Third Quarter 2021 Highlights Compared to
Third Quarter 2020
- Record revenue of $1.27 billion increased 24%
- Operating income of $210 million more than doubled, reaching a
new third quarter high
- Strong demand, higher full-priced sales, reduced promotions and
controlled costs fueled gross margin expansion to 44.3% and
operating margin to 16.5%
- American Eagle net revenue rose 21% and operating income was up
68%
- Aerie net revenue increased 28% and operating income rose
46%
American Eagle Outfitters, Inc. (NYSE: AEO) today announced
financial results for the third quarter ended October 30, 2021.
“As strong demand for our merchandise and brands continues, I’m
very pleased to report another quarter of record revenue and
profit. The work on our Real Power. Real Growth. value creation
plan is driving meaningful improvements to our profitability
through real estate and inventory optimization; omni-channel and
customer focus; and our supply chain initiatives. The power of our
brands, operations and talent are clearly evident and we are
intensely focused on ensuring these strengths continue to take AEO
to new heights,” said Jay Schottenstein, AEO’s Executive Chairman
of the Board and Chief Executive Officer.
“This quarter, we took an important next step in our supply
chain transformation with the planned acquisition of Quiet
Logistics to ensure ongoing efficiencies and procure a
state-of-the-art logistics platform with meaningful growth
potential. With our customer-first focus, the teams did a great job
bringing in goods to meet strong demand this holiday season. I am
extremely proud of the team’s ability to execute with precision at
a time of volatility and am confident that we will exceed $600
million of operating income for the year, well above the $550
million 2023 target,” Jay continued.
Third Quarter 2021 Results
- Total net revenue increased $242 million, or 24% to $1.27
billion, compared to $1.03 billion in the third quarter of
2020.
- Aerie revenue of $315 million rose 28% from third quarter 2020
on top of 34% growth last year. American Eagle revenue of $941
million rose 21% versus third quarter 2020 following an 11% decline
last year.
- Consolidated store revenue increased 29%. Total digital revenue
increased 10%. Compared to the pre-pandemic third quarter 2019
base, store revenue increased 9% and digital revenue increased
42%.
- Gross profit of $565 million rose 36% from $415 million in the
third quarter of 2020.
- Gross margin of 44.3% expanded 410 basis points from 40.2% in
the third quarter of 2020 and reflected the highest rate since
2007. The increase from 2020 largely reflected leverage on rent and
delivery, as well as strong product demand, higher full-priced
sales, lower promotions and inventory optimization initiatives,
partially offset by higher freight costs.
- Selling, general and administrative expense leveraged 190 basis
points as a rate to sales versus third quarter 2020 due to strong
revenue growth and lower incentive compensation.
- Depreciation and amortization expense of $41 million compared
to $39 million in the third quarter of 2020 and leveraged 60 basis
points as a rate to sales due to strong revenue growth.
- Operating income was $210 million. This compared to operating
income of $96 million in third quarter 2020 or $103 million on an
adjusted basis. Aerie’s operating income of $52 million increased
46% from $36 million in the third quarter of 2020 and American
Eagle’s operating income of $261 million increased 68% from $155
million in the third quarter of 2020.
- Operating margin of 16.5% reflected the highest rate since
2007. Aerie’s operating margin of 16.5% expanded 200 bps from 2020
and American Eagle’s operating margin of 27.8% expanded 780 bps
from 2020.
- Average diluted shares outstanding were 205 million compared to
184 million in the third quarter of 2020. The increase primarily
reflected 34 million shares of unrealized dilution associated with
the company’s convertible notes.
- EPS of $0.74. Adjusted EPS of $0.76 this quarter excludes $0.02
of non-cash interest expense on the company’s convertible
notes.
Inventory Total consolidated ending inventory at cost
increased 32% to $740 million compared to a 13% decline last year.
The increase was partially driven by higher air freight due to
global supply chain disruptions.
Capital Expenditures In the third quarter of 2021,
capital expenditures totaled $58 million, and year to date totaled
$144 million. For fiscal 2021, the company now expects capital
expenditures to be at the low end of our prior guidance range of
$250 to $275 million.
Cash Flow and Balance Sheet The company ended the period
with total cash of $741 million. This compares to $692 million in
third quarter 2020.
Shareholder Returns The company’s third quarter cash
dividend of $30 million was paid during the quarter.
Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast
at 9:30 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.
Non-GAAP Measures This press release includes information
on non-GAAP financial measures (“non-GAAP” or “adjusted”),
including consolidated adjusted operating income and earnings per
share, 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.
Non-GAAP information is provided as a supplement to, not as a
substitute for, or as superior to, measures of financial
performance prepared in accordance with GAAP. 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 consolidated financial
statements, as it helps identify underlying trends in our business
that could otherwise be masked by the effect of the items that we
exclude in such non-GAAP measures. Accordingly, we believe that
adjusted operating income provides useful information to investors
and others in understanding and evaluating our operating results,
enhancing the overall understanding of our past performance and
future prospects, and allowing for greater transparency with
respect to the key financial metrics used by our management in our
financial and operational decision-making.
