Wednesday, August 29, 2012

AEO 2Q12 Earnings 8/20/12

     American Eagle Outfitters released earnings for 2Q12 on August 20th, 2012.  They reported net sales of $740mil compared to $669mil in 2Q11, which represents an 11% increase year-over-year, and beats street expectations of $738mil.  Sales were driven by a 9% increase in comparable store sales, and an increase in the average selling price. The company's AE Brand, aerie and AEO Direct segments reported a growth of 7%, 13% and 28%, respectively, in comparable store sales.  An adjusted EPS of 21 cents marks a 62% increase in EPS year-over-year.  Gross margin improved 210 basis points to 37.4%. Increase in margin was driven by strong top-line growth, lower product costs, and a decrease in occupancy/warehousing expenses.  AEO opened 9 new stores (8 of which are outlet stores), in 2Q12, and also closed 8 locations during the same period.

     EPS estimate for the third quarter is between 37 – 38 cents, which is higher than EPS from 2Q11 of 30 cents.  For the year, adjusted EPS is expected to be $1.33 to $1.36 which assumes comp store sales growth in the mid single-digit range. Guidance is adjusted for the 10 cent per share 77kids operating loss due to the closing of that business. The sale of the 77kids business was closed late in the quarter, and is expected to cause an after-tax loss of $35mil, of which $9mil is expected to be incurred in 3Q12.

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