American Eagle Outfitters Reports EPS of $0.66 for Fourth Quarter 2007; Maintains First 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 February 2, 2008 were flat to last year at $0.66 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 14 week period ended February 3, 2007. For the 52 week period ended February 2, 2008, earnings per share increased 7% to $1.82 from $1.70 per diluted share for the 53 weeks ended February 3, 2007. "During the fourth quarter, our team managed the business well in a challenging retail environment." said Jim O'Donnell, Chief Executive Officer. "As we look ahead, we are focused on strengthening our business, improving operations and managing inventory and expenses. At the same time, we are prudently investing in the development of our brands and continuing to build long-term profitability." Fourth Quarter Results Total sales for the 13 weeks ended February 2, 2008 increased to $995.4 million compared to $973.4 million for the 14 week period ended February 3, 2007. Excluding sales from the additional week in fiscal 2006, total sales increased 7% for the 13 weeks ended February 2, 2008. Fourth quarter comparable store sales are compared to the 13 week period ended February 3, 2007. On this basis, comparable store sales decreased 2%. Gross profit for the fourth quarter was $455.3 million, or 45.7% as a percent to sales, down from 47.9% last year. Merchandise margin declined as a result of higher markdowns, partially offset by lower product costs. Buying, occupancy and warehousing costs increased as a percent to sales, primarily driven by rent expense and higher delivery costs related to the company's direct business. The deleveraging in rent was due to the decline in comparable store sales, new store openings and the extra week in the fourth quarter last year. Fourth quarter selling, general and administrative expenses of $217.6 million leveraged 50 basis points as a rate to sales to 21.9% from 22.4% last year. Within SG&A, incentive compensation and supplies leveraged, while professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. increased as a percent to sales. As a rate to sales, essentially 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 or increased slightly to last year. 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 $209.2 million compared to $226.8 million last year. As a percent to sales, operating income was 21.0%, compared to 23.2% last year. The company generated net income during the fourth quarter of $140.5 million compared to $150.2 million last year. As a percent to sales net income was 14.1%, compared to 15.4% last year. 2007 Annual Results Total sales for the 52 weeks ended February 2, 2008 increased to $3.055 billion from $2.794 billion for the 53 week period ended February 3, 2007. Excluding sales from the additional week in fiscal 2006, total sales increased 9% for the 52 weeks ended February 2, 2008. Fiscal 2007 comparable store sales are compared to the 52 week period ended February 3, 2007. On this basis, comparable store sales increased 1%. Gross profit for the year increased to $1.423 billion, or 46.6% as a percent to sales, from $1.340 billion, or 48.0% as a percent to sales last year. Gross profit as a percent to sales declined 140 basis points, reflecting higher markdowns, an increase in delivery costs related to our direct business and the deleveraging of rent. These items were partially offset by lower product costs. Selling, general and administrative expenses of $715.2 million leveraged 40 basis points as a rate to sales to 23.4% from 23.8% last year. Within SG&A, incentive compensation and supplies leveraged, while advertising and professional services increased as a percent to sales. Operating income for the year was $598.8 million, compared to $586.8 million last year. As a percent to sales, operating income was 19.6%, compared to 21.0% last year. For the year, net income was $400.0 million, compared to $387.4 million last year. As a percent to sales net income was 13.1% compared to 13.9% last year. Inventory Total merchandise inventories at the end of the fourth quarter were $286.5 million, an increase of $22.8 million compared to last year. Inventory (excluding e-commerce) decreased 5% on a per square foot basis from a year ago. Looking ahead, the company expects ending first quarter inventory to be down in the high single-digits at cost per foot. Real Estate In fiscal 2007, the company opened 30 and remodeled 53 AE stores. Together with 36 new aerie stand-alone stores and 14 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, total gross square footage increased over 10% for the year. The company ended the year with a total of 987 stores, including 929 AE stores, 39 aerie stores and 19 MARTIN + OSA stores. In fiscal 2008, the company plans to open approximately 40 AE stores, 70 aerie stores, 15 MARTIN + OSA stores and remodel re·mod·el tr.v. re·mod·eled also re·mod·elled, re·mod·el·ing also re·mod·el·ling, re·mod·els also re·mod·els To make over in structure or style; reconstruct. 35 to 40 AE stores, for approximately 10% square footage growth. E-commerce American Eagle's e-commerce business, which includes ae.com and aerie.com, is also an important area of growth. In 2007, AEO direct delivered over $240 million in sales, a 30% increase over the prior year. Next month, the company will launch the MARTIN + OSA e-commerce Web site. In January, the company announced its new children's apparel brand. 