These amounts are not determined in accordance with GAAP and
therefore, should not be used exclusively in evaluating the
company’s business and operations. We encourage investors and
others to review our financial information in its entirety, not to
rely on any single financial measure and to view these non-GAAP
financial measures in conjunction with the related GAAP financial
measures.
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 33 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 and annual fiscal 2021 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 30, 2021 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 2021 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 30,
January 30,
October 31,
2021
2021
2020
ASSETS Cash and cash equivalents $ 740,668
$ 850,477 $ 692,356 Merchandise inventory 739,808
405,445 559,961 Accounts receivable, net 228,461
146,102 124,560 Prepaid expenses and other 66,593
120,619 130,909 Total current assets 1,775,530
1,522,643 1,507,786 Property and equipment, at cost, net of
accumulated depreciation 665,408 623,808 650,397
Operating lease right-of-use assets 1,148,108 1,155,965
1,243,311 Intangible assets net, including goodwill 69,332
70,332 50,864 Non-current deferred income taxes
57,753 33,045 12,774 Other assets 33,884
29,013 33,083 Total Assets $
3,750,015 $
3,434,806 $
3,498,215
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts
payable $ 314,561 $ 255,912 $ 304,552 Current portion
of operating lease liabilities 299,693 328,624
346,321 Accrued compensation and payroll taxes 123,588
142,272 117,736 Other current liabilities and accrued
expenses 56,090 55,343 47,587 Unredeemed gift cards
and gift certificates 42,070 62,181 39,794 Accrued
income taxes and other 33,570 14,150 15,503 Dividends
payable - - 22,843 Total current liabilities 869,572
858,482 894,336 Non-current operating lease
liabilities 1,123,681 1,148,742 1,196,755 Long-term
debt, net 336,249 325,290 321,081 Other non-current
liabilities 23,816 15,627 17,846 Total non-current
liabilities 1,483,746 1,489,659 1,535,682 Commitments
and contingencies - - - Preferred stock - -
- Common stock 2,496 2,496 2,496 Contributed
capital 627,264 663,718 655,891 Accumulated other
comprehensive loss (39,049 ) (40,748 ) (44,673 )
Retained earnings 2,185,393 1,868,613 1,865,370
Treasury stock (1,379,407 ) (1,407,414 ) (1,410,887 )
Total stockholders' equity 1,396,697 1,086,665
1,068,197 Total Liabilities and Stockholders' Equity $
3,750,015 $
3,434,806 $
3,498,215 Current Ratio 2.04 1.77 1.69
AMERICAN EAGLE OUTFITTERS,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Dollars and shares in thousands,
except per share amounts)
(unaudited)
GAAP Basis
13 Weeks Ended
October 30,
% of
October 31,
% of
2021
Revenue
2020
Revenue
Total net revenue $
1,274,078
100.0
%
$
1,031,617
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
709,554
55.7
%
616,840
59.8
%
Gross profit
564,524
44.3
%
414,777
40.2
%
Selling, general and administrative expenses
313,890
24.6
%
273,297
26.5
%
Restructuring and COVID-19 related charges
-
0.0
%
6,955
0.6
%
Depreciation and amortization expense
40,947
3.2
%
38,974
3.8
%
Operating income (loss)
209,687
16.5
%
95,551
9.3
%
Interest expense, net
8,612
0.7
%
7,924
0.8
%
Other (income), net
(3,130
)
-0.2
%
(2,223
)
-0.2
%
Income (loss) before income taxes
204,205
16.0
%
89,850
8.7
%
Provision (benefit) from income taxes
51,981
4.1
%
31,742
3.1
%
Net income (loss) $
152,224
11.9
%
$
58,108
5.6
%
Net income (loss) per basic share $
0.91
$
0.35
Net income (loss) per diluted share $
0.74
$
0.32
Weighted average common shares outstanding - basic
167,637
166,185
Weighted average common shares outstanding - diluted
205,013
184,397
GAAP Basis
39 Weeks Ended
October 30,
% of
October 31,
% of
2021
Revenue
2020
Revenue
Total net revenue $
3,502,848
100.0
%
$
2,466,819
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
1,999,743
57.1
%
1,758,537
71.3
%
Gross profit
1,503,105
42.9
%
708,282
28.7
%
Selling, general and administrative expenses
872,320
24.9
%
685,206
27.8
%
Impairment, restructuring and COVID-19 related charges
-
0.0
%
177,186
7.1
%
Depreciation and amortization expense
119,674
3.4
%
120,818
4.9
%
Operating income (loss)
511,111
14.6
%
(274,928
)
-11.1
%
Interest expense, net
26,038
0.7
%
16,617
0.7
%
Other (income), net
(6,354
)
-0.2
%
(793
)
0.0
%
Income (loss) before income taxes
491,427
14.1
%
(290,752
)
-11.8
%
Provision (benefit) from income taxes
122,226
3.6
%
(77,943
)
-3.2
%
Net income (loss) $
369,201
10.5
%
$
(212,809
)
-8.6
%
Net income (loss) per basic share $
2.20
$
(1.28
)
Net income (loss) per diluted share $
1.78
$
(1.28
)
Weighted average common shares outstanding - basic
168,062
166,385
Weighted average common shares outstanding - diluted
207,032
166,385
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.
