AMERICAN EAGLE OUTFITTERS INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - AMERICAN EAGLE OUTFITTERS INC	d586836d8k.htm
EX-99.2 - EX-99.2 - AMERICAN EAGLE OUTFITTERS INC	d586836dex992.htm

Exhibit 99.1

AMERICAN EAGLE OUTFITTERS

REPORTS SECOND QUARTER 2013 RESULTS

PITTSBURGH–August 21, 2013 - American Eagle Outfitters, Inc. (NYSE:AEO) today reported earnings of $0.10 per diluted share for the second quarter ended August 3, 2013, compared to earnings from continuing operations of $0.21 per diluted share in the comparable quarter last year.

Robert Hanson, Chief Executive Officer stated, “Our second quarter results reflected disappointing product execution in women’s. Additionally, we faced a highly promotional and competitive retail landscape and a decline in traffic, which have continued into the third quarter. We are working hard to strengthen our assortments, marketing efforts and overall execution, while maintaining tight inventories and disciplined expense management. Although extremely disappointed with our results, I’m confident in the strength of our brands, our strategic initiatives including, factory stores, aerie, omni-channel and international, as well as the team’s resolve to regain momentum and improve our bottom line performance.”

Second Quarter 2013 Non-GAAP Results

The following discussion is based on Non-GAAP results for the comparable quarter last year, as presented in the accompanying GAAP to Non-GAAP reconciliations.

•

Total net revenue decreased 2% to $727 million, compared to $740 million last year.

•

Consolidated comparable sales, including AEO Direct, decreased 7%, compared to an 8% increase last year. Second quarter 2013 comparable sales are compared to the 13 weeks ended August 4, 2012.

•

Gross profit decreased 11% to $245 million and, as a rate to revenue, decreased 360 basis points to 33.8%. The decline is primarily the result of higher markdowns and the deleverage of rent on negative comps.

•

Selling, general and administrative expense of $186 million increased 5% from last year and deleveraged 160 basis points to 25.6% as a rate to revenue.

•

Operating income decreased 56% to $29 million, resulting in a rate of 4.1% compared to 9.1% last year.

•

EPS of $0.10 compared to adjusted EPS from continuing operations of $0.21 last year, a 52% decrease.

Inventory

Total merchandise inventory at the end of the second quarter declined slightly to $461 million compared to $462 million last year. At cost per foot, inventory decreased 1%.

Capital Expenditures

In the second quarter, capital expenditures totaled $78 million. Due to the retiming of projects, the company now expects capital expenditures of $230 to $250 million for fiscal 2013. This compares to previous expectations of $250 to $280 million. The capital spending plan includes new store growth, remodels, a new distribution center to support omni-channel growth and the implementation of new and upgraded technology.

Real Estate

In the second quarter, total square footage increased 1% from last year. The company opened 26 new stores, including 18 factory stores, and closed 7 locations, including 6 aerie stores. As a result of the terminated licensed agreement previously announced, the company assumed operation of 6 existing stores in Hong Kong and China. Additionally, the company had 57 international franchise locations in 12 countries. For additional second quarter 2013 actual and fiscal 2013 projected real estate information, see the accompanying table.

Cash and Investments

The company ended the quarter with total cash and short-term investments of $405 million compared to $702 million last year. The reduction in cash reflects share repurchases of $33 million in the first quarter of 2013and $174 million in the fourth quarter of 2012. In addition to regular quarterly dividends, the company paid a special cash dividend of $1.50 per share in the third quarter of 2012 for $296 million.

Third Quarter Outlook

Management is issuing third quarter EPS guidance of $0.14 to $0.16 per diluted share, based on a mid- to high-single digit decline in comparable sales. This compares to EPS from continuing operations of $0.41 last year.

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 www.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 North America, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 59 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 third quarter 2013 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.
		Judy Meehan 412-432-3300

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	August 3,			February 2,			July 28,
	2013			2013			2012
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents	$	345,188		$	509,119		$	696,077
Short-term investments		59,678			121,873			5,995
Merchandise inventory		461,080			332,452			462,013
Assets held for sale		4,669			9,499			19,850
Accounts receivable		45,965			46,321			40,202
Prepaid expenses and other		115,595			73,805			76,584
Deferred income taxes		41,807			58,230			55,607

Total current assets		1,073,982			1,151,299			1,356,328

Property and equipment, net		593,879			500,134			534,886
Intangible assets, net		44,658			38,136			38,682
Goodwill		13,814			11,484			11,445
Non-current deferred income taxes		25,441			31,282			22,477
Other assets		28,311			23,718			15,064