77kids by american eagle[TM] will offer on-trend, high-quality clothing and accessories for kids age two to 10. The brand will debut worldwide online at www.77kids.com later this year, with brick-and-mortar stores in the U.S. planned for 2009. Capital Expenditures Fiscal 2007 capital expenditures were approximately $250 million. Of this amount, about one half relates to new and remodeled stores, 20% relates to home office, another 20% relates to distribution centers and the remaining 10% relates to IT initiatives. For fiscal year 2008, management expects capital expenditures to be in the range of $250 to $275 million. This supports approximately 10% square footage growth. 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. Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program During the fourth quarter, the company completed the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of 9.9 million shares of common stock for approximately $195.1 million. In fiscal 2007, the company repurchased 18.8 million shares for approximately $438.3 million. There are currently 41.3 million shares available for repurchase through 2010. First Quarter Guidance Last week, the company established earnings guidance of $0.25 to $0.27 per share, compared to $0.35 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. last year. The guidance reflects negative comparable store sales for the remainder of the quarter and a higher markdown Markdown The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer. Notes: The broker offers a lower price to try stimulate trading in hopes that they will make the money back on the extra rate compared to last year Cash and Cash Equivalents, Short-term Investments and Long-term Investments The company ended fiscal 2007 with total cash and cash equivalents, short-term investments and long-term investments of $786 million, including approximately $418 million of investments in auction rate securities ("ARS"). Subsequent to year-end, the company has been able to successfully reduce its ARS position to $372 million as of March 11, 2008. The company has no reason to believe that any of the issuers of its ARS are presently at risk or that the credit quality of the assets backing the ARS investments are impacted by the reduced liquidity of these investments. If the issuers are unable to successfully close future auctions or if their credit ratings deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. , the company may be required to record an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge on these investments in the future. The company believes that the current lack of liquidity relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its ARS investments will have no impact on its ability to fund its ongoing operations and growth initiatives. Conference Call Information At 9:00 a.m. Eastern Time on March 12, 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 March 12, 2008 at 12:00 p.m. Eastern Time through March 26, 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 266008. An audio replay of the conference call will also be available at www.ae.com. American Eagle Outfitters 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. American Eagle currently operates 854 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 75 AE stores in Canada. American Eagle also operates ae.com[R], which offers additional sizes and styles of favorite AE[R] merchandise and ships to more than forty countries around the world. The American Eagle[R] brand also includes a Dormwear[R] collection, aerie[TM], which is available in 39 standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. stores, American Eagle 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 AE girl. Designed to be sweetly sexy, comfortable and cozy See COSE. , the aerie brand offers AE customers a new way to express their personal style everyday, from the dormroom to the coffee shop to the classroom. 77E, a new multi-channel entertainment platform, features original and user-generated content The production of content by the general public rather than by paid professionals and experts in the field. Mostly available on the Web via blogs and wikis, user-generated content refers to material such as the daily news, encyclopedias and other references, movie and product reviews as on ae.com, in AE stores, on television, and on Web sites such as YouTube, MySpace and Facebook. For more information, visit www.ae.com. MARTIN + OSA[TM], a concept targeting 28 to 40 year-old women and men, offers refined casual clothing and accessories, designed to be valuable, irresistible ir·re·sis·ti·ble adj. 1. Impossible to resist: an irresistible impulse to sneeze. 2. Having an overpowering appeal: irresistible beauty. , inspiring, authentic and adventurous ad·ven·tur·ous adj. 1. Inclined to undertake new and daring enterprises. 2. Hazardous; risky. ad·ven . MARTIN + OSA currently operates 18 stores. For additional information and updates, visit www.martinandosa.com. The company 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. 77kids will debut online at www.77kids.com during Fiscal 2008, with brick-and-mortar stores in the U.S. planned for 2009. "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 first 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 fourth quarter earnings expectations may not be achieved; first quarter sales, margin and earnings 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] |
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