EX-99.1 2 aeo-ex99_1.htm EX-99.1 EX-99.1

 

 

Exhibit 99.1

img256790458_0.jpg 

 

AEO Inc. Reports Second Quarter Revenue and Operating Profit Above Expectations; Raises Annual Outlook Reflecting Strengthened Demand and Profit Initiatives

•
Record second quarter revenue of $1.2 billion, up slightly to last year
•
Operating profit of $65 million, up significantly, with growth across brands
•
Aerie posted all-time high second quarter revenue
•
American Eagle continued to see a sequential improvement in revenue trends
•
Realizing initial benefits from profit improvement initiatives

 

 

 

September 6, 2023

PITTSBURGH -- (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the second quarter ended July 29, 2023.

 

“I am pleased to report second quarter revenue and operating profit that exceeded our expectations. Demand picked up in June and July reflecting brand strength and on trend collections that are resonating well with customers, supported by exciting new marketing campaigns. It’s encouraging to see positive momentum continue into the third quarter, across brands and channels,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer.

“Looking to the second half, we are excited about future product arrivals, leveraging the positive response to early fall goods and delivering innovative customer connections. At the same time, we are keeping a sharp eye on the consumer environment and planning appropriately. We are taking action to position the business for improved profit, with preliminary initiatives included in our increased 2023 outlook. As we continue to optimize our operations, I am confident in our ability to strengthen profitability longer-term.”

 

Second Quarter 2023 Results:

•
Total net revenue of $1.2 billion was up slightly to the second quarter of 2022. Store revenue was up 4%. Digital revenue declined 7%.
•
Aerie revenue of $380 million rose 2% versus second quarter 2022. Comp sales were flat. American Eagle revenue of $767 million declined 1% versus second quarter 2022. Comp sales declined 2%.
•
Gross profit of $453 million increased approximately 22% compared to $370 million in the second quarter of 2022 and reflected a gross margin rate of 37.7% compared to 30.9% last year. Merchandise margin expansion was driven by lower markdowns reflecting inventory control and lower transportation and product costs. Gross profit also benefited from early profit improvement initiatives as well as lower delivery, distribution and warehousing costs.
•
Selling, general and administrative expense of $332 million was up 8% to last year. Higher corporate compensation, incentives and other corporate expense were partially offset by cost efficiencies. SG&A increased 190 basis points as a rate to sales versus second quarter 2022.
•
Operating income was $65 million, reflecting a 5.4% margin.
•
Diluted EPS was $0.25. Average diluted shares outstanding were 196 million.

 

Inventory

Total ending inventory declined 7% to $637 million compared to $687 million last year, with units down 11%. The company continues to maintain inventory discipline.

 

Capital Expenditures

Capital expenditures totaled $46 million in the second quarter. For 2023, management continues to expect capital expenditures to approximate $150 to $175 million.
 

Profit Improvement Focus

This year, the company launched a comprehensive review of its cost structure, with near-term opportunities identified primarily within the gross margin, which represents approximately 70% of the company’s expense base. In the second quarter, initial benefits were realized, contributing to the year-over-year improvement in the gross margin. The increased outlook for fiscal 2023, incorporates additional back half benefits in addition to stronger business trends. The profit improvement project is ongoing with initiatives being launched across the company’s expense base, which are expected to yield results over the next 12 to 24 months.
 

 

 

Outlook

For the year, management expects revenue to be up low single digits to last year, compared to prior guidance for revenue in the range of flat to down low single digits. Operating income is expected to be in the range of $325 to $350 million, up from prior guidance of $250 to $270 million. This reflects better than expected business performance in the second quarter, in addition to strengthened demand and continued profit improvement in the back half of the year. The outlook includes approximately $25 million in benefits from the company’s profit improvement initiatives. With better business trends, the company is accruing incentives and expects SG&A to be up in the low double digits for the year.
 

For the third quarter, management’s outlook reflects revenue up low single digits with operating income in the range of $115 to $125 million. With incentive accruals skewed to the back half of the year, SG&A is expected to increase in the mid-teens. Depreciation is expected to be similar to the second quarter.

 

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, 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 third quarter and annual fiscal 2023 and annual fiscal 2024 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.



