- Shifting macro combined with difficult compares proved
challenging
- Sales miss resulted in operating profit and margin below
expectations
- Taking swift measures to reset inventory and expense plans
for second half to better align with consumer demand
- Brands remain strong with performance continuing to reflect
structural improvements compared to pre-pandemic 2019
American Eagle Outfitters, Inc. (NYSE: AEO) today announced
financial results for the first quarter ended April 30, 2022.
“The first quarter proved challenging, with demand well below
our expectations, pressuring operating profit. Comparisons from an
extraordinary spring last year driven by stimulus payments and
pent-up customer demand, were compounded by rising inflation,
higher gas prices and a stronger than anticipated pivot to other
discretionary categories. In hindsight, our plans entering the year
were too optimistic. We are taking swift measures to adjust our
inventory and expense base with a firm goal of entering the second
half better aligned with demand trends,” commented Jay
Schottenstein, AEO’s Executive Chairman of the Board and Chief
Executive Officer.
“Despite near term challenges, our brands continue to reflect
progress from pre-pandemic periods, grounded in our Real Power.
Real Growth strategy. Aerie remains on a remarkable trajectory with
revenue more than doubling and profit expanding over five-fold
versus first quarter 2019. Greater focus in our assortment and
real-estate footprint at AE continue to drive efficiencies in the
business. We are committed to maintaining and building on these
structural improvements and right-setting the business to deliver
improved profitability in the second half,” continued Mr.
Schottenstein.
First Quarter 2022 Results:
- Total net revenue increased $20 million, or 2% to $1.055
billion, compared to $1.035 billion in the first quarter of 2021.
Our supply chain acquisitions contributed approximately 3
percentage points to revenue growth.
- Aerie revenue of $322 million rose 8% reflecting a 27% 3-year
revenue CAGR. American Eagle revenue of $686 million declined 6%
versus first quarter 2021 reflecting a -2% 3-year revenue
CAGR.
- Consolidated store revenue increased 2%. Total digital revenue
declined 6%. Compared to pre-pandemic first quarter 2019, store
revenue increased 1% and digital revenue increased 48%.
- Gross profit of $388 million declined 11% from $436 million in
the first quarter of 2021 and reflected a gross margin rate of
36.8% compared to 42.2% last year. Higher freight costs impacted
the gross margin by approximately 340 basis points and our supply
chain business had a 120 basis point impact as we integrate and
ramp up the platform. Delivery and rent also increased, offset
slightly by lower incentive compensation accruals.
- Selling, general and administrative expense of $299 million
increased 13%. SG&A increased 270 basis points as a rate to
sales versus first quarter 2021 primarily due to increased store
wages and hours, corporate compensation, professional services and
advertising partially offset by lower incentive compensation
accruals.
- Operating income of $42 million included $35 million from
higher freight costs and a $12 million loss from the supply chain
acquisitions and compared to operating income of $133 million in
the first quarter of 2021.
- Average diluted shares outstanding were 220 million, compared
to 207 million in the first quarter of 2021. The increase primarily
reflected 49 million shares of unrealized dilution associated with
the company’s convertible notes, consistent with the required
adoption of ASU 2020-06 this quarter, compared to 34 million shares
in the first quarter of 2021.
- EPS of $0.16 includes an approximately $3 million addback to
net income of interest expense associated with the company’s
convertible notes, in-line with the adoption of ASU 2020-06 this
quarter.
Inventory
Total ending inventory at cost increased 46% to $682 million
compared to $467 million last year. Higher costs drove roughly half
of the increase. From a brand standpoint, AE and Aerie each drove
roughly half of the increase. Total units were up 24%, due to
higher in-transit and on-hand inventory, including 7 points of
growth related to Aerie and OFFL/NE new store openings. Based on
current demand trends, management is resetting inventory for the
second half and will clear through excess spring goods in the
second quarter.
Capital Expenditures
In the first quarter of 2022, capital expenditures totaled $58
million. We expect full-year capital expenditures to be
approximately $275 million.
Cash Flow
The company ended the period with total cash of $229 million.
Total liquidity including available credit was $581 million.
Shareholder Returns
The company’s first quarter $0.18 per share cash dividend
amounting to $30 million was paid during the quarter.
Outlook
For the second quarter, management expects top-line growth to
trend similarly to the first quarter with a gross margin rate of
approximately 33%. This reflects higher markdowns to clear through
spring inventory, higher freight costs and the impact of the supply
chain acquisitions.
Incorporating shifts in the macro environment, the company is
lowering its outlook for the year. Management expects operating
profit to be above $314 million achieved in Fiscal 2019, with total
revenue up in the low single digits compared to Fiscal 2021. The
company expects to enter the second half better aligned with
demand, with a more balanced inventory position and leaner expense
base, driving improved margins and profitability relative to the
first half.
The company will provide updates to the longer-term outlook once
visibility into the macro and business trends improves.
