American Eagle Outfitters Delivers Record Second Quarter Revenue
Jay Schottenstein, Chief Executive Officer commented, “For the past few years, we have worked hard to lift our brands through merchandise leadership and innovation, strengthen our customer focus and invest in technology. Our efforts around these priorities are clearly paying off, as again evidenced by our strong earnings growth in the second quarter. As we enter the fall season, our execution, focus and market opportunities are greater than ever. In today’s evolving retail landscape, we are committed to offering the very best product and customer experience to position AEO’s brands as leaders in a new generation of successful retail brands.”
Second Quarter 2016 Results
- Total net revenue increased 3% to $823 million from $797 million last year.
- Consolidated comparable sales increased 3%, following an 11% increase last year.
- Gross profit increased 8% to $307 million and as a rate to revenue, expanded 160 basis points to 37.3%. The increase was driven by improved merchandise margin due to lower cost and higher realized selling prices. This was partially offset by increased delivery expense related to growth in digital sales.
- Selling, general and administrative expense of $200 million increased 2% compared to last year and improved 20 basis points as a rate to revenue to 24.3%. Investments in brand advertising and variable selling expense were partially offset by expense management efforts.
- Operating income increased 29% to $69 million from $53 million last year, and the operating margin expanded by 160 basis points to 8.3% as a rate to revenue.
- Other expense was comprised of $3 million related to currency loss on cash held in Canadian dollars. This compares to other expense of $2 million last year.
- EPS of $0.23 increased 35% from EPS of $0.17 last year.
Total merchandise inventories at the end of the second quarter increased 3% to $422 million, due in part to accelerated receipts to support our marketing programs. Strong inventory management remains a key priority. Third quarter 2016 ending inventory at cost is expected to be up in the low-single digits.
For the quarter, capital expenditures totaled $36 million and $61 million for the year to date period. The company now expects fiscal 2016 capital expenditures to be approximately $160 million, on the low end of the prior guidance of $160 to $170 million.
Cash and Investments
The company ended the quarter with total cash of $248 million compared to $327 million last year. Over the past year, we invested $227 million in share buybacks, returned $94 million in dividends and invested $135 million in capital expenditures, resulting in a lower cash balance.
In the quarter, the company opened 5 stores and closed 7 stores. Internationally, the company opened 13 licensed stores. For additional second quarter actual and fiscal 2016 projected store information, see the accompanying table.
Third Quarter Outlook
Based on an anticipated low single digit increase in comparable sales, management expects third quarter 2016 EPS to be approximately $0.40 to $0.41. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.35 last year.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, Hong Kong and the United Kingdom, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at more than 150 international stores operated by licensees.