PITTSBURGH
,
November 23, 2022
(press release)
–
American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the third quarter ended October 29, 2022. “I’m pleased to deliver a third quarter that exceeded our expectations, with profit margins meaningfully improved from the first half of the year. Bold actions to rationalize inventory and reduce expenses are paying off. Our inventory is in good shape, up 8% to last year, with progress continuing into the fourth quarter. We are staying disciplined and focused on improving profitability and cash flow, while maintaining a healthy balance sheet,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer. “As we navigate the current macro environment, we remain focused on our strategic initiatives — leading with innovation and judiciously investing in capabilities that will differentiate us in the long-run. Our organization is strong and I have tremendous confidence in the resilience of our brands. We are excited about upcoming merchandise collections and look forward to delivering an exceptional customer experience across brands and channels this holiday season,” Jay continued. Third Quarter 2022 Results: Inventory Total ending inventory at cost increased 8% to $798 million compared to $740 million last year, with units up 7%. This reflects a meaningful improvement from last quarter’s increase of 36%, reflecting actions to bring receipts more in line with demand. Inventory is current for the holiday season. The company continues to expect fourth quarter ending inventory to be down to last year. Capital Expenditures Capital expenditures totaled $71 million in the third quarter and $199 million year-to-date. Management continues to expect full-year spend to approximate $250 million. Quiet Platforms The logistics subsidiary is providing significant operational efficiencies and needed capacity for our brands. The third party customer base is ramping up as other brands look to upgrade their supply chain operations and drive efficiencies across their business to better compete in the current retail environment. As we evaluate our plans for Quiet, we are exploring different options to support future growth. Shareholder Returns The quarterly cash dividend remains paused to support financial flexibility, while navigating the near-term macro environment. Year-to-date, the company has returned $265 million in cash to shareholders through dividends and share repurchases, reflecting its highest level of returns since 2015. Outlook For the fourth quarter, the company is guiding brand revenue down in the mid single digits, and expects brand comps to be consistent with the third quarter. The company is also guiding fourth quarter gross margin in the range of 32% to 33%, at the higher end of previous guidance. While significant progress has been made in right-sizing inventory, management is taking a cautious view given what is likely to be a highly promotional Holiday season. Management continues to drive expense reductions across store payroll, corporate expense, professional services and advertising. The company remains on track to deliver $100 million in reductions to the original plan and expects SG&A dollars in the fourth quarter to be approximately flat to last year. Conference Call and Supplemental Financial Information Management will host a conference call and real time webcast today at 11:00 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. * * * * 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 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 260 international locations operated by licensees in 26 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 fourth 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. 82,133 434,770 740,668 797,731 553,458 739,808 250,879 286,683 228,461 146,362 122,013 66,593 1,277,105 1,396,924 1,775,530 1,148,832 1,193,021 1,148,108 789,809 728,272 665,408 271,209 271,416 16,389 96,530 102,701 52,943 34,135 44,167 57,753 54,857 50,142 33,884 3,672,477 3,786,643 3,750,015 188,448 231,782 314,561 332,160 311,005 299,693 47,531 71,365 42,070 36,436 141,817 123,588 13,056 16,274 33,570 67,799 70,628 56,090 685,430 842,871 869,572 1,089,710 1,154,481 1,123,681 411,911 341,002 336,249 22,894 24,617 23,816 1,524,515 1,520,100 1,483,746 - - - - - - 2,496 2,496 2,496 389,726 636,355 627,264 (41,267 ) (40,845 ) (39,049 ) 2,080,852 2,203,772 2,185,393 (969,275 ) (1,378,106 ) (1,379,407 ) 1,462,532 1,423,672 1,396,697 3,672,477 3,786,643 3,750,015 1.86 1.66 2.04 October 29, 2022 % of Revenue October 30, 2021 % of Revenue 1,240,583 100.0 % 1,274,078 100.0 % 760,810 61.3 % 709,554 55.7 % 479,773 38.7 % 564,524 44.3 % 311,101 25.1 % 313,890 24.6 % 51,124 4.1 % 40,947 3.2 % 117,548 9.5 % 209,687 16.5 % 3,878 0.3 % 8,612 0.7 % 782 0.1 % (3,130 ) -0.2 % 112,888 9.1 % 204,205 16.0 % 31,616 2.5 % 51,981 4.1 % 81,272 6.6 % 152,224 11.9 % 0.44 0.91 0.42 0.74 186,305 167,637 195,776 205,013 October 29, 2022 % of Revenue October 30, 2021 % of Revenue 3,493,745 100.0 % 3,502,848 100.0 % 2,255,929 64.5 % 1,999,743 57.1 % 1,237,816 35.5 % 1,503,105 42.9 % 917,687 26.3 % 872,320 24.9 % 146,664 4.2 % 119,674 3.4 % 173,465 5.0 % 511,111 14.6 % 60,066 1.7 % - 0.0 % 11,887 0.3 % 26,038 0.7 % (5,501 ) -0.2 % (6,354 ) -0.2 % 107,013 3.2 % 491,427 14.1 % 36,466 1.2 % 122,226 3.6 % 70,547 