EX-99.1 2 d692904dex991.htm EX-99.1 EX-99.1

EXHIBIT 99.1

AMERICAN EAGLE OUTFITTERS

REPORTS FOURTH QUARTER AND FISCAL 2013 RESULTS

PITTSBURGH–March 11, 2014 - American Eagle Outfitters, Inc. (NYSE:AEO) today reported adjusted earnings of $0.27 per share for the 13 week period ended February 1, 2014, compared to adjusted earnings of $0.55 per share for the 14 week period ended February 2, 2013. GAAP earnings of $0.05 per share include non-GAAP charges of ($0.22) per share, which are outlined in the accompanying GAAP to Non-GAAP reconciliations. This compares to GAAP earnings of $0.47 per share last year.

The company also announced adjusted earnings of $0.74 per share for the 52 week period ended February 1, 2014, compared to adjusted earnings from continuing operations of $1.39 per share for the 53 week period ended February 2, 2013. GAAP earnings of $0.43 per share include non-GAAP charges of ($0.31) per share, which are outlined in the accompanying GAAP to Non-GAAP reconciliations. This compares to GAAP earnings from continuing operations of $1.32 per share last year. The EPS figures refer to diluted earnings per share.

Jay Schottenstein, Interim CEO stated, “The Company’s results in 2013 were highly disappointing. While tough macro conditions have persisted in our retail sector, our merchandise and overall customer experience fell short of expectations. We’re taking steps to bring greater focus and excitement to our product offering and better engage our core customers. Our brands remain incredibly strong and I’m confident in our ability to execute the strategic plan and resume long-term profitable growth.”

The following discussion is based on Non-GAAP results, which exclude the adjustments presented in the accompanying GAAP to Non-GAAP reconciliations.

Fourth Quarter 2013 Non-GAAP Results

 

    Total net revenue for the 13 weeks decreased 7% to $1.04 billion from $1.12 billion for the 14 week period last year. Consolidated comparable sales for the 13 weeks decreased 7% over the same 13 week period last year. This follows a 4% comparable sales increase last year.

 

    Gross profit decreased 28% to $332 million and decreased 930 basis points to 31.9% as a rate to revenue. The decrease was primarily the result of increased promotional activity and the deleverage of rent on negative comparable sales.

 

    Selling, general and administrative expense of $216 million decreased 15% and leveraged 190 basis points to 20.7% as a rate to revenue. Lower incentive costs and a planned reduction in advertising drove the majority of the decline.

 

    Operating income decreased 52% to $86 million. The operating margin decreased 770 basis points to 8.2%.

 

    Adjusted EPS of $0.27 compares to $0.55 last year, a 51% decrease.


Fiscal 2013 Non-GAAP Results

 

    Total net revenue for the 52 weeks decreased 5% to $3.31 billion from $3.48 billion for the 53 week period last year. Consolidated comparable sales for the 52 weeks decreased 6% over the same 52 week period last year. This follows a 9% increase last year.

 

    Gross profit decreased 18% to $1.14 billion and decreased 540 basis points to 34.6% as a rate to revenue, primarily as a result of higher promotional activity and the deleverage of rent on negative comparable sales.

 

    Selling, general and administrative expense of $789 million decreased 5%, and deleveraged 10 basis points to 23.9% as a rate to revenue. The decrease resulted primarily from lower incentive costs, offset by higher store payroll and corporate salaries.

 

    Operating income decreased 47% to $234 million. The operating margin decreased 550 basis points to 7.1%.

 

    Adjusted EPS of $0.74 compares to $1.39 last year, a 47% decrease.

Inventory

Total merchandise inventories at the end of the fourth quarter declined 12% to $292 million compared to $332 million last year. At cost per foot, inventory decreased 16%, driven by a change in ownership terms. Excluding the change in ownership terms, ending inventory at cost per foot increased in the high single-digits, compared to an 8% decline last year. First quarter 2014 ending inventory at cost per foot is expected to decline in the mid single-digits.

Capital Expenditures

In 2013, capital expenditures totaled $278 million, which was above earlier expectations due in part to the timing of investments in our new distribution center and related systems to support omni-channel. For fiscal 2014, the company expects capital expenditures of approximately $230 million. Nearly half of the capital spending plan is for new and upgraded systems, the completion of the distribution center and omni-channel projects, while the rest relates to store upgrades, as well as factory and international store expansion plans.

Real Estate

In 2013, total square footage increased 5%. The company opened 64 stores, including 39 factory stores, six stores in Mexico and seven stores in China and Hong Kong. The company closed 42 stores, including 29 aerie stand alone locations. For additional fiscal 2013 actual and fiscal 2014 projected real estate information, see the accompanying table.