GAAP TO NON-GAAP
RECONCILIATION
(Dollars in thousands, except per
share amounts)
(unaudited)
13 Weeks Ended
October 31, 2020
Operating Income
Interest
Expense, net
Net Income
Diluted Earnings
per Common Share
GAAP Basis
$
95,551
$
7,924
$
58,108
$
0.32
% of Revenue
9.3%
0.8%
5.6%
Add: Incremental COVID-19 related expenses and restructuring
(1):
6,955
-
4,500
0.02
Less: Convertible debt (2):
-
4,113
2,657
0.01
Non-GAAP Basis
$
102,506
$
3,811
$
65,265
$
0.35
% of Revenue
9.9%
0.4%
6.2%
(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.
RESULTS BY SEGMENT
(Dollars in thousands)
(unaudited)
American Eagle
Aerie
Corporate(1)
Total(2)
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
Capital Expenditures
$
13,298
$
24,867
$
20,036
$
58,201
13 weeks ended October 31, 2020
Total net revenue
$
775,961
$
246,748
$
8,908
$
1,031,617
Operating income (loss)
$
155,259
$
35,738
$
(95,446
)
$
95,551
Restructuring and COVID-19 related charges
$
-
$
-
$
6,955
$
6,955
Adjusted operating income (loss)
$
155,259
$
35,738
$
(88,491
)
$
102,506
Capital Expenditures
$
10,488
$
6,399
$
14,302
$
31,189
American Eagle
Aerie
Corporate(1)
Total(2)
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
Capital Expenditures
$
36,093
$
48,164
$
60,148
$
144,405
39 weeks ended October 31, 2020
Total net revenue
$
1,791,042
$
653,240
$
22,537
$
2,466,819
Operating income (loss)
$
1,113
$
47,011
$
(323,052
)
$
(274,928
)
Impairment, restructuring, and COVID-19 related charges
$
90,926
$
18,215
$
68,045
$
177,186
Adjusted operating income (loss)
$
92,039
$
65,226
$
(255,007
)
$
(97,742
)
Capital Expenditures
$
25,361
$
23,807
$
43,423
$
92,591
(1)
Corporate includes revenue and operating results of the Todd
Snyder and Unsubscribed brands, and AirTerra, which are not
material to disclose as separate reportable segments. Corporate
operating costs represents certain costs that are not directly
attributable to another reportable segment.
(2)
The difference between Total Operating Income (loss) and
Income (loss) before Taxes includes the following items, which are
not allocated to our reportable segments:
- For the 13 weeks ended October 30, 2021, interest
expense, net or $8.6 million and other (income), net
of ($3.1) million. For the 39 weeks
ended October 30, 2021, interest expense, net of $26.0 million and
other (income), net of
($6.4) million. - For the 13
weeks ended October 31, 2020, interest expense, net of $7.9
million and other (income),
net of ($2.2) million. For the 39 weeks ended October
31, 2020, interest expense, net of $16.6 million and other
(income), net of ($0.8) million.
AMERICAN EAGLE OUTFITTERS,
INC.
STORE INFORMATION
(unaudited)
Third Quarter
YTD Third Quarter
2021
2021
Consolidated stores at beginning of period
1,090
1,078
Consolidated stores opened during the period AE Brand
3
14
Aerie stand-alone (incl. OFFLINE) (3)
25
43
Todd Snyder
0
1
Unsubscribed
2
3
AE77
1
1
Consolidated stores closed during the period AE Brand
0
(18)
Aerie stand-alone (incl. OFFLINE)
0
(1)
Total consolidated stores at end of period
1,121
1,121
AE Brand
897
Aerie stand-alone (incl. OFFLINE) (3)
216
Aerie side-by-side (incl. OFFLINE) (2)(4)
187
Todd Snyder
3
Unsubscribed
4
AE77
1
Stores remodeled and refurbished during the period
2
13
Total gross square footage at end of period (in '000)
6,924
6,924
International license locations at end of period (1)
256
256
Aerie Openings Aerie stand-alone (incl. OFFLINE) (3)
25
43
Aerie side-by-side (incl. OFFLINE) (2)(4)
4
9
Total Aerie Openings
29
52
(1)
International license locations are not included in the
consolidated store data or the total gross square footage
calculation.
(2)
Aerie side-by-side and OFFLINE 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. OFFLINE side-by-side
stores, when attached to an Aerie Brand store, are included in the
Aerie Brand store count.
(3)
Aerie stand-alone stores include 3 OFFLINE openings during
the period and 4 OFFLINE openings YTD, with 8 OFFLINE stores in the
consolidated totals.
(4)
Aerie side-by-side stores include 4 OFFLINE openings during
the period and YTD, with 5 OFFLINE stores in the consolidated
totals.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211123005507/en/
Olivia Messina 412-432-3300 LineMedia@ae.com
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