American Eagle Outfitters Inc. (NYSE: AEO) reported better-than-expected revenue and earnings for the second quarter of 2019 but provided a lower-than-anticipated earnings guidance for the third quarter, sending shares falling over 11% in premarket hours on Wednesday.
Net revenue rose 8% year-over-year to $1.04 billion, surpassing
estimates of $1 billion. Revenue results included $40 million for Japan license
royalties.
Consolidated comparable sales increased 2% compared to a 9% comp sales increase last year. Comp sales for the American Eagle brand fell 1% while Aerie’s comp sales rose 16%.
On a GAAP basis, net income was $65 million, or $0.38 per
share, compared to $60 million, or $0.34 per share, last year. Adjusted EPS amounted
to $0.39, beating forecasts of $0.32.
Total ending inventories at cost increased 15% to $535
million while ending inventory units were up 10%. The increase reflects inventory
to support strong demand for AE Jeans and new store openings mainly for Aerie.
In the second quarter, American Eagle incurred capital
expenditures of $55 million, which were mainly related to store remodels, new
store openings and investments to improve digital capabilities. The company
expects annual capital expenditures to range from $200-215 million.
During the quarter, the company opened 6 American
Eagle stores and closed 3, ending with 939 American Eagle stores, including 158
Aerie side-by-side locations. The company also opened 13 Aerie stand-alone
stores and closed 1, ending with 131 Aerie stand-alone stores. Internationally,
the company ended the quarter with 236 licensed stores compared to 223 last
year.
For the third quarter of 2019, the company expects comparable sales to increase in the low to mid single digits and adjusted EPS to be approx. $0.47-0.49. Analysts have been estimating third-quarter EPS of $0.52.
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