Total Assets	$	1,780,085		$	1,756,053		$	1,978,882

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	292,120		$	176,874		$	171,655
Accrued compensation and payroll taxes		20,496			65,533			54,168
Accrued rent		74,052			77,873			78,514
Accrued income and other taxes		9,614			29,155			15,822
Unredeemed gift cards and gift certificates		26,389			46,458			24,342
Current portion of deferred lease credits		14,104			13,381			14,679
Other current liabilities and accrued expenses		28,024			26,628			26,694

Total current liabilities		464,799			435,902			385,874

Deferred lease credits		67,461			59,571			69,598
Non-current accrued income taxes		19,722			19,011			26,285
Other non-current liabilities		24,430			20,382			18,711

Total non-current liabilities		111,613			98,964			114,594

Commitments and contingencies		—			—			—
Preferred stock		—			—			—
Common stock		2,496			2,496			2,496
Contributed capital		587,905			627,065			574,671
Accumulated other comprehensive income		24,397			29,297			28,073
Retained earnings		1,588,094			1,553,058			1,770,546
Treasury stock		(999,219	)		(990,729	)		(897,372	)

Total stockholders’ equity		1,203,673			1,221,187			1,478,414

Total Liabilities and Stockholders’ Equity	$	1,780,085		$	1,756,053		$	1,978,882

Current Ratio		2.31			2.64			3.51

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)


	GAAP Basis 13 Weeks Ended
	August 3, 2013		% of Revenue			July 28, 2012			% of Revenue
Total net revenue	$	727,313		100.0	%	$	739,680			100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses		481,818		66.2	%		463,116			62.6	%

Gross profit		245,495		33.8	%		276,564			37.4	%
Selling, general and administrative expenses		186,336		25.6	%		182,125			24.6	%
Depreciation and amortization		29,734		4.1	%		32,643			4.4	%

Operating income		29,425		4.1	%		61,796			8.4	%
Other (expense) income, net		1,149		0.1	%		(343	)		-0.1	%

Income before income taxes		30,574		4.2	%		61,453			8.3	%
Provision for income taxes		10,980		1.5	%		18,607			2.5	%

Income from continuing operations		19,594		2.7	%		42,846			5.8	%
Loss from discontinued operations, net of tax		—		0.0	%		(23,819	)		-3.2	%

Net income	$	19,594		2.7	%	$	19,027			2.6	%

Basic income per common share:
Income from continuing operations	$	0.10				$	0.22
Loss from discontinued operations		0.00					(0.12	)

Net income per basic share	$	0.10				$	0.10

Diluted income per common share:
Income from continuing operations	$	0.10				$	0.21
Loss from discontinued operations		0.00					(0.12	)

Net income per diluted share	$	0.10				$	0.09

Weighted average common shares outstanding - basic		192,731					196,160
Weighted average common shares outstanding - diluted		195,951					199,807

	26 Weeks Ended
	August 3, 2013		% of Revenue			July 28, 2012			% of Revenue
Total net revenue	$	1,406,790		100.0	%	$	1,448,375			100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses		897,686		63.8	%		896,898			61.9	%

Gross profit		509,104		36.2	%		551,477			38.1	%
Selling, general and administrative expenses		368,589		26.2	%		360,664			24.9	%
Depreciation and amortization		65,273		4.6	%		64,709			4.5	%

Operating income		75,242		5.4	%		126,104			8.7	%
Other income, net		467		0.0	%		3,164			0.2	%

Income before income taxes		75,709		5.4	%		129,268			8.9	%
Provision for income taxes		28,139		2.0	%		42,387			2.9	%

Income from continuing operations		47,570		3.4	%		86,881			6.0	%
Loss from discontinued operations, net of tax		—		0.0	%		(28,157	)		-1.9	%

Net income	$	47,570		3.4	%	$	58,724			4.1	%

Basic income per common share:
Income from continuing operations	$	0.25				$	0.44
Loss from discontinued operations		—					(0.14	)

Net income per basic share	$	0.25				$	0.30

Diluted income per common share:
Income from continuing operations	$	0.24				$	0.44
Loss from discontinued operations		—					(0.14	)

Net income per diluted share	$	0.24				$	0.30

Weighted average common shares outstanding - basic		192,720					195,525
Weighted average common shares outstanding - diluted		196,451					198,329

AMERICAN EAGLE OUTFITTERS, INC.

