American Eagle Outfitters Inc.
) adjusted earnings of 22 cents per share for first-quarter 2012
handily beat the Zacks Consensus Estimate of 20 cents and climbed
37.5% from the prior-year quarter earnings of 16 cents. On a
reported basis, the company earned 20 cents per share compared with
14 cents in the year-ago period.
The robust quarterly performance was primarily driven by solid
top-line growth and improved operating margin.
Adjusted figures do not include income generated from 77Kids
business as the company recently announced its plan to exit from
Quarter in detail
During the quarter, American Eagle's adjusted net sales went up
18% year over year to $708.7 million, slightly below the Zacks
Consensus Estimate of $711 million. Growth in revenue was driven by
a 17% increase in comparable store sales compared with a decline of
7% registered in the year-ago quarter.
During the period, the company's AE Brand, aerie and AEO Direct
segments reported a growth of 17%, 20% and 22%, respectively, in
comparable store sales.
During the quarter, adjusted gross profit increased 18% to
$274.9 million, primarily driven by solid top-line performance.
However, gross margin remained flat year over year at 38.8%, as the
benefit of 220 basis points from leveraged buying, occupancy and
warehousing expenses were fully offset by higher product cost and
increased cotton and incentive costs.
In the reported quarter, adjusted selling, general and
administrative (SG&A) expense increased 15% to $178.5 million.
However, as a percentage of sales, it improved 60 basis points to
25.2% compared with 25.8% in the prior-year quarter.
Consequently, adjusted operating income surged 46% to $64.3
million from $44.1 million in the prior-year period. Moreover,
adjusted operating margin expanded 180 basis points to 9.1%,
primarily due to increased sales and leveraged SG&A
American Eagle ended the quarter with cash and cash equivalents
of $713.4 million compared with $474.7 million in the year-ago
period. During the quarter, the company generated $12.7 million
cash from operating activities while it deployed $24.8 million
toward capital expenditure.
Looking ahead into fiscal 2012, the company expects adjusted
earnings to be between $1.16 and $1.22 per share, an increase of
19% - 26% from the previous fiscal adjusted earnings of 97 cents
per share. The company anticipates a mid-single-digit growth in
For the second quarter of fiscal 2012, American Eagle expects to
earn in the range of 13 cents to 15 cents per share compared with
13 cents in the prior-year period.
Moreover, the company still projects to incur a capital
expenditure of $100 million in fiscal 2012.
We remain impressed with the company's continued momentum in
denim along with improved merchandise assortments in the women's
business segment, which will likely lead to a turnaround in its top
line as well as a rebound in gross margin.
The company operates in a highly fragmented specialty retail
sector and faces intense competition from other teen-focused
retailers, such as
Abercrombie & Fitch Co.
Currently, the company carries a Zacks #2 Rank, which translates
into a short-term Buy rating. We have a long-term Neutral
recommendation on American Eagle.
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