Second Quarter 2021 Highlights Compared to
Second Quarter 2020
- Record revenue of $1.19 billion increased 35%
- Operating income reached an all-time second quarter high of
$168 million
- Higher full-priced sales, reduced promotions and controlled
costs fueled gross margin expansion to 42.1%
- Aerie net revenue increased 34%, operating income rose 132%,
reflecting a 21.0% operating margin
- American Eagle net revenue rose 35%, operating income was up
234%, reflecting a 23.5% operating margin
American Eagle Outfitters, Inc. (NYSE: AEO) today announced
financial results for the second quarter ended July 31, 2021.
“It’s extremely gratifying to see significant growth across our
business, as we delivered another quarter of record revenue and
profitability. Results underscore the strength of our brands,
outstanding product and a leading customer experience across
selling channels. We are running our business with a laser focus on
profitability through inventory and real-estate optimization
initiatives and investments to enhance our supply chain. Led by an
expanding customer file, Aerie is achieving consistent, robust
multi-year growth and very strong profit flow through. American
Eagle posted meaningful top-and bottom-line increases with
significant unlock still ahead. Our Real Power. Real Growth. plan
has been a guiding light for all facets of the business,
positioning us to successfully navigate a dynamic macro
environment. Despite external challenges, I believe we are on path
to achieve $600 million in operating income this year, well ahead
of our previous target,” said Jay Schottenstein, AEO’s Executive
Chairman of the Board and Chief Executive Officer.”
Second Quarter 2021 Results
- Total net revenue increased $311 million, or 35% to $1.19
billion, compared to $0.88 billion in the second quarter of
2020.
- Aerie revenue of $336 million rose 34% from second quarter 2020
on top of 32% growth last year. American Eagle revenue of $846
million rose 35% versus second quarter 2020 following a 26% decline
last year.
- Consolidated store revenue increased 73% from second quarter
2020 due to an improvement in store traffic. Total online demand
this quarter was up 9%. Digital revenue decreased 5% from second
quarter 2020 reflecting the natural channel shift associated with
improved store traffic across the US. Last year, the abrupt
acceleration in digital also created a significant fulfillment
backlog that shifted sales from the first quarter into the second
quarter in 2020. Compared to the pre-pandemic second quarter 2019
base, store revenue increased 4% and digital revenue increased
66%.
- Gross profit of $502 million rose 89% from $265 million in the
second quarter of 2020.
- Gross margin of 42.1% expanded 1210 basis points from 30% in
the second quarter of 2020. The increase from 2020 reflected
significant revenue and merchandise margin expansion across brands,
primarily driven by strong demand, higher full-priced sales, lower
promotions and inventory optimization initiatives. Rent, digital
delivery expenses and compensation also leveraged.
- Selling, general and administrative expense leveraged 70 basis
points as a rate to sales versus second quarter 2020 due to strong
revenue growth. On a dollar basis, SG&A increased due largely
to the re-opening of our stores. We also saw increased advertising
as well as incentive costs.
- Depreciation and amortization expense of $40 million compared
to $39 million in the second quarter of 2020 and leveraged 100
basis points as a rate to sales due to strong revenue growth, asset
impairments, as well as lower capital spending in 2020.
- Operating income of $168 million compared to an operating loss
of $12 million in second quarter 2020, or operating income of $2
million on an adjusted basis. Aerie’s operating income of $71
million increased 132% from $30 million in the second quarter of
2020 and American Eagle’s operating income of $199 million
increased 234% from $60 million in the second quarter of 2020.
- Operating margin of 14.1% reflected the highest rate since
2008. Aerie operating margin of 21.0% expanded 890 bps from 2020
and American Eagle’s operating margin of 23.5% expanded 1400 bps
from 2020.
- Average diluted shares outstanding were 209 million compared to
166 million in the second quarter of 2020. The increase primarily
reflected 36 million shares of unrealized dilution associated with
the company’s convertible notes.
- EPS of $0.58 this quarter. Adjusted EPS of $0.60 this quarter
excludes $0.02 of non-cash interest expense on the company’s
convertible notes.
Inventory
Total consolidated ending inventory at cost increased $82
million or 20% to $504 million compared to a 21% decline last year.
Inventory was up across both brands, positioned in key Fall
categories, yet remained below revenue growth, which is consistent
with our focus on inventory optimization.