 

CONTACT:

Line Media

412-432-3300

LineMedia@ae.com

 

 

 

 

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 29, 2023

 

 

July 30, 2022

 

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

 

175,315

 

$

 

98,214

 

 

Merchandise inventory

 

 

 

 

636,972

 

 

 

687,046

 

 

Accounts receivable, net

 

 

 

 

271,333

 

 

 

220,803

 

 

Prepaid expenses and other

 

 

 

 

117,871

 

 

 

171,326

 

 

Total current assets

 

 

 

 

1,201,491

 

 

 

1,177,389

 

 

Operating lease right-of-use assets

 

 

 

 

1,038,505

 

 

 

1,210,285

 

 

Property and equipment, at cost, net of accumulated depreciation

 

 

 

 

758,736

 

 

 

775,969

 

 

Goodwill

 

 

 

 

264,964

 

 

 

271,406

 

 

Intangible assets, net

 

 

 

 

90,312

 

 

 

98,651

 

 

Non-current deferred income taxes

 

 

 

 

21,990

 

 

 

37,017

 

 

Other assets

 

 

 

 

55,909

 

 

 

58,500

 

 

Total assets

 

 

$

 

3,431,907

 

$

 

3,629,217

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

 

238,660

 

$

 

198,645

 

 

Current portion of operating lease liabilities

 

 

 

 

309,517

 

 

 

328,348

 

 

Unredeemed gift cards and gift certificates

 

 

 

 

51,156

 

 

 

51,111

 

 

Accrued compensation and payroll taxes

 

 

 

 

74,509

 

 

 

50,788

 

 

Accrued income taxes and other

 

 

 

 

17,372

 

 

 

16,708

 

 

Other current liabilities and accrued expenses

 

 

 

 

71,262

 

 

 

72,461

 

 

Total current liabilities

 

 

 

 

762,476

 

 

 

718,061

 

 

Non-current liabilities:

 

 

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

 

 

 

970,862

 

 

 

1,137,656

 

 

Long-term debt, net

 

 

 

 

3,225

 

 

 

376,522

 

 

Other non-current liabilities

 

 

 

 

22,345

 

 

 

24,055

 

 

Total non-current liabilities

 

 

 

 

996,432

 

 

 

1,538,233

 

 

Commitments and contingencies

 

 

 

 

-

 

 

 

-

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

-

 

 

 

-

 

 

Common stock

 

 

 

 

2,496

 

 

 

2,496

 

 

Contributed capital

 

 

 

 

334,447

 

 

 

380,959

 

 

Accumulated other comprehensive loss

 

 

 

 

(11,566

)

 

 

(40,017

)

 

Retained earnings

 

 

 

 

2,158,294

 

 

 

2,000,021

 

 

Treasury stock

 

 

 

 

(810,672

)

 

 

(970,536

)

 

Total stockholders' equity

 

 

 

 

1,672,999

 

 

 

1,372,923

 

 

Total Liabilities and Stockholders' Equity

 

 

$

 

3,431,907

 

$

 

3,629,217

 

 

 

 

 

 

 

 

 

 

 

 

Current ratio

 

 

 

 

1.58

 

 

 

1.64

 

 

 

 

 

 

 

AMERICAN EAGLE OUTFITTERS, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Dollars and shares in thousands, except per share amounts)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Basis

 

 

 

13 Weeks Ended

 

 

 

July 29, 2023

 

 

% of Revenue

 

 

July 30, 2022

 

 

% of Revenue

 

Total net revenue

$

 

1,200,879

 

 

 

100.0

%

$

 

1,198,124

 

 

 

100.0

%

Cost of sales, including certain buying,
    occupancy and warehousing expenses

 

 

747,863

 

 

 

62.3

%

 

 

828,107

 

 

 

69.1

%

Gross profit

 

 

453,016

 

 

 

37.7

%

 

 

370,017

 

 

 

30.9

%

Selling, general and administrative expenses

 

 

331,872

 

 

 

27.6

%

 

 

307,832

 

 

 

25.7

%

Depreciation and amortization expense

 

 

55,854

 

 

 

4.7

%

 

 

48,171

 

 

 

4.0

%

Operating income

 

 

65,290

 

 

 

5.4

%

 

 

14,014

 

 

 

1.2

%

Debt related charges

 

 

-

 

 

 

0.0

%

 

 