Cash and Investments

The company ended the quarter with total cash and investments of $429 million compared to $631 million last year.


First Quarter Outlook

Business conditions remain challenging, with severe winter weather contributing to weak demand. Based on a high single-digit decline in comparable sales, management expects first quarter EPS to be approximately breakeven compared to adjusted EPS of $0.18 last year. The guidance excludes potential asset impairment and restructuring charges.

Conference Call and Supplemental Financial Information

Today, management will host a conference call and real time webcast at 9:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to http://investors.ae.com to access the webcast and audio replay. Also, 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 earnings per share information and the consolidated results of operations 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. The company believes that this non-GAAP information is useful as an additional means for investors to evaluate the company’s operating performance, when reviewed in conjunction with the company’s GAAP financial statements. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company’s business and operations.

* * * *

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 Outfitters® and Aerie® brands. The company operates more than 1,000 stores in the United States, Canada, Mexico, China, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 69 licensed international franchise stores in 12 countries. For more information, please visit www.ae.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding first quarter 2014 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors beyond the company’s control. Such factors include, but are not limited to the risk that the company’s operating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company’s Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. Accordingly, the company’s future performance and financial results may differ materially from those expressed or


implied in any such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

 

CONTACT:

   American Eagle Outfitters, Inc.
   Kristen Zaccagnini, 412-432-3300


AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     February 1,
2014
    February 2,
2013
 
     (unaudited)        

ASSETS

    

Cash and cash equivalents

   $ 418,933      $ 509,119   

Short-term investments

     10,002        121,873   

Merchandise inventory

     291,541        332,452   

Accounts receivable

     73,882        46,321   

Prepaid expenses and other

     83,724        73,805   

Deferred income taxes

     45,478        58,230   
  

 

 

   

 

 

 

Total current assets

     923,560        1,141,800   
  

 

 

   

 

 

 

Property and equipment, net

     637,417        509,633   

Intangible assets, net

     49,271        38,136   

Goodwill

     13,530        11,484   

Non-current deferred income taxes

     24,835        31,282   

Other assets

     45,551        23,718   
  

 

 

   

 

 

 

Total Assets

   $ 1,694,164      $ 1,756,053   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Accounts payable

   $ 203,872      $ 176,874   

Accrued compensation and payroll taxes

     23,560        65,533   

Accrued rent

     76,397        77,873   

Accrued income and other taxes

     5,778        29,155   

Unredeemed gift cards and gift certificates

     47,194        46,458   

Current portion of deferred lease credits

     13,293        13,381   

Other current liabilities and accrued expenses

     45,384        26,628   
  

 

 

   

 

 

 

Total current liabilities

     415,478        435,902   
  

 

 

   

 

 

 

Deferred lease credits

     59,510        59,571   

Non-current accrued income taxes

     16,543        19,011   

Other non-current liabilities

     36,455        20,382   
  

 

 

   

 

 

 

Total non-current liabilities

     112,508        98,964   
  

 

 

   

 

 

 

Commitments and contingencies

     —          —     

Preferred stock

     —          —     

Common stock

     2,496        2,496   

Contributed capital

     573,008        627,065   

Accumulated other comprehensive income

     12,157        29,297   

Retained earnings

     1,569,851        1,553,058   

Treasury stock

     (991,334     (990,729
  

 

 

   

 

 

 

Total stockholders’ equity

     1,166,178        1,221,187   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,694,164      $ 1,756,053   
  

 

 

   

 

 

 

Current Ratio

     2.22        2.62   


AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

     GAAP Basis  
     13 Weeks Ended
February 1,
2014
     % of
Revenue
    14 Weeks Ended
February 2,
2013
     % of
Revenue
 

Total net revenue

   $ 1,041,707         100.0   $ 1,117,053         100.0

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

     735,687         70.6     657,298         58.8
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     306,020         29.4     459,755         41.2

Selling, general and administrative expenses

     222,191         21.3     255,251         22.9

Loss on impairment of assets

     25,149         2.4     34,427         3.1

Depreciation and amortization

     34,703         3.4     30,116         2.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     23,977         2.3     139,961         12.5

Other income, net

     35         0.0     1,446         0.1
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before income taxes

     24,012         2.3     141,407         12.6

Provision for income taxes

     13,502         1.3     46,631         4.1
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from continuing operations

     10,510         1.0     94,776         8.5

Loss from discontinued operations, net of tax

     —           0.0     —           0.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 10,510         1.0   $ 94,776         8.5
  

 

 

    

 

 

   

 

 

    

 

 

 

Basic income per common share:

          

Income from continuing operations

   $ 0.05         $ 0.48      

Loss from discontinued operations

     —             —        
  

 

 

      

 

 

    

Net income per basic share

   $ 0.05         $ 0.48      
  

 

