American Eagle Outfitters Q1'FY14 diluted EPS sinks 88.9%

Inventory

Total merchandise inventories at the end of the first quarter declined 3% to $329 million compared to $341 million last year. At cost per foot, inventory decreased 7%. Inventories reflect a change to ownership terms completed late last year, as we began taking ownership of inventory at the receiving port rather than the port of departure. Excluding the change in terms, inventory at cost per foot increased in the mid single-digits. Second quarter 2014 ending inventory at cost per foot is expected to decline in the mid teens, or mid single-digits excluding the change in ownership terms.

American Eagle Outfitters, Inc. reported earnings of $0.02 per diluted share for the first quarter ended May 3, 2014, compared to adjusted earnings #

 

Capital Expenditures

In the first quarter, capital expenditures totaled $72 million. For fiscal 2014, the company continues to expect capital expenditures of approximately $230 million.

 

Real Estate

The company opened 11 new stores, including 5 factory stores, 2 stores in Mexico, and 1 store in China, and closed 20 locations, including 14 aerie stores. Three new North American mainline stores opened in key markets. Additionally, the company added 11 international licensed stores, including its first store in Colombia, and ended the quarter with 77 licensed stores in 13 countries.

 

Following a comprehensive fleet review, the company has identified an additional 150 stores to close in North America over the next three years, including nearly 100 AE stores. For 2014, the company is planning to close approximately 50 AE and 20 aerie stores in North America. Beginning in 2015, the company anticipates annualized after-tax savings of approximately $10-$15 million related to these store closures. For additional first quarter 2014 actual and fiscal 2014 projected real estate information, see the accompanying table.

 

Cash and Investments

The company ended the quarter with total cash and investments of $328 million compared to $496 million last year.

 

Second Quarter Outlook

Based on a high single-digit decline in comparable sales, management expects second quarter EPS to be approximately breakeven compared to earnings of $0.10 per diluted share last year. The guidance excludes potential asset impairment and restructuring charges.