AMERICAN EAGLE OUTFITTERS, INC. FOURTH QUARTER & FISCAL YEAR 2023
Investor Presentation
Safe Harbor Statement Under The Private Securities
Litigation Reform Act Of 1995
This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent management's expectations or beliefs concerning future events, including first quarter and annual fiscal 2024 results. Words such as "outlook," "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," "may," "potential," and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements made by the company are inherently uncertain because they are based on assumptions and expectations concerning future events and are subject to change based on many important factors, some of which may be beyond the company's control. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the risk that the company's operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity.
Non-GAAP Measures
This presentation includes information on non-GAAP financial measures ("non-GAAP" or "adjusted"), including consolidated adjusted gross margin, operating income, net income and net income per diluted share, excluding non-GAAP items. These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles ("GAAP") and are not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Management believes that this non-GAAP information is useful for an alternate presentation of the company's performance, when reviewed in conjunction with the company's GAAP consolidated financial statements and provides a higher degree of transparency. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. The tables included in this presentation reconcile the GAAP financial measures to
the non-GAAP financial measures discussed above.
Fourth Quarter 2023 Results
- Record fourth quarter revenue of $1.7 billion rose 12% to last year
- Aerie achieved all-time high fourth quarter revenue with comps up 13%
- American Eagle comps increased 6% reflecting continued sequential improvement
"I am proud of how the teams executed in the fourth quarter. As our profit improvement initiatives took hold,
we delivered a material improvement in business, underscoring the power of our brands, operations and
strategic focus. Customers responded well to our strong merchandise collections fueling positive results across brands and channels," commented Jay Schottenstein, AEO's Executive Chairman of the Board and Chief Executive Officer.
"We are entering 2024 with momentum and from a position of strength with an exciting line-up of innovation and customer engagement initiatives. Our balance sheet is healthy and we are seeing early proof points of our new long-termstrategy to deliver industry-leadingearnings growth and shareholder returns, which we look forward to sharing today."
Jay Schottenstein
AEO's Executive Chairman of the Board and Chief Executive Officer
Key Highlights (unaudited)
FOURTH QUARTER* | 2023 | 2022 |
TOTAL NET REVENUE CHANGE | 12% | -1% |
GROSS MARGIN** | 37.3% | 33.9% |
SELLING, GENERAL & ADMINISTRATIVE EXPENSES | 25.4% | 23.5% |
OPERATING MARGIN** | 8.4% | 6.4% |
*The fourth quarter of Fiscal 2023 represents the 14 weeks ended February 3, 2024. The fourth quarter of Fiscal 2022 represents the 13 weeks ended January 28, 2023.
**Results are shown on an adjusted basis for all periods presented. See accompanying tables for a reconciliation of GAAP to non-GAAP results.
Inventory Data (unaudited)
(in thousands) | February 3, 2024 | January 28, 2023 |
ENDING INVENTORY | $640,662 | $585,083 |
ENDING INVENTORY % CHANGE TO PRIOR YEAR | 9% | 6% |
QUARTERLY INVENTORY TURN* | 1.51 | 1.43 |
- Inventory turn is calculated as the total GAAP cost of goods sold for the quarterly periods divided by the straight average of the beginning and ending inventory balances from the consolidated balance sheets
**Fiscal 2023 represents the 53 weeks ended February 3, 2024. Fiscal 2022 represents the 52 weeks ended January 28, 2023.
Results by Segment (Dollars in Thousands) (unaudited)
Fourth Quarter Ended* | Fiscal Year Ended** | ||||
February 3, 2024 | January 28, 2023 | February 3, 2024 | January 28, 2023 | ||
Net Revenue: | |||||
American Eagle | $ 1,066,092 | $ 961,848 | $ 3,361,579 | $ 3,262,893 | |
Aerie | $ 537,462 | $ 463,663 | $ 1,670,000 | $ 1,506,798 | |
Other¹ | $ 159,576 | $ 154,039 | $ 489,056 | $ 469,371 | |
Intersegment Elimination | $ (84,220) | $ (83,462) | $ (258,865) | $ (249,229) | |
Total Net Revenue | $ 1,678,910 | $ 1,496,088 | $ 5,261,770 | $ 4,989,833 | |
Operating Income: | |||||
American Eagle | $ 181,564 | $ 153,577 | $ 599,796 | $ 541,406 | |
Aerie | $ 87,090 | $ 56,671 | $ 275,862 | $ 167,467 | |
Other¹ ³ | $ (2,087) | $ (17,413) | $ (36,124) | $ (56,793) | |
Intersegment Elimination | - | - | - | - | |
General corporate expenses² | $ (125,961) | $ (97,044) | $ (464,172) | $ (382,824) | |
Impairment, restructuring and other charges³ | $ (131,370) | $ (22,209) | $ (152,645) | $ (22,209) | |
Total Operating Income | $ 9,236 | $ 73,582 | $ 222,717 | $ 247,047 | |
Debt related charges | - | $ 4,655 | - | $ 64,721 | |
Interest (income) expense, net | $ (4,961) | $ 2,409 | $ (6,190) | $ 14,297 | |
Other (income), net | $ (1,505) | $ (4,964) | $ (10,951) | $ (10,465) | |
Income before income taxes | $ 15,702 | $ 71,482 | $ 239,858 | $ 178,494 | |
Capital Expenditures | |||||
American Eagle | $ 12,728 | $ 30,033 | $ 61,139 | $ 85,033 | |
Aerie | $ 9,170 | $ 21,421 | $ 40,746 | $ 107,084 | |
Other¹ | $ 10,745 | $ 2,763 | $ 44,183 | $ 32,717 | |
General corporate expenditures² | $ 6,879 | $ 6,797 | $ 28,369 | $ 35,544 | |
Total Capital Expenditures | |||||
$ 39,522 | $ 61,014 | $ 174,437 | $ 260,378 |
- The Todd Snyder brand, Unsubscribed brand, and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure, they are presented under the Other caption.
