- Delivered record first quarter revenue of $1.1 billion,
reflecting 2% growth to last year
- Adjusted operating profit of $44 million, up to last
year
- Aerie posted all-time high first quarter revenue and
profitability, with positive comp growth
- American Eagle continued to see a sequential improvement in
revenue trends with year-over-year growth in operating
income
American Eagle Outfitters, Inc. (NYSE: AEO) today announced
financial results for the first quarter ended April 29, 2023.
“We entered 2023 with a cautious plan, balancing continued
optimism for our brands with the flexibility to navigate
uncertainty in the macro environment. I am pleased to note that
this strategy delivered for us, as we successfully managed through
the first quarter and achieved results in-line with plan. Both
Aerie and American Eagle saw solid improvement during the quarter
and maintained strength in their categories,” commented Jay
Schottenstein, AEO’s Executive Chairman of the Board and Chief
Executive Officer.
“With ongoing macro challenges, we are maintaining a clear focus
on inventory discipline, cost savings and efficiencies across the
business. Looking forward, our priority is to rebuild operating
margins, while also seeking opportunities for profitable growth and
to deliver more consistent shareholder returns.”
First Quarter 2023 Results:
- Total net revenue of $1.1 billion was up 2% to the first
quarter of 2022. Store revenue was up 5%. Digital revenue declined
4%.
- Aerie revenue of $359 million rose 12% versus first quarter
2022. Comp sales increased 2%. American Eagle revenue of $671
million declined 2% versus first quarter 2022. Comp sales declined
4%.
- Gross profit of $413 million increased approximately 6%
compared to $388 million in the first quarter of 2022 and reflected
a gross margin rate of 38.2% compared to 36.8% last year.
Merchandise margin expansion was driven by lower transportation
costs with a partial offset from higher markdowns. Lower
compensation and delivery costs also had a positive impact on
margins offset by higher rent linked to new store openings.
- Selling, general and administrative expense of $312 million was
up 5% to last year. Higher corporate compensation and advertising
were partially offset by lower store compensation and professional
service expenses. SG&A increased 60 basis points as a rate to
sales versus first quarter 2022.
- GAAP operating income was $23 million. Non-GAAP operating
income of $44 million, reflected a 4.1% margin. This excluded $21
million of impairment, restructuring and other charges related to
Quiet Platforms as the company repositions for improved
profitability.
- GAAP diluted EPS of $0.09. Non-GAAP diluted EPS of $0.17
excludes $0.08 of impairment and restructuring charges.
- Average diluted shares outstanding were 197 million including
less than 1 million average shares of unrealized dilution
associated with the company’s convertible notes for the period
prior to redemption.
Inventory
Total ending inventory declined 8% to $625 million compared to
$682 million last year, with units down 9%. Inventory is current,
with AE and Aerie inventory across the US and Canada down in the
double-digits to last year. The company is maintaining inventory
discipline with the second quarter planned below the sales
trend.
Capital Expenditures
Capital expenditures totaled $46 million in the first quarter.
For 2023, management now expects capital expenditures to
approximate $150 to $175 million, compared to prior guidance of
$150 to $190 million.
Balance Sheet
The company continues to take steps to strengthen the balance
sheet. In the first quarter, the remaining $9 million of
outstanding principal related to the senior convertible notes due
2025 was redeemed.
Outlook
For the second quarter, management’s outlook reflects revenue
down low-single digits to last year with operating income in the
range of $25 to $35 million. This assumes gross margin recovery
year-over-year as the company cycles pressure from end of season
sell-offs and elevated freight costs. SG&A is expected to
increase in the low-to-mid-single digits. Depreciation is expected
to be similar to the first quarter.
For the year, management expects revenue in the range of flat to
down low-single digits to last year with operating income in the
range of $250 to $270 million.
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.
Non-GAAP Measures
This press release includes information on non-GAAP financial
measures (“non-GAAP” or “adjusted”), including consolidated
adjusted operating income, net income and net income per diluted
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 and provides a higher degree of transparency.
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.
The tables included in this press release reconcile the GAAP
financial measures to the non-GAAP financial measures discussed
above.
