina 412-432-3300 LineMedia@ae.com
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