- General corporate expenses are comprised of general and administrative costs that management does not attribute to any of our operating segments. These costs primarily relate to corporate administration, information and technology resources, finance and human resources functional and organizational costs, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-levelactivities and projects.
- Please refer to GAAP to Non-GAAP reconciliations for more details regarding impairment, restructuring, and other charges.
*The fourth quarter of Fiscal 2023 represents the 14 weeks ended February 3, 2024. The fourth quarter of Fiscal 2022 represents the 13 weeks ended January 28, 2023.
**Fiscal 2023 represents the 53 weeks ended February 3, 2024. Fiscal 2022 represents the 52 weeks ended January 28, 2023.
Statement of Operations Summary-GAAP Basis (unaudited)
Fourth Quarter Ended* (In thousands)
February 3, 2024
% of Revenue
January 28, 2023
% of Revenue
Total net revenue | $1,678,910 | 100.0% | $1,496,088 | 100.0% |
Cost of sales, including certain buying, occupancy and | ||||
warehousing expenses | 1,064,324 | 63.4% | 988,656 | 66.1% |
Gross profit | 614,586 | 36.6% | 507,432 | 33.9% |
Selling, general and administrative expenses | 427,090 | 25.4% | 351,408 | 23.5% |
Impairment and restructuring charges | 120,420 | 7.1% | 22,209 | 1.5% |
Depreciation and amortization expense | 57,840 | 3.5% | 60,233 | 4.0% |
Operating income | 9,236 | 0.6% | 73,582 | 4.9% |
Interest (income) expense, net | (4,961) | -0.3% | 2,409 | 0.2% |
Other (income), net | (1,505) | -0.1% | (4,964) | -0.4% |
Debt related charges | - | 4,655 | 0.3% | |
Income before income taxes | 15,702 | 1.0% | 71,482 | 4.8% |
Provision for income taxes | 9,386 | 0.6% | 16,891 | 1.2% |
Net income | $6,316 | 0.4% | $54,591 | 3.6% |
Net income per basic share | $0.03 | $0.29 | ||
Net income per diluted share | $0.03 | $0.28 | ||
Weighted average common shares outstanding - basic | 197,524 | 190,621 | ||
Weighted average common shares outstanding - diluted | 199,589 | 196,893 |
*The fourth quarter of Fiscal 2023 represents the 14 weeks ended February 3, 2024. The fourth quarter of Fiscal 2022 represents the 13 weeks ended January 28, 2023.
Fiscal Year Ended** (in thousands)
Total net revenue
Cost of sales, including certain buying, occupancy and warehousing expenses
Gross profit
Selling, general and administrative expenses Impairment and restructuring charges Depreciation and amortization expense Operating income
Interest (income) expense, net
Other (income), net
Debt related charges
Income before income taxes
Provision for income taxes
Net income
Net income per basic share
Net income per diluted share
Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted
February 3, 2024 | % of Revenue | January 28, 2023 | % of Revenue | |
$5,261,770 | 100.0% | $4,989,833 | 100.0% | |
3,237,192 | 61.5% | 3,244,585 | 65.0% | |
2,024,578 | 38.5% | 1,745,248 | 35.0% | |
1,433,300 | 27.2% | 1,269,095 | 25.4% | |
141,695 | 2.7% | 22,209 | 0.4% | |
226,866 | 4.4% | 206,897 | 4.2% | |
222,717 | 4.2% | 247,047 | 5.0% | |
(6,190) | -0.1% | 14,297 | 0.3% | |
(10,951) | -0.2% | (10,465) | -0.2% | |
- | 0.0% | 64,721 | 1.3% | |
239,858 | 4.5% | 178,494 | 3.6% | |
69,820 | 1.3% | 53,358 | 1.1% | |
$170,038 | 3.2% | $125,136 | 2.5% | |
$0.87 | $0.69 | |||
$0.86 | $0.64 | |||
195,646 | 181,778 | |||
196,863 | 205,226 |
**Fiscal 2023 represents the 53 weeks ended February 3, 2024. Fiscal 2022 represents the 52 weeks ended January 28, 2023.