Capital Expenditures
In the second quarter of 2021, capital expenditures totaled $49
million, and year to date totaled $86 million. For fiscal 2021, the
company now expects capital expenditures to be at the lower end of
our prior guidance range of $250 to $275 million.
Cash Flow and Balance Sheet
The company ended the period with total cash and short-term
investments of $824 million. This compares to $899 million in
second quarter 2020 which included $200 million from AEO’s
revolving credit facility, repaid in third quarter 2020.
Shareholder Returns
As previously announced, the Board of Directors of AEO approved
a 31% increase in the quarterly dividend in June 2021 from $0.1375
to $0.18 per share. The company’s second quarter cash dividend of
$30 million was paid during the quarter.
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.aeo-inc.com to access the webcast and audio replay.
Additionally, 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 consolidated
adjusted operating income and earnings per share, 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. Non-GAAP
information is provided as a supplement to, not as a substitute
for, or as superior to, measures of financial performance prepared
in accordance with GAAP. Management believes that this non-GAAP
information is useful for an alternate presentation of the
company’s performance, when reviewed in conjunction with the
company’s GAAP consolidated financial statements, as it helps
identify underlying trends in our business that could otherwise be
masked by the effect of the items that we exclude in such non-GAAP
measures. Accordingly, we believe that adjusted operating income
provides useful information to investors and others in
understanding and evaluating our operating results, enhancing the
overall understanding of our past performance and future prospects,
and allowing for greater transparency with respect to the key
financial metrics used by our management in our financial and
operational decision-making.
These amounts are not determined in accordance with GAAP and
therefore, should not be used exclusively in evaluating the
company’s business and operations. We encourage investors and
others to review our financial information in its entirety, not to
rely on any single financial measure and to view these non-GAAP
financial measures in conjunction with the related GAAP financial
measures.
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, and Hong
Kong, and ships to 81 countries worldwide through its websites.
American Eagle and Aerie merchandise also is available at more than
200 international locations operated by licensees in 33 countries.
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 2021 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 30,
2021 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 2021 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 31,
January 30,
August 1,
2021
2021
2020
ASSETS Cash and cash equivalents
$
773,994
$
850,477
$
898,787
Short-term investments
50,000
-
-
Merchandise inventory
503,507
405,445
421,196
Accounts receivable
155,361
146,102
107,243
Prepaid expenses and other
118,721
120,619
155,141
Total current assets
1,601,583
1,522,643
1,582,367
Property and equipment, net
641,396
623,808
659,351
Operating lease right-of-use assets
1,103,247
1,155,965
1,271,491
Intangible assets, including goodwill
70,620
70,332
51,432
Non-current deferred income taxes
46,600
33,045
30,224
Other assets
31,576
29,013
33,111
Total Assets
$
3,495,022
$
3,434,806
$
3,627,976
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$
221,471
$
255,912
$
295,296
Current portion of operating lease liabilities
288,534
328,624
348,921
Accrued compensation and payroll taxes
133,185
142,272
66,131