 

      

 

 

    

Diluted income per common share:

          

Income from continuing operations

   $ 0.05         $ 0.47      

Loss from discontinued operations

     —             —        
  

 

 

      

 

 

    

Net income per diluted share

   $ 0.05         $ 0.47      
  

 

 

      

 

 

    

Weighted average common shares outstanding - basic

     192,953           196,137      

Weighted average common shares outstanding - diluted

     194,287           201,376      

 

     GAAP Basis  
     52 Weeks Ended
February 1,
2014
     % of
Revenue
    53 Weeks Ended
February 2,
2013
    % of
Revenue
 

Total net revenue

   $ 3,305,802         100.0   $ 3,475,802        100.0

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

     2,191,803         66.3     2,085,480        60.0
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     1,113,999         33.7     1,390,322        40.0

Selling, general and administrative expenses

     796,505         24.1     834,601        24.0

Loss on impairment of assets

     44,465         1.3     34,869        1.0

Depreciation and amortization

     131,974         4.0     126,246        3.6
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     141,055         4.3     394,606        11.4

Other income, net

     1,022         0.0     7,432        0.2
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     142,077         4.3     402,038        11.6

Provision for income taxes

     59,094         1.8     137,940        4.0
  

 

 

    

 

 

   

 

 

   

 

 

 

Income from continuing operations

     82,983         2.5     264,098        7.6

Loss from discontinued operations, net of tax

     —           0.0     (31,990     -0.9
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 82,983         2.5   $ 232,108        6.7
  

 

 

    

 

 

   

 

 

   

 

 

 

Basic income per common share:

         

Income from continuing operations

   $ 0.43         $ 1.35     

Loss from discontinued operations

     —             (0.16  
  

 

 

      

 

 

   

Net income per basic share

   $ 0.43         $ 1.19     
  

 

 

      

 

 

   

Diluted income per common share:

         

Income from continuing operations

   $ 0.43         $ 1.32     

Loss from discontinued operations

     —             (0.16  
  

 

 

      

 

 

   

Net income per diluted share

   $ 0.43         $ 1.16     
  

 

 

      

 

 

   

Weighted average common shares outstanding - basic

     192,802           196,211     

Weighted average common shares outstanding - diluted

     194,475           200,665     


AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)

 

     13 Weeks Ended
February 1, 2014
 
     Gross
Profit
    Selling, general
& administrative
expenses
    Depreciation
and
amortization
    Operating
income (loss)
    Income
before
income
taxes
    Diluted
income per
common
share
 

GAAP Basis

   $ 306,020      $ 222,191      $ 34,703      $ 23,977      $ 24,012      $ 0.05   

Asset Impairment(1):

     —          —          —          (25,149     (25,149     (0.08

Asset Write-offs & Corporate Charges(2):

     (26,199     6,328        4,118        (36,645     (37,853     (0.12

Tax Related(3):

     —          —          —          —          —          (0.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Basis

   $ 332,219      $ 215,863      $ 30,585      $ 85,771      $ 87,014      $ 0.27   

% of Total Net Revenue

     31.9     20.7     3.0     8.2     8.3  

 

(1)   -   Pre-tax asset impairment for AEO & aerie brand stores.
(2)   -   Pre-tax charges including $24.1M of charges related to fabric and product liabilities and the discontinuation of the AE Performance line, $9.1M of corporate & store asset write-offs, $3.3M of employee severance & related costs and $1.3M for the write-down of the Company’s corporate jet.
(3)   -   International valuation allowance, partially offset by tax benefits from changes in tax reserves.


AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)

 

     52 Weeks Ended
February 1, 2014
 
     Gross
Profit
    Selling, general
& administrative
expenses
    Depreciation
and
amortization
    Operating
income (loss)
    Income
before
income
taxes
    Diluted
income per
common
share
 

GAAP Basis

   $ 1,113,999      $ 796,505      $ 131,974      $ 141,055      $ 142,077      $ 0.43   

Asset Impairment(1):

     —          —          —          (44,465     (44,465     (0.14

Asset Write-offs & Corporate Charges(2):

     (28,624     7,840        11,724        (48,188     (49,396     (0.16

Tax Related(3):

     —          —          —          —          —          (0.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Basis

   $ 1,142,623      $ 788,665      $ 120,250      $ 233,708      $ 235,938      $ 0.74   

% of Total Net Revenue

     34.6     23.9     3.6     7.1     7.2  

 

(1)   -  

Pre-tax asset impairments for AEO & aerie brand stores and Warrendale Distribution Center.