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 approximately 80 countries worldwide through
its websites. American Eagle and Aerie merchandise also is
available at more than 260 international locations operated by
licensees in approximately 30 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 second
quarter and annual fiscal 2023 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 28,
2023 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 2023 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 29,
2023 April 30, 2022 Assets Current assets: Cash
and cash equivalents $
117,841
$
228,775
Merchandise inventory
624,851
682,100
Accounts receivable, net
259,074
230,469
Prepaid expenses and other
127,735
139,195
Total current assets
1,129,501
1,280,539
Operating lease right-of-use assets
1,053,938
1,210,169
Property and equipment, at cost, net of accumulated depreciation
762,433
745,165
Goodwill
264,896
271,398
Intangible assets, net
92,399
100,679
Non-current deferred income taxes
13,034
42,977
Other assets
57,693
50,591
Total assets $
3,373,894
$
3,701,518
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $
212,318
$
236,376
Current portion of operating lease liabilities
321,430
317,844
Unredeemed gift cards and gift certificates
57,014
59,256
Accrued compensation and payroll taxes
43,550
34,469
Accrued income taxes and other
13,812
15,550
Other current liabilities and accrued expenses
68,313
73,984
Total current liabilities
716,437
737,479
Non-current liabilities: Non-current operating lease liabilities
987,048
1,150,951
Long-term debt, net
30,225
405,807
Other non-current liabilities
21,168
24,275
Total non-current liabilities
1,038,441
1,581,033
Commitments and contingencies
-
-
Stockholders' equity: Preferred stock
-
-
Common stock
2,496
2,496
Contributed capital
324,396
562,973
Accumulated other comprehensive loss
(26,777
)
(40,315
)
Retained earnings
2,130,108
2,224,113
Treasury stock
(811,207
)
(1,366,261
)
Total stockholders' equity
1,619,016
1,383,006
Total Liabilities and Stockholders' Equity $
3,373,894
$
3,701,518
Current ratio
1.58
1.74
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS
OF OPERATIONS (Dollars and shares in thousands, except per
share amounts) (unaudited)
GAAP Basis 13 Weeks
Ended April 29, 2023 % of Revenue April 30,
2022 % of Revenue Total net revenue $
1,080,926
100.0
%
$
1,055,037
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
667,747
61.8
%
667,011
63.2
%
Gross profit
413,179
38.2
%
388,026
36.8
%
Selling, general and administrative expenses
312,345
28.9
%
298,755
28.3
%
Impairment, restructuring and other charges
21,275
2.0
%
-
0.0
%
Depreciation and amortization expense
56,728
5.2
%
47,369
4.5
%
Operating income
22,831
2.1
%
41,902
4.0
%
Interest expense, net
690
0.1
%
4,588
0.4
%
Other income, net
(3,311
)
-0.3
%
(4,444
)
-0.4
%
Income before income taxes
25,452
2.3
%
41,758
4.0
%
Provision for income taxes
6,999
0.6
%
10,018
1.0
%
Net income $
18,453
1.7
%
$
31,740
3.0
%
Net income per basic share $
0.09
$
0.19
Net income per diluted share $
0.09
$
0.16
Weighted average common shares outstanding - basic
194,487
168,460
Weighted average common shares outstanding - diluted
197,160
219,742
AMERICAN EAGLE OUTFITTERS, INC. BASIC AND DILUTED
EARNINGS PER SHARE RECONCILIATION (Dollars and shares in
thousands) (unaudited)
13 Weeks Ended
Numerator: April 29, 2023 April 30, 2022 Net
income and numerator for basic EPS
$
18,453
$
31,740
Add: Interest expense, net of tax, related to the 2025 Notes (1)
58
3,369
Numerator for diluted EPS
$
18,511
$
35,109
Denominator: Denominator for basic EPS - weighted
average shares
194,487
168,460
Add: Dilutive effect of the 2025 Notes (1)
834
48,574
Add: Dilutive effect of stock options and non-vested restricted
stock
1,839
2,708
Denominator for diluted EPS - weighted average shares
197,160
219,742
(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
calculating diluted EPS.
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands,
except per share amounts) (unaudited)
13 Weeks Ended
April 29, 2023 Operating income Net income
Diluted earnings per common share GAAP Basis
$
22,831
$
18,453
$
0.09
% of Revenue
2.1
%
1.7
%
Add: Impairment, restructuring and other charges (1)
21,275
15,424
0.08
Non-GAAP Basis
$
44,106
$
33,877
$
0.17
% of Revenue
4.1
%
3.1
%
(1) $21.3 million pre-tax impairment, restructuring and
other charges related to Quiet Platforms as the Company repositions
the business for improved profitability including: - $10.8 million
of long-lived asset impairment charges- $5.6 million of employee
related costs- $4.9 million of other commercial related charges
AMERICAN EAGLE OUTFITTERS, INC. RESULTS BY SEGMENT
(Dollars in thousands) (unaudited)
American Eagle
Aerie Corporate and Other (1) Total 13
weeks ended April 29, 2023 Total net revenue
$
671,092
$
359,082
$
50,752
$
1,080,926
Operating income (loss)
$
107,167
$
56,604
$
(140,940
)
$
22,831
Impairment, restructuring and other charges
$
-
$
-
$
21,275
$
21,275
Adjusted operating income (loss)
$
107,167
$
56,604
$
(119,665
)
$
44,106
% of revenue
16.0
%
15.8
%
4.1
%
Capital expenditures
$
14,943
$
11,188
$
19,726
$
45,857
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
(1) Corporate and Other includes revenue and operating
results of the Todd Snyder brand, Unsubscribed brand, and Quiet
Platforms (net of intersegment eliminations), which have been
identified as separate operating segments, but are not material to
disclose as separate reportable segments. Corporate operating costs
represent certain costs that are not directly attributable to
another reportable segment.
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION (unaudited)
First Quarter
2023
Consolidated stores at beginning of period
1,175
Consolidated stores opened during the period AE Brand (2)
4
Aerie (incl. OFFL/NE) (3)
2
Todd Snyder
1
Consolidated stores closed during the period AE Brand (2)
(2
)
Total consolidated stores at end of period
1,180
AE Brand (2)
867
Aerie (incl. OFFL/NE) (3)
297
Todd Snyder
11
Unsubscribed
5
Total gross square footage at end of period (in '000)
7,273
International license locations at end of period (1)
280
(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/20230524005783/en/
Olivia Molitaris 412-432-3300 LineMedia@ae.com
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