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The company reported EPS of $0.34 for the quarter ended August 4, 2018, compared to $0.12 for the quarter ended July 29, 2017, up 183 per cent. EPS of $0.34 increased 79 per cent compared to adjusted EPS of $0.19 last year.
For the reported period, gross profit increased to $353 million from $293 million. Gross profit increased 20 per cent to $353 million from adjusted gross profit of $294 million last year. The gross margin rate increased to 36.6 per cent of revenue compared to adjusted 34.9 per cent last year, primarily reflecting rent leverage.
Selling, general and administrative expense of $234 million deleveraged to 24.3 per cent as a rate to revenue. Investments in customer-facing store payroll, higher wages, increased incentive expense and advertising contributed to the rise from $204 million last year.
Depreciation and amortisation expense increased 6 per cent to $43 million from $40 million last year, due to continued investments in our business. As a rate to revenue, depreciation leveraged to 4.4 per cent. The company posted an operating income of $76 million compared to $39 million last year, an increase of $37 million, or 95 per cent. Operating income increased 52 per cent to $76 million from adjusted operating income of $50 million last year, rising to 7.9 per cent as a rate to revenue.
"The second quarter results exceeded our expectations, delivering record sales and 79% growth in adjusted earnings. This marked our 14th consecutive quarter of comparable sales growth, with the American Eagle and Aerie brands posting positive results across both stores and e-commerce. Driven by exceptional product, teamwork and execution, it’s gratifying to see strength throughout our business, as we capitalize on the broad appeal of our brands and leading merchandise assortments," Jay Schottenstein, chief executive officer, said.
"We are pleased with the performance of the business through the back-to-school season with strength across brands and channels continuing. As we look forward, we remain focused on fueling our brands, delivering the best customer experiences and achieving strong financial returns," continued Schottenstein.
During the quarter, the company opened 4 American Eagle stores and had no closures, ending with 939 American Eagle stores, including 131 Aerie side-by-side locations. The company opened 1 Aerie stand-alone store and closed 1, ending with 109 Aerie stand-alone stores. Additionally, the company opened 1 Tailgate store. Internationally, the company ended the quarter with 223 licensed stores.
Based on an anticipated comparable sales increase in the high-single digits and total revenue growth in the mid-single digits, reflecting the approximate $40 million revenue shift into the second quarter due to the shifted retail calendar, management expects third quarter 2018 EPS to be approximately $0.45 to $0.47. This guidance excludes potential asset impairment and restructuring charges. Last year’s third quarter reported EPS of $0.36 included approximately $0.01 per share of restructuring and related charges. Excluding these items, last year’s third quarter adjusted EPS was $0.37. (RR)
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