Other current liabilities and accrued expenses
56,568
55,343
51,281
Unredeemed gift cards and gift certificates
44,095
62,181
43,165
Accrued income taxes and other
25,365
14,150
12,783
Dividends payable
-
-
22,837
Total current liabilities
769,218
858,482
840,414
Non-current operating lease liabilities
1,094,386
1,148,742
1,253,105
Long-term debt, net
331,680
325,290
516,953
Other non-current liabilities
24,207
15,627
19,604
Total non-current liabilities
1,450,273
1,489,659
1,789,662
Commitments and contingencies
-
-
-
Preferred stock
-
-
-
Common stock
2,496
2,496
2,496
Contributed capital
630,506
663,718
647,284
Accumulated other comprehensive loss
(36,894
)
(40,748
)
(47,991
)
Retained earnings
2,058,448
1,868,613
1,807,687
Treasury stock
(1,379,025
)
(1,407,414
)
(1,411,576
)
Total stockholders' equity
1,275,531
1,086,665
997,900
Total Liabilities and Stockholders' Equity
$
3,495,022
$
3,434,806
$
3,627,976
Current Ratio
2.08
1.77
1.88
AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars and shares in thousands,
except per share amounts) (unaudited)
GAAP Basis
13 Weeks Ended July 31, % of August 1,
% of
2021
Revenue
2020
Revenue
Total net revenue
$
1,194,156
100.0
%
$
883,510
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
691,765
57.9
%
618,311
70.0
%
Gross profit
502,391
42.1
%
265,199
30.0
%
Selling, general and administrative expenses
293,939
24.6
%
223,711
25.3
%
Impairment, restructuring and COVID-19 related charges
-
0.0
%
14,611
1.7
%
Depreciation and amortization expense
40,456
3.4
%
39,114
4.4
%
Operating income (loss)
167,996
14.1
%
(12,237
)
-1.4
%
Interest expense (income), net
8,921
0.8
%
8,547
1.0
%
Other (income) expense, net
(1,363
)
-0.1
%
(1,554
)
-0.2
%
Income (loss) before income taxes
160,438
13.4
%
(19,230
)
-2.2
%
Provision (benefit) from income taxes
38,927
3.2
%
(5,478
)
-0.6
%
Net income (loss)
$
121,511
10.2
%
$
(13,752
)
-1.6
%
Net income (loss) per basic share
$
0.73
$
(0.08
)
Net income (loss) per diluted share
$
0.58
$
(0.08
)
Weighted average common shares outstanding - basic
167,491
166,315
Weighted average common shares outstanding - diluted
208,933
166,315
GAAP Basis 26 Weeks Ended July
31, % of August 1, % of
2021
Revenue
2020
Revenue Total net revenue
$
2,228,769
100.0
%
$
1,435,202
100.0
%
Cost of sales, including certain buying, occupancy and warehousing
expenses
1,290,188
57.9
%
1,141,697
79.5
%
Gross profit
938,581
42.1
%
293,505
20.5
%
Selling, general and administrative expenses
558,430
25.1
%
411,908
28.7
%
Impairment, restructuring and COVID-19 related charges
-
0.0
%
170,231
11.9
%
Depreciation and amortization expense
78,727
3.5
%
81,844
5.7
%
Operating income (loss)
301,424
13.5
%
(370,478
)
-25.8
%
Interest expense (income), net
17,426
0.7
%
8,693
0.6
%
Other (income) expense, net
(3,223
)
-0.1
%
1,429
0.1
%
Income (loss) before income taxes
287,221
12.9
%
(380,600
)
-26.5
%
Provision (benefit) from income taxes
70,244
3.2
%
(109,685
)
-7.6
%
Net income (loss)
$
216,977
9.7
%
$
(270,915
)
-18.9
%
Net income (loss) per basic share
$
1.29
$
(1.63
)
Net income (loss) per diluted share
$
1.04
$
(1.63
)
Weighted average common shares outstanding - basic
168,036
166,461
Weighted average common shares outstanding - diluted
208,400
166,461
AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP
RECONCILIATION (Dollars in thousands, except per share amounts)
(unaudited)
13 Weeks Ended July 31, 2021
Interest Expense, net Net Income Diluted Earnings
perCommon Share GAAP Basis
$
8,921
$
121,511
$
0.58
% of Revenue
0.8
%
10.2
%
Less: Convertible debt (1):
4,956
3,754
0.02
Non-GAAP Basis
$
3,965
$
125,265
$
0.60
% of Revenue
0.3
%
10.5
%
(1) Amortization of the non-cash discount on the Company's
convertible notes
AMERICAN EAGLE OUTFITTERS,
INC.