60,066

 

 

 

5.1

%

Interest expense, net

 

 

951

 

 

 

0.1

%

 

 

3,421

 

 

 

0.3

%

Other income, net

 

 

(2,150

)

 

 

-0.2

%

 

 

(1,839

)

 

 

-0.2

%

Income (loss) before income taxes

 

 

66,489

 

 

 

5.5

%

 

 

(47,634

)

 

 

-4.0

%

Provision (benefit) for income taxes

 

 

17,919

 

 

 

1.5

%

 

 

(5,168

)

 

 

-0.5

%

Net income (loss)

$

 

48,570

 

 

 

4.0

%

$

 

(42,466

)

 

 

-3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per basic share

$

 

0.25

 

 

 

 

$

 

(0.24

)

 

 

 

Net income per diluted share

$

 

0.25

 

 

 

 

$

 

(0.24

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

195,329

 

 

 

 

 

 

180,189

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

196,103

 

 

 

 

 

 

180,189

 

 

 

 

 

 

 

 

 

GAAP Basis

 

 

 

26 Weeks Ended

 

 

 

July 29, 2023

 

 

% of Revenue

 

 

July 30, 2022

 

 

% of Revenue

 

Total net revenue

$

 

2,281,805

 

 

 

100.0

%

$

 

2,253,161

 

 

 

100.0

%

Cost of sales, including certain buying, occupancy and warehousing expenses

 

 

1,415,610

 

 

 

62.0

%

 

 

1,495,118

 

 

 

66.4

%

Gross profit

 

 

866,195

 

 

 

38.0

%

 

 

758,043

 

 

 

33.6

%

Selling, general and administrative expenses

 

 

644,217

 

 

 

28.2

%

 

 

606,587

 

 

 

26.9

%

Impairment, restructuring and other charges

 

 

21,275

 

 

 

1.0

%

 

 

-

 

 

 

0.0

%

Depreciation and amortization expense

 

 

112,582

 

 

 

4.9

%

 

 

95,540

 

 

 

4.2

%

Operating income

 

 

88,121

 

 

 

3.9

%

 

 

55,916

 

 

 

2.5

%

Debt related charges

 

 

-

 

 

 

0.0

%

 

 

60,066

 

 

 

2.7

%

Interest expense, net

 

 

1,642

 

 

 

0.1

%

 

 

8,009

 

 

 

0.4

%

Other (income), net

 

 

(5,461

)

 

 

-0.2

%

 

 

(6,283

)

 

 

-0.3

%

Income (loss) before income taxes

 

 

91,940

 

 

 

4.0

%

 

 

(5,876

)

 

 

-0.3

%

Provision (benefit) for income taxes

 

 

24,918

 

 

 

1.1

%

 

 

4,850

 

 

 

0.2

%

Net income (loss)

$

 

67,022

 

 

 

2.9

%

$

 

(10,726

)

 

 

-0.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per basic share

$

 

0.34

 

 

 

 

$

 

(0.06

)

 

 

 

Net income (loss) per diluted share

$

 

0.34

 

 

 

 

$

 

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

195,214

 

 

 

 

 

 

174,544

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

196,822

 

 

 

 

 

 

174,544

 

 

 

 

 

 

 

 

 

 

AMERICAN EAGLE OUTFITTERS, INC.

 

RESULTS BY SEGMENT

 

(Dollars in thousands)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 13 weeks ended

 

 

For the 26 weeks ended

 

 

July 29, 2023

 

 

July 30, 2022

 

 

July 29, 2023

 

 

July 30, 2022

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

    American Eagle

$

767,018

 

 

$

777,828

 

 

$

1,438,110

 

 

$

1,463,407

 

    Aerie

$

380,413

 

 

$

371,683

 

 

$

739,495

 

 

$

693,395

 

Total Segment Net Revenue

$

1,147,431

 

 

$

1,149,511

 

 

$

2,177,605

 

 

$

2,156,802

 

    Other (1)

$

108,318

 

 

$

110,393

 

 

$

217,675

 

 

$

200,077

 

    Intersegment Elimination

$

(54,870

)

 

$

(61,780

)

 

$

(113,475

)

 

$

(103,718

)

Total Net Revenue

$

1,200,879

 

 

$

1,198,124

 

 

$

2,281,805

 

