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American Eagle Outfitters reports increased digital demand in first quarter

American Eagle Outfitters

American Eagle Outfitters, Inc. reported earnings per share of $1.54 for the first quarter ended 2nd May, 2020.

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This compared to $0.23 for the 13 weeks ended 4th May, 2019. Adjusted EPS of $0.84 this year excluded $0.70 of impairment and restructuring charges and compared to adjusted EPS of $0.24 last year, which excluded $0.01 of restructuring costs.

Jay Schottenstein, AEO’s Chairman and Chief Executive Officer commented, “I am extremely proud of the team’s agility and humanity as we have taken immediate actions to ensure the health and safety of our people, preserve financial strength and prepare AEO for a new future. Store closures and aggressive inventory liquidation had a significant impact on our first quarter financials. Yet customer engagement remained high and digital demand accelerated, well-exceeding our expectations. Aerie’s performance was truly exceptional despite store closures.”

“I am very pleased to see stores re-opening strong, supported by industry-leading health and sanitization measures to ensure safe and secure stores for our associates and customers. American Eagle and Aerie will be well-positioned for the back-to-school and fall seasons. We will offer compelling new collections and deliver the best customer experiences. AEO entered this crisis with a strong balance sheet and two of the most recognized, trusted and loved brands. Recent liquidity measures will protect our financial strength and enable us to continue to invest in our business, further solidifying our competitive position. We view this moment as an inflection point to accelerate strategies to emerge stronger, leaner, and more agile to effectively win in a post-COVID-19 world,” continued Jay.

Total net revenue for the 13 weeks ended 2nd May, 2020 decreased $335 million, or 38% to $552 million compared to $886 million for the 13 weeks ended 4th May, 2019.

By brand, American Eagle revenue decreased 45%, following a 5% increase last year. Aerie’s revenue decreased 2%, following a 28% increase last year.

The company’s digital demand, as measured by ordered sales, increased 33%. Aerie rose 75% and AE increased 15%. First quarter digital reported revenue was up 9%, reflecting strong demand, partly offset by temporary delays in fulfillment that led to higher than normal DC backlogs. The company has since reduced backlogs from mid-April peaks.

Gross profit of $28 million compared to $325 million last year. The gross margin rate of 5.1% compared to 36.7% last year. The gross profit dollar decline primarily reflected the reduction in store revenue, markdowns and promotions to clear through AE spring and summer goods, and $60 million in inventory provisions. The company also experienced buying, occupancy and warehousing pressure as a rate to revenue, due to the sales decline.

Selling, general and administrative expense of $188 million decreased $43 million from $231 million last year, primarily due to lower store operating expenses during closures.

Depreciation and amortization expense of $43 million decreased $2 million from $45 million last year.

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Operating loss of $358 million compared to income of $48 million last year. Adjusted operating loss of $203 million this year excluded $156 million of impairment and restructuring charges and compared to adjusted operating income of $49 million last year, which excluded $1.5 million of restructuring charges.

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