(2)   -   Pre-tax charges including $24.1M of charges related to fabric and product liabilities and the discontinuation of the AE Performance line, $14.3M of corporate & store asset write-offs, $6.3M for the write-down of the Company’s corporate jet and $4.7M of employee severance & related costs.
(3)   -   International valuation allowance, partially offset by tax benefits from changes in tax reserves.


AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)

 

     14 Weeks Ended
February 2, 2013
 
     Gross
Profit
    Selling, general
& administrative
expenses
    Depreciation
and
amortization
    Operating
income (loss)
    Income
before
income
taxes
    Diluted
income per
common
share
 

GAAP Basis

   $ 459,755      $ 255,251      $ 30,116      $ 139,961      $ 141,407      $ 0.47   

Asset Impairment(1):

     —          —          —          (34,427     (34,427     (0.11

Asset Write-offs & Corporate Charges(2):

     (893     2,121        —          (3,014     (3,014     (0.01

Tax Related(3):

     —          —          —          —          —          0.04   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Basis

   $ 460,648      $ 253,130      $ 30,116      $ 177,402      $ 178,848      $ 0.55   

% of Total Net Revenue

     41.2     22.6     2.7     15.9     16.0  

 

(1)   -   Pre-tax asset impairments for AEO & aerie brand stores.
(2)   -   Pre-tax charges including $2.1M of employee severance & related costs and $0.9M of asset write-offs.
(3)   -   Tax benefits from audit settlements.


AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)

 

     53 Weeks Ended
February 2, 2013
 
     Gross
Profit
    Selling, general
& administrative
expenses
    Depreciation
and
amortization
    Operating
income (loss)
    Income
before
income
taxes
    Diluted
income per
common
share
 

GAAP Basis

   $ 1,390,322      $ 834,601      $ 126,246      $ 394,606      $ 402,038      $ 1.32   

Asset Impairment(1):

     —          —          —          (34,869     (34,869     (0.11

Asset Write-offs & Corporate Charges(2):

     (893     6,046        710        (7,649     (7,649     (0.02

Tax Related(3):

     —          —          —          —          —          0.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Basis

   $ 1,391,215      $ 828,555      $ 125,536      $ 437,124      $ 444,556      $ 1.39   

% of Total Net Revenue

     40.0     23.8     3.6     12.6     12.8  

 

(1)   -   Pre-tax asset impairments for AEO & aerie brand stores.
(2)   -   Pre-tax charges including $6.0M of employee severance & related costs and $1.6M of asset write-offs.
(3)   -   Tax benefits from audit settlements.


AMERICAN EAGLE OUTFITTERS, INC.

COMPARABLE SALES RESULTS BY BRAND

(unaudited)

 

     Fourth Quarter
Comparable Sales
 
     2013 (1)     2012 (1)  

American Eagle Outfitters, Inc. (3)

     -7     4

AE Total Brand (3)

     -7     5

aerie Total Brand (3)

     -4     3

AEO Direct

     8     25

 

     Fiscal Year
Comparable Sales
 
     2013 (2)     2012 (2)  

American Eagle Outfitters, Inc. (3)

     -6     9

AE Total Brand (3)

     -7     9

aerie Total Brand (3)

     -2     11

AEO Direct

     13     25

 

(1) Fourth quarter 2013 comp sales are compared to the sales for the 13 weeks ended February 2, 2013. Fourth quarter 2012 comp sales are for the 13 weeks ended February 2, 2013 compared to the 13 weeks ended February 4, 2012.
(2) Fiscal year 2013 comp sales are compared to the sales for the 52 weeks ended February 2, 2013. Fiscal year 2012 comp sales are for the 52 weeks ended February 2, 2013 compared to the 52 weeks ended February 4, 2012.
(3) AEO Direct is included in consolidated and total brand comparable sales.


AMERICAN EAGLE OUTFITTERS, INC.

REAL ESTATE INFORMATION

(unaudited)

 

     Fourth Quarter
2013
    Fiscal Year
2013
    Fiscal 2014
Guidance

Consolidated stores at beginning of period

     1,064        1,044      1,066

Consolidated stores opened during the period

      

AE Brand (1)

     18        64      40 - 50

Consolidated stores closed during the period

      

AE Brand

     (6     (13   (15) - (20)

aerie

     (10     (29   (25) - (30)
  

 

 

   

 

 

   

 

Total consolidated stores at end of period

     1,066        1,066      1,056 - 1,076

Stores remodeled and refurbished during the period

     4        56      45

Total gross square footage at end of period

     6,503,486        6,503,486      Not Provided

International licensed stores at end of period (2)

     66        66      106

 

(1)    

Fiscal Year includes 39 outlet store openings and six franchise stores in Hong Kong and China that were acquired by the company in the second quarter of 2013.

(2)   -   International licensed stores are not included in the consolidated store data or the total gross square footage calculation.