AEO maintains healthy balance sheet & strong cash position

15 Mar '11

4 min read

American Eagle Outfitters Inc announced income from continuing operations for the fourth quarter ended January 29, 2011 of $0.44 per diluted share, an increase of 16% from $0.38 per diluted share last year.

The company also announced an 11% increase in adjusted earnings per diluted share from continuing operations for the fiscal year ended January 29, 2011. Fiscal 2010 income from continuing operations was $1.02 per diluted share, which excludes a realized loss from the sale of investment securities of $0.12 per diluted share.

This compares to adjusted income from continuing operations of $0.92 per diluted share last year. Please see the table below for a complete reconciliation of GAAP to non-GAAP earnings per diluted share from continuing operations for both periods.

“For the quarter and year, the company achieved higher operating income, despite lower sales, as we managed the business effectively through a number of challenges,” said Jim O'Donnell, chief executive officer.

“We have maintained a healthy balance sheet and strong cash position, while returning approximately $400 million to shareholders through a combination of share buybacks and dividend payments in fiscal 2010. As we look to 2011, we are moving forward with growth initiatives across our brands. Although we face external headwinds, including rising product costs, we expect to make further progress in positioning American Eagle Outfitters for long-term profitable growth.”

Fourth Quarter Results – Continuing Operations

Total sales for the quarter decreased 4% to $916 million, compared to $956 million last year. Fourth quarter comparable store sales decreased 7%, compared to a 5% increase last year.

Gross profit was $361 million, or 39.4% as a rate to sales, compared to $392 million, or 41.0% as a rate to sales, last year. The merchandise margin decreased 60 basis points. As a rate to sales, buying, occupancy and warehousing costs increased 100 basis points. This was due primarily to the impact of new store openings and negative comparable store sales.

Selling, general and administrative expense decreased 15% to $194 million, compared to $228 million last year. The $194 million of SG&A this year included $5 million of severance and related charges. The decrease in SG&A was due to a combination of lower levels of incentive compensation and expense reductions stemming from the company's corporate profit initiative. Building on the momentum established in the third quarter, the company experienced cost improvements in virtually all operating areas.

Operating income for the quarter increased 5% to $134 million, compared to $127 million last year. The operating margin expanded 130 basis points to 14.6% from 13.3% last year.

Fiscal 2010 Results – Continuing Operations

Total sales for the year increased 1% to $2.97 billion, compared to $2.94 billion last year. Comparable storesales decreased 1%, compared to a 4% decrease last year.

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