American Eagle Outfitters, Inc.
) posted second-quarter fiscal 2013 earnings of 10 cents per
share, down 52.4% from the comparable year-ago quarter figure of
21 cents. However, it was in line with the Zacks Consensus
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The year-over-year decline in earnings per share was mainly due
to lower sales and higher operating expenses.
Quarter in Detail
American Eagle's net sales dropped 1.7% year over year to $727.3
million but came marginally ahead of the Zacks Consensus Estimate
of $714.0 million. A fall in revenues was primarily due to poor
performance of the women's collections. An intensely competitive
and promotional retail backdrop as well as lower traffic were the
Consolidated comparable-store sales (comps) including AEO Direct,
fell 7% compared with an 8% rise in the year-ago quarter.
Comps at the company's aerie stores decreased 2%, while at AE
Total Brand stores, it fell 8%. However, American Eagle's AEO
Direct segments reported year-over-year comps growth of 11%.
Adjusted gross profit for the quarter decreased 11.2% to $245.5
million. Moreover, gross margin declined 360 basis points (bps)
to 33.8% owing to increased markdowns and the deleverage of rent.
Adjusted selling, general and administrative (SG&A) expenses
increased 4.8% to $186.3 million. Moreover, as a percentage of
sales, it expanded 160 bps to 25.6% in the quarter. The increase
was driven by higher buying, occupancy and warehousing
The company's adjusted operating income fell 56.0% to $29.4
million, primarily due to lower sales and higher operating
expenses. Consequently, adjusted operating margin contracted 500
bps to 4.1%.
American Eagle ended the quarter with cash and short-term
investments of nearly $405.0 million compared with $702.0 million
at the end of second-quarter fiscal 2012. The lower cash balances
were due to share repurchases worth $207 million and payment of
special dividend worth $296 million in the preceding quarters.
During the quarter, the company deployed $78 million towards
capital expenditure, primarily in store and e-Commerce
enhancements as well as for the advancement of information
American Eagle's total inventory was $461.1 million at the
quarter-end, compared with $462.0 million at the end of
second-quarter fiscal 2012. Cost per foot fell 1% from the
year-ago comparable quarter's level.
During the reported quarter, American Eagle opened 26 stores,
including 18 factory outlets. It shut down 7 stores including 6
aerie stores. It also remodeled 20 stores. At the end of the
quarter, the company was operating a total of 1,056 stores across
the United States and 57 international franchise stores.
Fiscal 2013 Guidance
For 2013, total square footage is expected to rise in mid single
digits. Moreover, the company has lowered its capital expenditure
to $230-$250 million as against the earlier guidance of $250-$280
million. This was due to rescheduling of certain projects and
For the third quarter of fiscal 2013, American Eagle projects
earnings from 14-16 cents per share compared with 41 cents
reported in the third quarter of fiscal 2012. The guidance is
based on the company's anticipation of mid to high single-digit
decline in comps. The current Zacks Consensus Estimate is pegged
at 36 cents per share, which may undergo revision in the near
Additionally, American Eagle anticipates a slight rise in
inventory at cost per foot.
Other Stocks to Consider
Currently, American Eagle carries a Zacks Rank #4 (Sell). Better
performing stocks in the apparel retail industry include
The Gap, Inc.
). All of them carry a Zacks Rank #2 (Buy).