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American Eagle Outfitters Reports Record Annual Sales Of $3.5 Billion And 43% Growth In Adjusted EPS

Inventory

Total merchandise inventories at the end of the fourth quarter declined 10% to $332 million compared to $368 million last year. At cost per foot, inventory decreased 8%. First quarter 2013 ending inventory cost per foot is expected to be down in the mid single-digits.

Capital Expenditures

In 2012, capital expenditures totaled $94 million, with approximately half related to store investments and the balance to information technology and investments in e-commerce. For fiscal 2013, the company expects capital expenditures of $250 million to $280 million. In addition to investments in store growth and maintenance projects, the company’s capital spending plan includes building a new distribution center to support online growth, the installation of a new fleet-wide point-of-sale system and an upgraded merchandise planning system.

Real Estate

In 2012 total square footage decreased 1% from last year. The company opened 16 stores, closed 41 stores and completed 48 remodels. For additional fiscal 2012 actual and fiscal 2013 projected real estate information, see the accompanying table.

Store Impairment

During the fourth quarter, the company incurred pre-tax store asset impairment charges of $34 million, related to 42 aerie and nine AE stores.

Discontinued Operations- 77kids

On August 3, 2012, the company completed the sale of 77kids. In conjunction with the sale, the company incurred total after-tax losses of $32 million, or $0.16 per share, for the year ended February 2, 2013. 77kids results are presented as discontinued operations for all periods. Additionally, all prior period inventory balances for 77kids have been recorded as an asset held for sale on the company’s consolidated balance sheets.

Future Outlook

With macro-economic headwinds and unfavorable weather affecting consumer spending in February, management is issuing first quarter EPS guidance of $0.16 to $0.19 per diluted share, compared to EPS from continuing operations of $0.22 last year. EPS guidance is based on comparable store sales in the negative mid-single digit range, compared to a 17% increase in the first quarter of last year. Management remains committed to its strategic plan annual targets of 7% to 9% top line CAGR, 12% to 15% EBIT CAGR, and a ROIC of 14% to 17%.

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