American Eagle Outfitters Reports 62% Increase In Second Quarter EPS

The company expects to incur an after-tax loss of approximately $35 million, which includes $25 million of exit related charges and $10 million of operational costs during the exit period. The after tax loss for the second quarter was $24 million, or a $0.12 loss per diluted share, compared to an operating loss of $5 million, or a $0.03 loss per diluted share, last year. The remainder of the exit period costs are expected to be incurred in the third quarter of fiscal 2012.

AEO Direct

In the second quarter, online sales increased 28%, compared to a 17% increase last year. The company’s online business includes ae.com and aerie.com.

Inventory (Excluding 77kids)

Total merchandise inventories at the end of the second quarter were $462 million vs. $457 million last year. At cost per foot, inventory is up 3% compared to last year. Third quarter ending inventory cost per foot is expected to be down mid single-digits.

Capital Expenditures

For the second quarter, capital expenditures were $24 million, compared to $28 million last year. For fiscal 2012, the company continues to expect capital expenditures to be approximately $100 million.

Real Estate

In the second quarter, total square footage decreased slightly, reflecting three store openings, offset by eight store closures, and 17 remodels and refurbishments. For additional second quarter 2012 actual and fiscal 2012 projected real estate information, see the accompanying table.

Cash and Investments

The company ended the quarter with total cash and short-term investments of $702 million compared to $514 million last year.

Future Outlook

For the third quarter, management expects EPS from continuing operations to be in the range of $0.37 to $0.38 per diluted share, compared to $0.30 last year. For the year, management is raising its EPS guidance from continuing operations to a range of $1.33 to $1.36, compared to an adjusted $0.97 last year. EPS guidance is based on comparable store sales growth of mid single-digits for the third quarter and low single-digits for the fourth quarter.

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