 

$

2,253,161

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income:

 

 

 

 

 

 

 

 

 

 

 

    American Eagle

$

128,664

 

 

$

109,110

 

 

$

234,203

 

 

$

213,015

 

    Aerie

$

57,253

 

 

$

11,830

 

 

$

112,922

 

 

$

54,903

 

Total Segment Adjusted Operating Income

$

185,917

 

 

$

120,940

 

 

$

347,125

 

 

$

267,918

 

    Other (1) (3)

$

(10,341

)

 

$

(11,507

)

 

$

(26,648

)

 

$

(27,732

)

    Intersegment Elimination

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

    General corporate expenses (2)

$

(110,286

)

 

$

(95,419

)

 

$

(211,081

)

 

$

(184,270

)

Total Adjusted Operating Income

$

65,290

 

 

$

14,014

 

 

$

109,396

 

 

$

55,916

 

Less: Impairment, restructuring and other charges(3)

$

-

 

 

$

-

 

 

$

(21,275

)

 

$

-

 

Total Operating Income

$

65,290

 

 

$

14,014

 

 

$

88,121

 

 

$

55,916

 

 

 

 

 

 

 

 

 

 

 

 

 

    Debt related charges

$

-

 

 

$

60,066

 

 

$

-

 

 

$

60,066

 

    Interest expense, net

$

951

 

 

$

3,421

 

 

$

1,642

 

 

$

8,009

 

    Other income, net

$

(2,150

)

 

$

(1,839

)

 

$

(5,461

)

 

$

(6,283

)

Income before income taxes

$

66,489

 

 

$

(47,634

)

 

$

91,940

 

 

$

(5,876

)

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

    American Eagle

$

16,249

 

 

$

18,754

 

 

$

31,192

 

 

$

34,524

 

    Aerie

$

10,889

 

 

$

30,244

 

 

$

22,077

 

 

$

61,259

 

    Other (1)

$

6,154

 

 

$

4,107

 

 

$

11,730

 

 

$

5,132

 

    General corporate expenditures (2)

$

12,810

 

 

$

16,359

 

 

$

26,960

 

 

$

26,943

 

Total Capital Expenditures

$

46,102

 

 

$

69,464

 

 

$

91,959

 

 

$

127,858

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The Todd Snyder brand, Unsubscribed brand, and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure, they are presented under the Other caption.

 

(2) General corporate expenses are comprised of general and administrative costs that management does not attribute to any of our operating segments. These costs primarily relate to corporate administration, information and technology resources, finance and human resources functional and organizational costs, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-level activities and projects.

 

(3) $21.3 million of pre-tax impairment, restructuring and other charges related to Quiet Platforms, including $10.8 million of long-lived asset impairment charges, $5.6 million of severance costs, and $4.9 million of contract related charges for the 26 weeks ended July 29, 2023.

 

 

 

 

 

 


 

AMERICAN EAGLE OUTFITTERS, INC.

 

STORE INFORMATION

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

Second Quarter

 

 

YTD Second Quarter

 

 

 

 

 

2023

 

 

2023

 

Consolidated stores at beginning of period

 

 

 

 

1,180

 

 

 

1,175

 

Consolidated stores opened during the period

 

 

 

 

 

 

 

 

AE Brand (1)

 

 

 

 

2

 

 

 

6

 

Aerie (incl. OFFL/NE) (2)

 

 

 

 

3

 

 

 

5

 

Todd Snyder

 

 

 

 

2

 

 

 

3

 

Consolidated stores closed during the period

 

 

 

 

 

 

 

 

AE Brand (1)

 

 

 

 

(3

)

 

 

(5

)

Total consolidated stores at end of period

 

 

 

 

1,184

 

 

 

1,184

 

 

 

 

 

 

 

 

 

 

AE Brand (1)

 

 

 

 

866

 

 

 

 

Aerie (incl. OFFL/NE) (2)

 

 

 

 

300

 

 

 

 

Todd Snyder

 

 

 

 

13

 

 

 

 

Unsubscribed

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross square footage at end of period (in '000)

 

 

 

 

7,293

 

 

 

7,293

 

 

 

 

 

 

 

 

 

 

International license locations at end of period (3)

 

 

 

 

279

 

 

 

279

 

 

(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.