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American Eagle achieves EPS within expected range
May '11
American Eagle Outfitters Inc announced earnings for the first quarter ended April 30, 2011 of $0.14 per diluted share, compared to income from continuing operations of $0.17 per diluted share last year.

“While sales for the quarter came in lower than anticipated, we achieved EPS within our expected range. A higher merchandise margin and the positive impact of our expense control initiatives contributed to the bottom line. During the quarter, we continued to implement strategic initiatives across our brands that will position the business for improved performance in the second half of the year and fuel longer-term, profitable growth,” said Jim O'Donnell, chief executive officer.

First Quarter Results – Continuing Operations

Total sales for the quarter decreased 6% to $610 million, compared to $648 million last year. First quarter comparable store sales decreased 8%, compared to a 5% increase last year.

Gross profit was $232 million, or 38.0% as a rate to sales, compared to $258 million, or 39.7% as a rate to sales, last year. The merchandise margin increased 70 basis points. As a rate to sales, buying, occupancy and warehousing costs increased 240 basis points. This was primarily due to rent, reflecting the impact of new store openings and negative comparable store sales.

Selling, general and administrative expense decreased 6% to $158 million, compared to $169 million last year. As a rate to sales, SG&A was flat to last year at 26.0%. The decrease in SG&A resulted from expense savings efforts, which yielded reductions in compensation, supplies and services, partially offset by planned investments in advertising and costs associated with new store growth.

Operating income for the quarter was $38 million, compared to $54 million last year. The operating margin decreased to 6.3% from 8.2% last year.

Other income, net of $5 million includes a $0.01 per diluted share benefit related to auction rate security recoveries.

Income from continuing operations for the quarter was $28 million, or $0.14 per diluted share, compared to $36 million, or $0.17 per diluted share, last year. As a rate to sales, income from continuing operations decreased to 4.6% from 5.5% last year.

AEO Direct

The company's direct-to-consumer business includes ae.com, aerie.com and 77kids.com. In the first quarter, sales increased 3% due to higher transactions driven by improved conversion. First quarter sales compared to a 1% increase last year.


Total merchandise inventory at the end of the first quarter was $332 million, an increase of $5 million, or 2%, compared to last year. First quarter ending inventory at cost per foot was flat to last year.

Looking ahead to the second quarter, inventory plans reflect investments in key items and the expansion of the accessory business. For the apparel business, second quarter average weekly inventory per foot is planned to increase in the high single-digits and units are planned to decrease in the low single-digits. Including accessories, total inventory is planned to increase in the low double-digits with units increasing in the low single-digits.

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Courtesy: Commonwealth Bank of Australia

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