Teen clothing retailer American Eagle Outfitters, Inc. (AEO) reported Wednesday that profit for the fourth quarter climbed 81% from last year, helped by strong sales and margins amid fewer markdown sales during the Christmas shopping season.
Adjusted earnings per share for the quarter surged, and came in line with analysts' expectations. Quarterly net sales grew 7%, and topped consensus estimate by a whisker. The company also provided earnings forecast for the first quarter of fiscal 2010, above Street view.
In a statement, chief executive officer, Jim O'Donnell said, "While 2009 began with numerous challenges, I am extremely pleased that we ended the year on a high note, delivering increases in both sales and earnings in the fourth quarter. During the quarter, we were especially pleased with the improvement in the AE brand. Our assortments were stronger, and the price/value offering was more compelling than ever."
Fourth Quarter Results
The Pittsburgh, Pennsylvania-based shopping mall fixture reported net income of $59.32 million or $0.28 per share for the fourth quarter, up from $32.73 million or $0.16 per share in the prior-year quarter.
The results for the latest quarter include $0.05 per share of store impairment, while the year-ago quarter results included $0.01 per share of other-than-temporary investment security impairment, and $0.02 per share of store impairment.
Excluding the special items, non-GAAP earnings for the quarter rose to $0.33 per share from the year-ago quarter's $0.19 per share. On average, 32 analysts polled by Thomson Reuters expected the company to report earnings of $0.33 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Total net sales for the quarter increased 7% to $971.98 million from $905.71 million in the same quarter last year, and topped twenty seven Wall Street analysts' consensus estimate of $969.28 million by a whisker. Comparable store sales grew 5% for the quarter, over a 16% decline last year.
In February, American Eagle's total sales were up 6% to $188 million, and January sales rose 18% to $163.5 million from last year. In December, sales increased 9% to $538.9 million. Meanwhile, comparable-store sales for the month of February grew 6%, January comparable store sales were up 10%, and December comparable store sales increased 7%.
Peer Performance
Among American Eagle's peers, San Francisco, California-based specialty retailer Gap, Inc. (GPS) reported late last month that its fourth-quarter profit surged 45% from last year, driven by strong international sales and improved sales at Old Navy stores. Net earnings rose to $352 million or $0.51 per share from $243 million or $0.34 per share in the prior-year quarter. Quarterly net sales increased 4% to $4.24 billion from $4.08 billion last year.
Another peer, New Albany, Ohio-based teen apparel retailer Abercrombie & Fitch Co. (ANF) reported in mid-February a year-over-year decline in profit for the fourth quarter, hurt primarily by a 13% drop in comparable store sales and higher store related impairment charges. Net income dropped to $47.46 million or $0.53 per share from $68.41 million or $0.78 per share in the year-ago quarter. Quarterly net sales decreased 5% to $935.99 million from $980.81 million last year.
Other Metrics
Operating income for the fourth quarter surged to $94.44 million or 9.7% of net sales, from $53.35 million or 5.9% of net sales, in the prior-year quarter.
Gross profit for the quarter was $388.16 million or 39.9% of net sales, up from $311.64 million, or 34.4% of net sales, in the year-ago quarter, due to lower markdowns.
Selling, general and administrative expenses grew 1.4% to $237.12 million or 24.4% of net sales, from $214.78 million or 23.7% of net sales, in the prior-year quarter. Provision for income taxes were $36.01 million, higher than $20.52 million in the same quarter last year. The loss on impairment of assets for the quarter was $17.99 million, up from $6.71 million last year, relating to the impairment of underperforming MARTIN+OSA stores.
Capital expenditures for the quarter were $21 million, compared to $39 million in the year-ago quarter. The company ended the fourth quarter with cash and cash equivalents of $693.96 million, compared to $473.34 million at end of the prior-year quarter.
Total merchandise inventory at the end of the fourth quarter grew about 1% to $326.4 million from $294.9 million at the end of the year-ago quarter. Inventory related to retail stores at cost per foot increased 8%.
During the fourth quarter, American Eagle opened one AE store, closed 15 AE stores, and remodeled one AE store.
Last week, American Eagle announced a quarterly cash dividend of $0.10 per share, payable on April 9, to stockholders of record at the close of business on March 29, 2010.
The company announced Tuesday that it plans to close its MARTIN+OSA concept, including all 28 stores and the online business, following extensive evaluation and review of strategic alternatives as the brand was not achieving performance levels that warrant further investment. The store closures are expected to be substantially complete by the end of the second quarter of fiscal year 2010.
Full-Year Highlights
For fiscal 2009, American Eagle reported net income of $169.02 million or $0.81 per share, lower than $179.06 million or $0.86 per share in the prior year.
Excluding the special items, non-GAAP earnings for the year dropped to $0.76 per share from the year ago $0.99 per share. Analysts expected the company to report earnings of $0.76 per share for fiscal 2009.
Net sales for the full year edged up to $2.991 billion from $2.989 billion in the previous year. The Street was looking for full-year 2009 revenues of $2.99 billion. Comparable store sales decreased 4% for the year, over a 10% decline last year.
Looking Ahead...
"We will build upon the momentum and maximize the AE brand, continuing to re-capture market share. In 2010, we will focus our efforts and resources on the American Eagle family of brands including AE, aerie and 77 kids, which have the greatest potential," O'Donnell added.
Chief Financial Officer, Joan Hilson said, "In 2010, we will build upon the progress and momentum that began during the second half of 2009. Our goal is to achieve on-going margin improvement each quarter, returning to a minimum of mid-teen operating margin by 2011. This will be achieved through a combination of top line sales growth, on-going margin recovery, and focusing on new concepts which have demonstrated the highest potential."
For the first quarter, the company expects non-GAAP earnings in a range of $0.15 to $0.17 per share. Analysts expect the company to report earnings of $0.15 per share for the first quarter.
Meanwhile, the company said that it expects to close 15 to 25 stores AE stores during the first quarter, and is planning to add about 14 new and 20 remodeled AE stores, as well as 20 new aerie stores, and the first five 77 kids stores. Further, the company plans to close the 28 MARTIN+OSA stores, as previously announced.
The company also expects fiscal 2010 capital expenditures to be in a range of $100 million to $120 million, as the it continues with the reduced spending plan, with about 50% being used for investment in stores.
Stock Quote
In Wednesday's regular trading session, AEO is currently trading at $18.31, up $1.16 or 6.76% on a volume of 2.98 million shares. In the past 52-week period, the stock has been trading in a broad range of $8.79 to $19.86.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.