American Eagle Outfitters expects to report lower EPS in Q1

American Eagle Outfitters, Inc. (AEO) reported EPS of 43 cents for the 13 weeks ended February 2, 2019 compared to 52 cents for the 14 weeks ended February 3, 2018, which included the benefit of an extra week of sales due to the retail calendar. The company said adjusted EPS of 44 cents last year excluded 8 cents of tax benefit. Based on an anticipated comparable sales increase in the low single digits, management expects first quarter 2019 EPS to be approximately 19 cents to 21 cents compared to reported EPS of 22 cents and adjusted EPS of 23 cents in the previous year’s first quarter.

“Strong execution by the teams drove a record fourth quarter and fiscal 2018, as we reached a milestone of 4 billion dollars in annual revenue with increased operating profit,” commented Jay Schottenstein, AEO’s Chairman and CEO in a statement.

Highlights of AEO’s fourth quarter results

Total net revenue for the 13 weeks increased 15 million dollars or 1 percent to 1.24 billion dollars. The company added that total revenue was adversely affected by approximately 60 million dollars of lost revenue due to operating one less week in 2018. Consolidated comparable sales increased 6 percent, following an 8 percent increase last year.

By brand, American Eagle comparable sales increased 3 percent, building on a 5 percent increase last year, while Aerie’s comparable sales increased 23 percent, following a 34 percent increase last year, marking the 17th consecutive quarter of double-digit comp growth.

Gross profit increased 5 million dollars or 1 percent to 431 million dollars from 425 million dollars last year, while the gross margin rate was flat at a rate of 34.6 percent. Operating income was 101 million dollars compared to 116 million dollars last year. As a rate to revenue, operating income decreased to 8.2 percent from 9.4 percent last year.

Review of AEO’s FY18 performance

Total net revenue for the 52 weeks ended February 2, 2019, increased 240 million dollars or 6 percent to 4 billion dollars. Total revenue, the company said, was adversely affected by approximately 40 million dollars of lost revenue due to operating one less week in 2018. Consolidated comparable sales increased 8 percent, following a 4 percent increase last year.

By brand, American Eagle comparable sales increased 5 percent, building on a 2 percent increase last year, while Aerie’s comparable sales increased 29 percent, following a 27 percent increase in 2017.

Gross profit increased 117 million or 8 percent to 1.5 billion dollars and the gross margin rate increased 80 basis points to 36.9 percent of revenue compared to 36.1 percent last year. Operating income of 337 million dollars increased from 303 million dollars last year, while adjusted operating income of 339 million dollars increased 4 percent from 325 million dollars last year. As a rate to revenue, adjusted operating income decreased to 8.4 percent from 8.6 percent.

EPS increased to 1.47 dollars compared to 1.13 dollars last year. The company added that adjusted EPS of 1.48 dollars excludes 1 cent of restructuring charges and increased 28 percent compared to adjusted EPS of 1.16 dollars last year, which excluded 8 cents of tax benefit related to the U.S. tax legislation and 11 cents of restructuring and related charges.

AEO ended the year with a total of 1,055 stores. During the year, the company opened 16 AE stores and closed 15, ending the year with 934 AE stores. Included in the AE store count are 147 Aerie side-by-side locations, of which 29 opened in 2018. Additionally, the company opened 12 Aerie standalone stores and closed six, ending the year with 115 Aerie standalone locations and 262 total Aerie stores. . Internationally, the company ended the year with 231 licensed stores.

Picture:Aerie website