GAAP TO NON-GAAP RECONCILIATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)


	13 Weeks Ended
	July 28, 2012
	American Eagle Outfitters, Inc. (GAAP Basis)						Tax Benefits ⁽¹⁾			Restructuring Costs ⁽¹⁾			American Eagle Outfitters, Inc. (Non-GAAP Basis)
				% of Sales												% of Sales
Net sales	$	739,680			100.0	%	$	—		$	—		$	739,680			100.0	%
Cost of sales, including certain buying,occupancy and warehousing expenses		463,116			62.6	%		—			—			463,116			62.6	%

Gross profit		276,564			37.4	%		—			—			276,564			37.4	%
Selling, general and administrative expenses		182,125			24.6	%		—			4,367			177,758			24.0	%
Depreciation and amortization		32,643			4.4	%		—			710			31,933			4.3	%

Operating income (loss)		61,796			8.4	%		—			(5,077	)		66,873			9.1	%
Other (expense), net		(343	)		-0.1	%		—			—			(343	)		-0.1	%

Income (loss) before income taxes		61,453			8.3	%		—			(5,077	)		66,530			9.0	%
Provision (benefit) for income taxes		18,607			2.5	%		(4,411	)		(1,882	)		24,900			3.4	%

Income (loss) from continuing operations		42,846			5.8	%		4,411			(3,195	)		41,630			5.6	%

Loss from discontinued operations, net of tax		(23,819	)		-3.2	%		—			—			(23,819	)		-3.2	%

Net income (loss)	$	19,027			2.6	%	$	4,411		$	(3,195	)	$	17,811			2.4	%

Basic income per common share
Income from continuing operations	$	0.22					$	0.03		$	(0.02	)	$	0.21
Loss from discontinued operations	$	(0.12	)				$	0.00		$	0.00		$	(0.12	)

Basic income per common share	$	0.10					$	0.03		$	(0.02	)	$	0.09
Diluted income per common share
Income from continuing operations	$	0.21					$	0.02		$	(0.02	)	$	0.21
Loss from discontinued operations	$	(0.12	)				$	0.00		$	0.00		$	(0.12	)

Diluted income per common share	$	0.09					$	0.02		$	(0.02	)	$	0.09
Weighted average common shares outstanding - basic		196,160						196,160			196,160			196,160
Weighted average common shares outstanding - diluted		199,807						199,807			199,807			199,807

(1)-	Non-GAAP Items consist of $4.4 million of tax benefits from audit settlements, offset by $3.9 million of pre-tax severance and related costs and $1.2 million of pre-tax asset impairments and asset write offs.

AMERICAN EAGLE OUTFITTERS, INC.

COMPARABLE SALES RESULTS BY BRAND

(unaudited)


	Second Quarter Comparable Sales
	2013⁽¹⁾			2012
American Eagle Outfitters, Inc. ⁽³⁾		-7	%		8	%
AE Total Brand ⁽³⁾		-8	%		8	%
aerie Total Brand ⁽³⁾		-2	%		17	%
AEO Direct		11	%		27	%

	YTD Second Quarter Comparable Store Sales
	2013⁽²⁾			2012
American Eagle Outfitters, Inc. ⁽³⁾		-6	%		13	%
AE Total Brand ⁽³⁾		-7	%		12	%
aerie Total Brand ⁽³⁾		1	%		19	%
AEO Direct ⁽²⁾		17	%		24	%

(1)	Second quarter 2013 comp sales are compared to the sales for the 13 weeks ended August 4, 2012.

(2)	YTD second quarter 2013 comp sales are compared to the sales for the 26 weeks ended August 4, 2012.

(3)	AEO Direct is included in consolidated and total brand comparable sales.

AMERICAN EAGLE OUTFITTERS, INC.

REAL ESTATE INFORMATION

(unaudited)


	Second Quarter 2013	YTD Second Quarter 2013	Fiscal 2013 Guidance
Consolidated stores at beginning of period	1,037	1,044	1,044
Consolidated stores opened during the period
AE Brand ⁽²⁾	26	33	55 - 60
Consolidated stores closed during the period
AE Brand	(1)	(5)	(20) - (30)
aerie	(6)	(16)	(15) - (20)

Total consolidated stores at end of period	1,056	1,056	1054 - 1064
Stores remodeled and refurbished during the period	20	42	50 - 65
Total gross square footage at end of period	6,373,055	6,373,055	Not Provided
International franchise stores at end of period ⁽¹⁾	57	57	66

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

(2)-	Includes six franchise stores in Hong Kong and China that were acquired by the company in the second quarter of 2013.

AMERICAN EAGLE OUTFITTERS INC - FORM 8-K - EX-99.1 - August 22, 2013

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