Today, American Eagle Outfitters (AEO) held its fourth
quarter earnings conference call, reporting revenues of $1.12B, representing an
increase of 9% from $1.03 billion last quarter which were directly in-line with
analyst expectations. Revenue growth was driven by a 4% comp increase on top of
an 11% increase last year and growing average unit sales (AURs). Comps broken
down by business show American Eagle Outfitters comps increased a meager 1% and
aerie comps declining 3% and e-Commerce growing 24%, showing consumers increasing
shift to online sales.
Gross profit for the quarter rose 27% to $461MM. Margins
grew 600 bps to 41.2% driven by lower cotton costs and other operational
leverage opportunities. SG&A expenses increased 21% to $253MM, due to
increased marketing spending, among other incentive relative costs. Operating
income for the quarter climbed 48% to $177MM with margins expanding 430 bps to
15.9%. The company achieved net income of $111MM. EPS increased 41% to $0.55
compared to $0.39 last year, missing analyst estimates of $0.56 by $0.01.
AEO ended the quarter with $631MM in cash on its balance
sheet, and inventory levels of $332MM. Capital expenditure investments for the
quarter totaled $94MM with slated out plans to boost spending in 2013 to
support future growth initiatives. The company issued rather bleak earnings guidance
for the first quarter citing unfavorable weather and macroeconomic factors, with
EPS expected to fall within the range of $0.16 - $0.19 based on an expected
consolidated comp in the negative mid-single-digit range.
Robert Hanson, chief
executive officer stated, “I’m extremely pleased with our progress in 2012 as
the team delivered on our near-term priorities and exceeded our targeted
financial metrics. In a competitive and volatile consumer environment, we drove
a strong topline on leaner inventories, reduced markdowns and achieved cost
leverage. We remain focused on our strategic plan aimed at fortifying our
brands and processes and growing our business across North America.
Concurrently, we are laying the ground work for transformational global
expansion, while continuing to drive strong returns to our shareholders.” The
company as of market close today is trading at $20.27, down 10.11% from its opening
price and full holdings of the stock position have been sold.
--
GB Shokunbi