Conference Call and Supplemental Financial
Information
Management will host a conference call and real time webcast
today at 4:30 p.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, 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 second
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)
April 30, 2022
January 29, 2022
May 1, 2021
ASSETS Cash and cash equivalents $ 228,775 $ 434,770
$
716,679
Short-term investments - -
75,000
Merchandise inventory 682,100 553,458
466,698
Accounts receivable, net 230,469 286,683
149,056
Prepaid expenses and other 139,195 122,013
88,347
Total current assets 1,280,539 1,396,924
1,495,780
Operating lease right-of-use assets 1,210,169 1,193,021
1,130,743
Property and equipment, at cost, net of accumulated depreciation
745,165 728,272
627,967
Goodwill, net 271,398 271,416
13,395
Intangible assets, net 100,679 102,701
56,301
Non-current deferred income taxes 42,977 44,167
45,995
Other assets 50,591 50,142
30,485
Total assets $
3,701,518 $
3,786,643
$
3,400,666
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 236,376 $ 231,782
$
231,932
Current portion of operating lease liabilities 317,844 311,005
297,561
Unredeemed gift cards and gift certificates 59,256 71,365
50,754
Accrued compensation and payroll taxes 34,469 141,817
87,488
Accrued income taxes and other 15,550 16,274
20,250
Other current liabilities and accrued expenses 73,984 70,628
56,498
Total current liabilities 737,479 842,871
744,483
Non-current operating lease liabilities 1,150,951 1,154,481
1,126,165
Long-term debt, net 405,807 341,002
329,718
Other non-current liabilities 24,275 24,617
24,737
Total non-current liabilities 1,581,033 1,520,100
1,480,620
Commitments and contingencies
-
-
-
Preferred stock
-
-
-
Common stock 2,496 2,496
2,496
Contributed capital 562,973 636,355
648,434
Accumulated other comprehensive loss (40,315 )
(40,845
)
(37,810
)
Retained earnings 2,224,113 2,203,772
1,951,496
Treasury stock (1,366,261 )
(1,378,106
)
(1,389,053
)
Total stockholders' equity 1,383,006 1,423,672
1,175,563
Total liabilities and stockholders' equity $
3,701,518 $
3,786,643
$
3,400,666
Current ratio 1.74 1.66
2.01
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars and shares in thousands,
except per share amounts) (unaudited)
GAAP Basis
13 Weeks Ended
April 30, 2022
% of Revenue
May 1, 2021
% of Revenue
Total net revenue
$
1,055,037
100.0
%
$
1,034,614
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
667,011
63.2
%
598,424
57.8
%
Gross profit
388,026
36.8
%
436,190
42.2
%
Selling, general and administrative expenses
298,755
28.3
%
264,492
25.6
%
Depreciation and amortization expense
47,369
4.5
%
38,271
3.7
%
Operating income
41,902
4.0
%
133,427
12.9
%
Interest expense, net
4,588
0.4
%
8,506
0.8
%
Other income, net
(4,444
)
-0.4
%
(1,860
)
-0.2
%
Income before income taxes
41,758
4.0
%
126,781
12.3
%
Provision from income taxes
10,018
1.0
%
31,318
3.1
%
Net income
$
31,740
3.0
%
$
95,463
9.2
%
Net income per basic share
$
0.19
$
0.57
Net income per diluted share
$
0.16
$
0.46
Weighted average common shares outstanding - basic
168,460
167,257
Weighted average common shares outstanding - diluted
219,742
206,562
AMERICAN EAGLE OUTFITTERS, INC. BASIC AND DILUTED
EARNINGS PER SHARE RECONCILIATION (Dollars and shares in
thousands) (unaudited)
13 Weeks Ended
Numerator: April 30, 2022 May 1, 2021 Net
income and numerator for basic EPS
$
31,740
$
95,463
Add: Interest expense, net of tax, related to the 2025 Notes (1)
3,369
-
Numerator for diluted EPS
$
35,109
$
95,463
Denominator: Denominator for basic EPS - weighted
average shares
168,460
167,257
Add: Dilutive effect of the 2025 Notes (1)
48,574
33,798
Add: Dilutive effect of stock options and non-vested restricted
stock
2,708
5,507
Denominator for diluted EPS - adjusted weighted average shares
219,742
206,562
(1) During the 13 weeks ended April 30, 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.
RESULTS BY SEGMENT (Dollars in thousands) (unaudited)
American Eagle Aerie Corporate and Other(1)
Total 13 weeks ended April 30, 2022 Total net revenue
$
685,579
$
321,712
$
47,746
$
1,055,037
Operating income (loss)
$
103,905
$
43,073
$
(105,076
)
$
41,902
% of revenue
15.2
%
13.4
%
4.0
%
Capital expenditures
$
15,770
$
31,015
$
11,609
$
58,394
13 weeks ended May 1, 2021 Total net revenue
$
727,702
$
297,487
$
9,425
$
1,034,614
Operating income (loss)
$
151,232
$
69,978
$
(87,783
)
$
133,427
% of revenue
20.8
%
23.5
%
12.9
%
Capital expenditures
$
13,439
$
10,819
$
12,548
$
36,806
(1) Corporate and Other includes revenue and operating
results of the Todd Snyder and Unsubscribed brands, and the Supply
Chain Platform (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)
First Quarter
2022
Consolidated stores at beginning of period
1,133
Consolidated stores opened during the period AE Brand (2)
7
Aerie (incl. OFFL/NE) (3)
12
Consolidated stores closed during the period AE Brand (2)
(9
)
Aerie (incl. OFFL/NE) (3)
(2
)
Total consolidated stores at end of period
1,141
AE Brand (2)
878
Aerie (incl. OFFL/NE) (3)
254
Todd Snyder
5
Unsubscribed
4
Total gross square footage at end of period (in '000)
6,975
International license locations at end of period (1)
258
(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/20220526005693/en/
Olivia Messina 412-432-3300 LineMedia@ae.com
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