American Eagle Outfitters Report Q2 Comp Sales Increased 2%, Sales And EPS Above Expectations

About American Eagle Outfitters, Inc. (AEO) today reported consolidated comparable sales were up 2% in the second quarter and sales and earnings per share were above management expectations.

About American Eagle Outfitters, Inc.

American Eagle Outfitters offers on-trend clothing, accessories and personal care products under its American Eagle Outfitters® and Aerie® brands in more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and in 190 international locations operated by licensees.

Second Quarter 2017 Results

• Total Net revenue: UP 3% to $845 million
• Consolidated comparable sales: UP 2% (following a 3% increase last year)
• Gross profit: DOWN 4.2% to $294 million
• Gross margin rate: DOWN 240 basis points to 34.9% to revenue primarily due to increased promotional activity
• Selling, general and administrative expense: UP 2% to $204 million
• Adjusted operating income: DOWN 27.5% to $50 million compared to $69 million last year with a rate of 6.0% to revenue compared to 8.3% last year.
• EPS: DOWN 47.8% to $0.12 compared to EPS of $0.23 last year while
• adjusted EPS: DOWN 17.4% to $0.19

Shareholder Returns, Cash

• Total cash: DOWN 22.2% to $193 million
• Over the past year, AEO returned $88 million in share buybacks, $90 million in dividends and invested $187 million in capital expenditures, resulting in a lower cash balance.

Inventory

• Total ending inventories at cost: UP 3% to $433 million
• Ending units: Flat
• Average unit cost: UP 2%

Store Information

• Opened 9 new Aerie locations, of which 7 were in new markets
• Opened 6 new AE stores, with 2 in Mexico and 4 in the U.S.
• Opened 9 international licensed stores and closed 3.
• For the remainder of the year, the company plans to:
  • > open another 5 AE stores and 5 Aerie stores in the U.S., Canada, and Mexico,
  • > open 32 new international licensed stores
  • > close a total of 25 to 40 stores

Third Quarter Outlook

• Management expects third quarter 2017 EPS to be approximately $0.36 to $0.38. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.41 last year.

Jay Schottenstein, Chief Executive Officer commented:

“...I’m proud of the continued growth in jeans, bottoms, women’s apparel and Aerie, with encouraging signs in men’s tops beginning to emerge. Our brands are strong and we have significant opportunity for further growth.

I’m optimistic as we enter the second half of the year, and we remain focused on delivering product innovation, strengthening customer engagement and improving profit flow-through.”