GAAP to Non-GAAP Reconciliation
14 Weeks Ended February 3, 2024 | Gross | Operating | Income Tax | Effective | Net | Earnings per |
(in thousands, except per share amounts) | Profit¹ | Income² | Expense | Tax Rate | Income | Diluted Share |
GAAP Basis | $614,586 | $9,236 | $9,386 | 59.8% | $6,316 | $0.03 |
% of Revenue | 36.6% | 0.6% | 0.4% | |||
Add: Impairment and restructuring charges | $10,950 | $131,370 | $115,081 | $0.58 | ||
Tax effect of the above³ | $16,289 | -34.7% | ||||
Non-GAAP Basis | $625,536 | $140,606 | $25,675 | 17.5% | $121,397 | $0.61 |
% of Revenue | 37.3% | 8.4% | 7.2% |
- $11.0 million of inventory write-down charges related to our international businesses as further described in footnote (2) below.
- Quiet Platforms: $98.3 million of impairment and restructuring charges
- $40.5 million of intangible asset impairment
- $39.6 million of goodwill impairment
- $13.9 million of long-term asset impairment primarily related to technology which is no longer a part of the long-term strategy
- $4.3 million of employee severance, based on our revised strategy for Quiet Platforms
International: $10.9 million of impairment and restructuring charges
- $4.7 million related to Japan operating lease ROU assets and $3.6 million of Japan store property and equipment related to the exit of the Japan market
- $1.3 million of Hong Kong operating lease ROU assets
- $1.3 million of employee severance
Additionally, we recorded $11.0 million of inventory write-down charges related to restructuring our international operations, which was recorded separately in Cost of Sales and discussed in note (1) above.
Corporate: $11.2 of impairment and restructuring charges
- $6.0 million of employee severance related to corporate realignment
- $5.2 million of other asset impairment related to further strategic business changes
All impairments were recorded due to insufficient prospective cash flows to support the asset value.
- The income tax impact of $16.3 million is primarily caused by the non-deductibility of goodwill impairment and international restructuring charges as well as the additional tax expense on the overall mix of earnings in jurisdictions with different tax rates.
GAAP to Non-GAAP Reconciliation
13 Weeks Ended January 28, 2023 | Operating | Debt-Related | Income Tax | Effective | Net | Earnings per |
(in thousands, except per share amounts) | Income¹ | Charges² | Expense | Tax Rate | Income | Diluted Share |
GAAP Basis | $73,582 | $4,655 | $16,891 | 23.6% | $54,591 | $0.28 |
% of Revenue | 4.9% | 3.6% | ||||
Add: Impairment and restructuring charges | $22,209 | $18,186 | $0.09 | |||
Less: Debt-related charges | -$4,655 | $552 | $0.00 | |||
Tax effect of the above³ | $8,126 | 1.8% | ||||
Non-GAAP Basis | $95,791 | - | $25,017 | 25.4% | $73,329 | $0.37 |
% of Revenue | 6.4% | 4.9% |
(1) Quiet Platforms: $3.8 million of impairment and restructuring charges
- $2.8 million consisting of $2.3 million of operating lease ROU asset and $0.5 million of property and equipment impairment related to the closure of the Jacksonville, FL distribution center
- $1.0 million of severance related to employees of that distribution center
International: $8.0 million of impairment and restructuring charges
- $7.5 million of store impairment due to insufficient cash flows to support the asset value
- $0.5 million of employee severance related to downsizing our Hong Kong retail operations
U.S. and Canada: $10.4 million of impairment charges
- $10.4 million of impairment charges, consisting of $9.2 million of operating lease ROU asset and $1.2 million of store property and equipment All impairments were recorded due to insufficient prospective cash flows to support the asset value.
- $4.7 million debt related charges related primarily to the induced conversion expense on the exchange of our convertible notes.
- The income tax impact of $8.1 million related to impairment and restructuring charges is primarily caused by the non-deductibility of the portion of the induced conversion expense associated with the Note Exchanges. Furthermore, there was additional tax expense on the overall mix of earnings in jurisdictions with different tax rates.
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American Eagle Outfitters Inc. published this content on 07 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 March 2024 13:07:41 UTC.