GAAP TO NON-GAAP
RECONCILIATION
(Dollars in thousands, except per
share amounts)
(unaudited)
13 Weeks Ended
August 1, 2020
Operating (Loss)
Income
Interest Expense, net
Net (Loss) Income
Diluted (Loss) per Common
Share
GAAP Basis
$
(12,237
)
$
8,547
$
(13,752
)
$
(0.08
)
% of Revenue
-1.4
%
1.0
%
-1.6
%
Add: Incremental COVID-19 related
expenses and restructuring (1):
14,611
-
10,447
0.05
Less: Convertible debt (2):
-
3,949
2,826
0.03
Non-GAAP Basis
$
2,374
$
4,598
$
(479
)
$
(0.00
)
% of Revenue
0.3
%
0.5
%
-0.1
%
(1) $14.6 million incremental COVID-19 related expenses and
restructuring charges:
-$13.9 million of incremental COVID-19 related expenses
consisting of personal protective equipment and supplies for our
associates and customers - $0.7 million of corporate severance
charges
(2) Amortization of the non-cash discount on the Company's
convertible notes
AMERICAN EAGLE
OUTFITTERS, INC. RESULTS BY SEGEMENT (Dollars in
thousands) (unaudited)
American Eagle
Aerie Corporate(1) Total(2) 13 weeks ended
July 31, 2021 Total net revenue
$
845,882
$
335,795
$
12,479
$
1,194,156
Operating income (loss)
$
198,896
$
70,646
$
(101,546
)
$
167,996
Capital Expenditures
$
17,189
$
16,641
$
15,569
$
49,399
13 weeks ended August 1, 2020 Total net revenue
$
624,831
$
251,511
$
7,168
$
883,510
Operating income (loss)
$
59,603
$
30,404
$
(102,244
)
$
(12,237
)
Impairment, restructuring, and COVID-19 related charges
$
-
$
-
$
14,611
$
14,611
Adjusted operating income (loss)
$
59,603
$
30,404
$
(87,633
)
$
2,374
Capital Expenditures
$
6,774
$
8,620
$
12,098
$
27,492
American Eagle Aerie Corporate(1)
Total(2) 26 weeks ended July 31, 2021 Total net
revenue
$
1,573,584
$
633,282
$
21,903
$
2,228,769
Operating income (loss)
$
350,128
$
140,624
$
(189,328
)
$
301,424
Capital Expenditures
$
30,628
$
27,460
$
28,117
$
86,205
26 weeks ended August 1, 2020 Total net revenue
$
1,015,081
$
406,492
$
13,629
$
1,435,202
Operating income (loss)
$
(154,146
)
$
11,275
$
(227,607
)
$
(370,478
)
Impairment, restructuring, and COVID-19 related charges
$
90,926
$
18,215
$
61,090
$
170,231
Adjusted operating income (loss)
$
(63,220
)
$
29,490
$
(166,517
)
$
(200,247
)
Capital Expenditures
$
14,873
$
17,408
$
29,121
$
61,402
(1) Corporate includes revenue and operating results of the
Todd Snyder and Unsubscribed brands, which are not material to
disclose as separate reportable segments. Corporate operating costs
represents certain costs that are not directly attributable to
another reportable segment. (2) The difference between Total
Operating Income (loss) and Income (loss) before Taxes includes the
following items, which are not allocated to our reportable
segments: - For the 13 weeks ended July 31, 2021, interest
expense, net or $8.9 million and other (income) expense, net of
($1.4) million. For the 26 weeks ended July 31, 2021, interest
expense, net of $17.4 million and other (income) expense, net of
($3.2) million. - For the 13 weeks ended August 1, 2020,
interest expense, net of $8.5 million and other (income) expense,
net of ($1.6) million. For the 26 weeks ended August 1, 2020,
interest expense, net of $8.7 million and other (income) expense,
net of $1.4 million.
AMERICAN EAGLE OUTFITTERS, INC.
STORE INFORMATION (unaudited)
Second Quarter
YTD Second Quarter
2021
2021
Consolidated stores at beginning of period
1,074
1,078
Consolidated stores opened during the period AE Brand
7
11
Aerie stand-alone(3)
12
18
Todd Snyder
1
1
Unsubscribed
0
1
Consolidated stores closed during the period AE Brand
(4
)
(18
)
Aerie stand-alone(3)
0
(1
)
Total consolidated stores at end of period
1,090
1,090
AE Brand
894
Aerie stand-alone(3)
191
Aerie side-by-side(2)
183
Unsubscribed
2
Todd Snyder
3
Stores remodeled and refurbished during the period
8
11
Total gross square footage at end of period (in '000)
6,799
6,799
International license locations at end of period (1)
242
242
Aerie Openings Aerie stand-alone(3)
12
18
Aerie side-by-side stores (2)
5
5
Total Aerie Openings
17
23
(1) International license locations are not included in the
consolidated store data or the total gross square footage
calculation. (2) Aerie side-by-side and Offline side-by-side stores
are included in the AE Brand store count as they are considered
part of the AE Brand store to which they are attached. (3) Aerie
stand-alone stores include 1 OFFLINE opening YTD and 5 OFFLINE
stores in the consolidated totals.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210902005238/en/
Olivia Messina 412-432-3300 LineMedia@ae.com
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