American Eagle Outfitters Reports EPS of $0.29 for Second Quarter 2008; Provides Third Quarter EPS Guidance.PITTSBURGH -- American Eagle Outfitters, Inc. (NYSE NYSE See: New York Stock Exchange :AEO) today announced that earnings for the 13 weeks ended August 2, 2008 decreased 22% to $0.29 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to the 13 week period ended August 4, 2007. "The second quarter financial results were not up to our standards," said Jim O'Donnell, Chief Executive Officer. "While the consumer environment is clearly challenging, we are taking steps to invigorate in·vig·or·ate tr.v. in·vig·or·at·ed, in·vig·or·at·ing, in·vig·or·ates To impart vigor, strength, or vitality to; animate: "A few whiffs of the raw, strong scent of phlox invigorated her" our business. We are strengthening our competitive position by underscoring AE's value pricing For the strategic management concept, see . In public roads and transport, value pricing or road pricing is the practice of raising funds by charging users directly rather than via taxation. , which is consistent with our heritage of great value together with excellent quality. Additionally, we are driving improvements within our merchandise assortments. Yet, we are managing to the current macro environment, with tight inventories and we continue to pursue expense opportunities. As I look ahead to 2009 and beyond, I have tremendous confidence in the strength of our brands, our teams, and that we are positioning our company for improved financial performance, future growth and success." Second Quarter Results Total sales for the 13 weeks ended August 2, 2008 decreased 2% to $688.8 million compared to $703.2 million for the 13 week period ended August 4, 2007. Second quarter comparable store sales decreased 9%, compared to a 2% increase last year. Gross profit for the second quarter was $289.4 million, or 42.0% as a rate to sales, compared to $316.4 million, or 45.0% as a rate to sales last year. Merchandise margin declined by 80 basis points. Buying, occupancy and warehousing costs increased by 220 basis points, due to de-leveraging in rent related to new store openings and the second quarter comparable store sales decline. Selling, general and administrative expenses of $167.9 million increased to 24.4% as a rate to sales from $166.4 million, or 23.7% as a rate last year. The higher rate this quarter is primarily due to the comparable store sales decline. The company de-leveraged advertising. Nearly all other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were flat to last year as a rate to sales. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter was $89.4 million, compared to $122.7 million last year. The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 13.0%, compared to 17.4% last year. The company's tax rate for the second quarter was 35.9%, compared to 38.1% last year. The lower effective rate was due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. state tax settlements. The company generated net income during the second quarter of $59.8 million, compared to $81.3 million last year. As a percent to sales, net income was 8.7%, compared to 11.6% last year. Inventory Total merchandise inventories at the end of the second quarter were $341.5 million, an increase of $20.2 million compared to last year. Inventory (excluding e-commerce) decreased 8% on a per square foot basis from a year ago. Real Estate In the second quarter, the company opened 9 AE stores, 26 aerie stores and 1 MARTIN + OSA Martin + Osa (Martin & Osa) is a new clothing brand developed by American Eagle Outfitters. The store's name and inspiration comes from Martin and Osa Johnson, a globetrotting husband and wife team from Kansas who explored Africa and the South Pacific Islands, chronicling their stores. In fiscal 2008, the company plans to open 36 AE stores, 77 aerie stores and 10 MARTIN + OSA stores. Together with approximately 31 AE store remodels, the company expects to grow square footage by approximately 12% in fiscal 2008. AEO Direct The company's direct business, which includes ae.com, aerie.com and martinandosa.com, is also an important area of growth. For the quarter, sales grew approximately 21% over last year, driven primarily by increases in both traffic and conversion. Capital Expenditures For the second quarter, capital expenditures were approximately $83.9 million. For fiscal 2008, management continues to expect capital expenditures to be in the range of $250 to $275 million. Of this amount, approximately one half relates to new and remodeled stores. The balance of the 2008 capital spend relates to investments in the company's home office, distribution centers and IT initiatives to support AEO Direct and brand growth. In 2009, the company expects capital expenditures to be in the range of $150 to $175 million. Cash and Cash Equivalents, Short-term Investments and Long-term Investments The company ended the first quarter with total cash and cash equivalents, short-term investments and long-term investments of $689 million. This included approximately $333 million of investments in auction rate securities. Outlook The company's August month-to-date comparable store sales are down 6%. At this time, management is providing third quarter earnings guidance of $0.31 to $0.36 per share, compared to $0.45 per share last year. This guidance reflects a view that the business environment remains challenging through the second half of this year. August Sales Announcement Due to management's participation in the Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. Global Retailing Conference on Thursday, September 4th, August sales will be announced on Wednesday, September 3rd, after the market closes. Conference Call Information At 9:00 a.m. Eastern Time on August 26, 2008, the company's management team will host a conference call to review the financial results. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 five to seven minutes prior to the scheduled start time. The conference call will also be simultaneously broadcast over the Internet at www.ae.com or www.streetevents.com. Anyone unable to listen to the call can access a replay beginning August 26, 2008 at 12:00 p.m. Eastern Time through September 9, 2008. To listen to the replay, dial 1-877-660-6853, or internationally dial 1-201-612-7415, and reference account 3055 and confirmation code 293578. An audio replay of the conference call will also be available at www.ae.com. American Eagle Outfitters, through its subsidiaries ("AEO"), designs, markets and sells its own brand of laidback, current clothing targeting 15 to 25 year-olds, providing high-quality merchandise at affordable prices. The original collection includes standards like jeans and graphic Ts as well as essentials like accessories, outerwear, footwear, basics and swimwear. AEO currently operates 875 stores in 50 states, the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. , and 76 AE stores in Canada. AEO also operates ae.com([R]), which offers additional sizes and styles of favorite AE([R]) merchandise and ships to more than sixty countries around the world. The American Eagle([R]) brand also includes a Dormwear([R]) collection, aerie[TM], which is available in 81 standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. stores, AE stores and at aerie.com. The collection includes bras, undies, camis, hoodies, robes robe n. 1. A long loose flowing outer garment, especially: a. An official garment worn on formal occasions to show office or rank, as by a judge or high church official. b. An academic gown. c. , boxers, sweats and leggings leg·ging n. 1. A leg covering usually extending from the ankle to the knee and often made of material such as leather or canvas, worn especially by soldiers and workers. 2. leggings a. for the AEO girl. Designed to be sweetly sexy, comfortable and cozy See COSE. , the aerie brand offers AEO customers a new way to express their personal style everyday, from the dormroom to the coffee shop to the classroom. MARTIN + OSA([R]), a concept targeting 28 to 40 year-old women and men, offers Refined Casual[TM] clothing and accessories, designed to be valuable, irresistible, inspiring, authentic and adventurous ad·ven·tur·ous adj. 1. Inclined to undertake new and daring enterprises. 2. Hazardous; risky. ad·ven . AEO currently operates 22 MARTIN + OSA stores. For additional information and updates, visit www.martinandosa.com. AEO plans to launch a children's apparel brand, 77kids by american eagle[TM], offering on-trend, high-quality clothing and accessories for kids age two to 10. The 77kids[TM] line will debut online at www.77kids.com during Fiscal 2008, with brick-and-mortar stores in the U.S. planned for 2010. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which represent our expectations or beliefs concerning future events, specifically regarding third quarter sales and earnings, inventory, real estate, aerie, MARTIN + OSA and 77kids by american eagle. 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 third quarter earnings expectations may not be achieved; real estate, aerie and MARTIN + OSA growth may not occur as planned; and those other risks described in the Risk Factors Section of the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Form 10-Q's 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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