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Sunday, March 21, 2010

American Eagle Outfitters

Wal-Mart.com USA, LLCAppliances at Sears.ca

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American Eagle Outfitters, Inc. (NYSE:AEO) announced that non-GAAP earnings for the fourth quarter ended January 30, 2010 were $0.33 per diluted share, excluding non-cash store impairment charges totaling $0.05 per diluted share. This compares to non-GAAP earnings of $0.19 per diluted share for the quarter ended January 31, 2009, which excluded non-cash, other-than-temporary investment security and store impairment charges totaling $0.03 per diluted share.

The company also announced that non-GAAP earnings for the fiscal year ended January 30, 2010 were $0.76 per diluted share. This compares to non-GAAP earnings of $0.99 per diluted share last year. Please see the table below for a complete reconciliation of GAAP to non-GAAP earnings.

In a separate press release dated March 9, 2010, the company announced that after an extensive evaluation and review of strategic alternatives, it plans to close the MARTIN+OSA concept, including all 28 stores and the online business. For additional information, see press release and Form 8-K dated March 9, 2010.

"While 2009 began with numerous challenges, I am extremely pleased that we ended the year on a high note, delivering increases in both sales and earnings in the fourth quarter," said Jim O'Donnell, chief executive officer. "During the quarter, we were especially pleased with the improvement in the AE brand. Our assortments were stronger, and the price/value offering was more compelling than ever. We will build upon the momentum and maximize the AE brand, continuing to re-capture market share. In 2010, we will focus our efforts and resources on the American Eagle family of brands including AE, aerie and 77 kids, which have the greatest potential. I am confident that we have the potential to realize our goals and position the company for long-term success." Fourth Quarter ResultsTotal sales for the quarter ended January 30, 2010 increased 7% to $972.0 million compared to $905.7 million for the quarter ended January 31, 2009. Fourth quarter comparable store sales increased 5%, compared to a 16% decline last year.

Gross profit for the fourth quarter was $388.2 million, or 39.9% as a rate to sales, compared to $311.6 million, or 34.4% as a rate to sales last year. The merchandise margin increased by 600 basis points, primarily due to lower markdowns. As a rate to sales, buying, occupancy and warehousing costs increased by 50 basis points. This was due primarily to the de-leveraging of rent and buying expense.

Selling, general and administrative expense of $237.1 million compares to $214.8 million last year, a 10.4% increase. Operational efficiencies and reductions in supply costs and advertising were offset by the accrual of incentive compensation costs, which was not earned in 2008.

Loss on impairment of assets was $18.0 million, or 1.8% as a rate to sales, compared to $6.7 million, or 0.7% as a rate to sales last year, and relates to the impairment of underperforming MARTIN+OSA stores.

Operating income for the quarter was $94.4 million, compared to $53.4 million last year. The operating margin was 9.7%, compared to 5.9% last year.

Other income, net was $1.6 million versus $2.9 million last year. The decline was primarily due to lower interest income, which resulted from an overall decrease in interest rates compared to last year.

Additionally, a $0.7 million other-than-temporary impairment charge was recognized in connection with the valuation of investment securities compared to a charge of $3.0 million last year.

The company generated net income during the fourth quarter of $59.3 million, compared to $32.7 million last year. Fiscal 2009 ResultsTotal sales for the year ended January 30, 2010 increased slightly to $2.991 billion, compared to $2.989 billion for the year ended January 31, 2009. Comparable store sales decreased 4% for the year, compared to a 10% decrease for the same period last year.

Gross profit for the year was $1.158 billion, or 38.7% as a rate to sales, compared to $1.174 billion, or 39.3% as a rate to sales last year. The merchandise margin improved by 80 basis points, primarily due to reduced markdowns. Buying, occupancy and warehousing costs increased by 140 basis points, primarily due to rent related to new store growth.

Selling, general and administrative expenses of $756.3 million compares to $734.0 million last year, a 3% increase. As a rate to sales, SG&A increased 60 basis points. In 2009, the company sustained expense savings achieved in 2008 and experienced expense reductions in the areas of advertising and travel. This was offset by the accrual of incentive costs, which was not earned in 2008.

Loss on impairment of assets was $18.0 million, or 0.6% as a rate to sales, compared to $6.7 million, or 0.2% as a rate to sales last year, and relates to the impairment of underperforming MARTIN+OSA stores.

Operating income for the year was $238.4 million, compared to $302.1 million last year. The operating margin was 8.0%, compared to 10.1% last year.

Other (expense) income, net was ($5.1) million versus $17.8 million last year. The decline was primarily due to a significantly lower rate of return on investments as well as a non-cash, non-operating foreign currency loss related to holding U.S. dollars in Canada in anticipation of repatriation that occurred in the second quarter of 2009. Additionally, we recognized a $0.9 million other-than-temporary impairment charge in connection with the valuation of our investment securities, which compared to a $22.9 million charge last year.

The company generated net income during the fiscal year of $169.0 million, compared to $179.1 million last year. InventoryTotal merchandise inventory at the end of the fourth quarter was $326.4 million, an increase of $31.5 million compared to $294.9 million last year. On a cost per square foot basis, ending inventory increased 8% compared to an 8% decline in inventory per foot at the end of fiscal 2008. Looking ahead to the first quarter, average weekly inventory at cost per foot is planned to increase in the mid single-digits, following a 5% decline last year. First quarter inventory growth largely reflects an increased investment in AE denim to support strong demand. Total inventory units per foot are flat in the first quarter. The increased inventory at cost relative to units reflects the higher mix of denim as a percent to the total. AEO DirectThe company's direct business includes ae.com, aerie.com, 77kids.com and martinandosa.com. In fiscal 2009, sales increased 12% to $344.3 million compared to $307.0 million in fiscal 2008. Capital ExpendituresFor the fourth quarter, capital expenditures were $21 million compared to $39 million last year. Reflecting our reduced spending plan, fiscal 2009 capital expenditures totaled $127 million compared to $265 million last year. Of the 2009 capital expenditures, approximately one half related to new and remodeled stores. The balance of the 2009 capital spend related to investments in the company's home office, distribution centers and IT initiatives to support AEO Direct and brand growth. As we continue with our reduced spending plan, 2010 capital expenditures are expected to be in the range of $100 to $120 million, with approximately one half relating to the investment in stores. Real EstateIn the fourth quarter, the company opened one AE store, completed the remodeling of one AE store and closed 15 AE stores. In fiscal 2009, the company opened eight new AE stores, remodeled 22 AE stores and closed 24 AE stores. The company also opened 21 aerie stores. For the year, total gross square footage increased approximately 1%.

Keywords: Advertising, American Eagle Outfitters Inc., Consumer, Fashion, Finance, Investing, Investment, Investment Securities, Manufacturing, Men, Online Retail, Other Consumer, Retail, Return On Investment, Specialty, Teens, Textiles, Women

This article was prepared by Marketing Weekly News editors from staff and other reports. Copyright 2010, Marketing Weekly News via VerticalNews.com.

Source Citation
"American Eagle Outfitters Reports Fourth Quarter 2009 Results." Marketing Weekly News 27 Mar. 2010: 213. General Business File ASAP. Web. 21 Mar. 2010.
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