- 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
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.
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 % ofRevenue July 30,
2022 % ofRevenue 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 % ofRevenue July 30, 2022 % ofRevenue
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) 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. (2) Aerie (incl. OFFL/NE)
includes Aerie stand alone locations, OFFL/NE stand alone
locations, and Aerie/OFFL/NE side-by-side locations. (3)
International license locations (retail stores and concessions) are
not included in the consolidated store data or the total gross
square footage calculation.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230906860210/en/
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