2.0 % 369,201 10.5 % 0.39 2.20 0.36 1.78 178,637 168,062 207,499 207,032 $ 81,272 $ 152,224 $ 70,547 $ 369,201 529 - 4,897 - $ 81,801 $ 152,224 $ 75,444 $ 369,201 186,305 167,637 178,637 168,062 8,418 33,687 27,280 34,616 1,053 3,689 1,582 4,354 195,776 205,013 207,499 207,032 $ 8,612 $ 152,224 $ 0.74 0.7 % 11.9 % 4,569 3,330 0.02 $ 4,043 $ 155,554 $ 0.76 0.3 % 12.2 % $ 837,575 $ 349,712 $ 53,296 $ 1,240,583 $ 174,129 $ 56,487 $ (113,068 ) $ 117,548 20.8 % 16.2 % 9.5 % $ 20,477 $ 24,404 $ 26,626 $ 71,507 $ 940,992 $ 315,049 $ 18,037 $ 1,274,078 $ 261,225 $ 52,021 $ (103,559 ) $ 209,687 27.8 % 16.5 % 16.5 % $ 13,298 $ 24,867 $ 20,036 $ 58,201 $ 2,301,051 $ 1,043,129 $ 149,565 $ 3,493,745 $ 387,213 $ 111,414 $ (325,162 ) $ 173,465 16.8 % 10.7 % 5.0 % $ 55,000 $ 85,663 $ 58,701 $ 199,364 $ 2,513,700 $ 947,851 $ 41,297 $ 3,502,848 $ 611,650 $ 191,341 $ (291,880 ) $ 511,111 24.3 % 20.2 % 14.6 % $ 36,093 $ 48,164 $ 60,148 $ 144,405 2022 2022 1,160 1,133 8 19 16 51 - 1 - 1 (5 ) (23 ) - (3 ) 1,179 1,179 876 292 6 5 7,309 7,309 261 261 Olivia Messina Multimedia Files:
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
October 29, 2022
January 29, 2022
October 30, 2021
Assets
Current assets:
Cash and cash equivalents
$
$
$
Merchandise inventory
Accounts receivable, net
Prepaid expenses and other
Total current assets
Operating lease right-of-use assets
Property and equipment, at cost, net of accumulated depreciation
Goodwill, net
Intangible assets, net
Non-current deferred income taxes
Other assets
Total assets
$
$
$
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
$
$
Current portion of operating lease liabilities
Unredeemed gift cards and gift certificates
Accrued compensation and payroll taxes
Accrued income taxes and other
Other current liabilities and accrued expenses
Total current liabilities
Non-current liabilities:
Non-current operating lease liabilities
Long-term debt, net
Other non-current liabilities
Total non-current liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock
Contributed capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
Current ratio
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
GAAP Basis
13 Weeks Ended
Total net revenue
$
$
Cost of sales, including certain buying, occupancy and
warehousing expenses
Gross profit
Selling, general and administrative expenses
Depreciation and amortization expense
Operating income
Interest expense, net
Other expense (income), net
Income before income taxes
Provision for income taxes
Net income
$
$
Net income per basic share
$
$
Net income per diluted share
$
$
Weighted average common shares outstanding - basic
Weighted average common shares outstanding - diluted
GAAP Basis
39 Weeks Ended
Total net revenue
$
$
Cost of sales, including certain buying, occupancy and
warehousing expenses
Gross profit
Selling, general and administrative expenses
Depreciation and amortization expense
Operating income
Debt related charges
Interest expense, net
Other income, net
Income before income taxes
Provision for income taxes
Net income
$
$
Net income per basic share
$
$
Net income per diluted share
$
$
Weighted average common shares outstanding - basic
Weighted average common shares outstanding - diluted
AMERICAN EAGLE OUTFITTERS, INC.
BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
(Dollars and shares in thousands)
(unaudited)
13 Weeks Ended
39 Weeks Ended
Numerator:
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Net income and numerator for basic EPS
Add: Interest expense, net of tax, related to the 2025 Notes (1)
Numerator for diluted EPS
Denominator:
Denominator for basic EPS - weighted average shares
Add: Dilutive effect of the 2025 Notes (1)
Add: Dilutive effect of stock options and non-vested restricted stock
Denominator for diluted EPS - adjusted weighted average shares
(1) During the 39 weeks ended October 29, 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.
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
% of Revenue
Less: Convertible debt (1)
Non-GAAP Basis
% of Revenue
(1) 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 and Other (1)
Total
13 weeks ended October 29, 2022
Total net revenue
Operating income (loss)
% of revenue
Capital expenditures
13 weeks ended October 30, 2021
Total net revenue
Operating income (loss)
% of revenue
Capital expenditures
American Eagle
Aerie
Corporate and Other (1)
Total
39 Weeks Ended October 29, 2022
Total net revenue
Operating income (loss)
% of revenue
Capital expenditures
39 Weeks Ended October 30, 2021
Total net revenue
Operating income (loss)
% of revenue
Capital expenditures
(1) Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and Quiet Platforms (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)
Third Quarter
YTD Third Quarter
Consolidated stores at beginning of period
Consolidated stores opened during the period
AE Brand (2)
Aerie (incl. OFFL/NE) (3)
Todd Snyder
Unsubscribed
Consolidated stores closed during the period
AE Brand (2)
Aerie (incl. OFFL/NE) (3)
Total consolidated stores at end of period
AE Brand (2)
Aerie (incl. OFFL/NE) (3)
Todd Snyder
Unsubscribed
Total gross square footage at end of period (in '000)
International license locations at end of period (1)
(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.
412-432-3300
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