Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries AEO Inc. Reports Second Quarter 2022 Results. Expanding Actions to Strengthen Financial Performance By: American Eagle Outfitters, Inc. via Business Wire September 07, 2022 at 16:15 PM EDT Second quarter results impacted by challenging consumer backdrop Expanding scope of expense and capital expenditure reductions Significant progress made on right-sizing inventory Pausing quarterly cash dividend to provide additional financial flexibility American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the second quarter ended July 30, 2022. “This is an unprecedented time in retail. As we cycle exceptional demand from last year, a tougher macro environment is impacting consumer spending behavior. Second quarter performance reflected these challenges, constraining revenue and amplifying margin pressure as we fully cleared through excess spring and summer goods,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer. “In a shifting macro environment, we are focused on controlling the controllables. We entered the second half with inventory levels in a much better position and an assortment that is current for the Fall season. Given ongoing external uncertainties, we have taken additional actions to improve financial performance. We have made more expansive expense reductions and are pulling back further on capital expenditures. As an additional cautionary move, we have paused our quarterly cash dividend to strengthen our cash position. Our brands and products remain highly relevant and sought after by our customers. I am confident we will successfully navigate current challenges, and set AEO up for a stronger future.” Second Quarter 2022 Results: Total net revenue of $1.2 billion, flat to the second quarter of 2021. Our supply chain business, Quiet Platforms, contributed approximately 2 percentage points to revenue growth. Brand revenue declined 2%. Aerie revenue of $372 million rose 11% versus second quarter 2021, reflecting a 25% 3-year revenue CAGR. Comp sales declined 6% versus second quarter 2021. American Eagle revenue of $778 million declined 8% versus second quarter 2021 reflecting a -3% 3-year revenue CAGR. Comp sales declined 10% versus second quarter 2021. Consolidated store revenue declined 2%. Total digital revenue declined 6%. Compared to pre-pandemic first quarter 2019, store revenue increased 1% and digital revenue increased 60%. Gross profit of $370 million declined 26% from $502 million in the second quarter of 2021 and reflected a gross margin rate of 30.9% compared to 42.1% last year. Higher markdowns drove 750 basis points of the rate decline with roughly a third reflecting higher end of season selloffs to fully clear excess spring and summer goods. Higher freight costs impacted the gross margin by approximately 200 basis points and Quiet Platforms had a 60 basis point impact as we integrate and ramp up the platform. Delivery, warehousing costs and rent also increased, offset slightly by lower incentive compensation accruals. Selling, general and administrative expense of $308 million increased 5%. SG&A increased 110 basis points as a rate to sales versus second quarter 2021 primarily due to increased store wages, corporate compensation, professional services and advertising, partially offset by lower incentive compensation accruals. Operating income of $14 million included an approximately $30 million impact from higher end-of-season selloffs, $25 million from higher freight costs and a $9 million loss from Quiet Platforms, and compared to operating income of $168 million in the second quarter of 2021. GAAP EPS of ($0.24). Adjusted EPS of $0.04 excludes $60 million of debt related charges primarily linked to the convertible notes exchange transaction and includes an approximately $1 million addback to net income of interest expense associated with the company’s convertible notes. GAAP average diluted shares outstanding were 180 million. Adjusted average diluted shares outstanding were 207 million, compared to 209 million in the second quarter of 2021. Unrealized dilution associated with the company’s convertible notes was 25 million shares compared to 36 million shares in the second quarter of 2021 reflecting the timing and impact of exchange transactions completed in the quarter. The company also repurchased 17 million shares in the quarter as part of its accelerated share repurchase program. Third quarter weighted average share count is expected to be 198 million shares. Inventory Total ending inventory at cost increased 36% to $687 million compared to $504 million last year. From a brand standpoint, AE and Aerie each drove roughly half of the increase. Total units were up 22%, reflecting better in-stocks and earlier receipts due to improved flow across the supply chain. Store openings over the past 12 months across Aerie and Offline also drove a portion of the inventory increase. Ending second quarter inventory consisted of current BTS and fall merchandise. The company continues to make progress adjusting inventories lower to be in line with demand trends. Third quarter ending inventory is projected to be up in the mid-single digits with fourth quarter inventory expected to be down year-on-year. Capital Expenditures Capital expenditures totaled $69 million in the second quarter and $128 million year-to-date. For the year, management now expects to spend approximately $250 million, compared to prior guidance of $275 million. Shareholder Returns In the first half of the year, the company paid two quarterly cash dividends of $0.18 per share, amounting to approximately $65 million. The company also repurchased approximately 17 million shares through an accelerated share repurchase program totalling $200 million. The total cash returned to shareholders of $265 million was the highest level since 2015. To increase financial flexibility while navigating near-term macro challenges, the company is pausing its quarterly cash dividend. Outlook Quarter-to-date, demand trends remain difficult, with brand revenue down in the high-single digits following exceptional growth and a record Back-to-School season last year. Assuming current trends continue, the third quarter gross-margin rate would be in the mid-30s and fourth quarter in the low-30s. This reflects higher markdowns in anticipation of a more promotional retail environment and the company’s seasonal clearance cadence which is more weighted to the fourth quarter. Management has expanded expense cuts with a focus on store payroll, corporate expense, professional services and advertising. These actions are now expected to drive $100 million in annualized expense reductions to plan, compared to our prior target of $60 million. This translates to SG&A dollars remaining relatively flat to last year in the second half, compared to prior guidance for low-to-mid-single digit growth. Conference Call and Supplemental Financial Information Management will host a conference call and real time webcast today at 4:30 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.aeo-inc.com to access the webcast and audio replay. Additionally, a financial results presentation is posted on the company’s website. About American Eagle Outfitters, Inc. American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 270 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including third quarter and annual fiscal 2022 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," “potential,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results for fiscal 2022 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity. AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited) July 30, 2022 January 29, 2022 July 31, 2021 ASSETS Cash and cash equivalents $ 98,214 $ 434,770 $ 773,994 Short-term investments - - 50,000 Merchandise inventory 687,046 553,458 503,507 Accounts receivable, net 220,803 286,683 155,361 Prepaid expenses and other 171,326 122,013 118,721 Total current assets 1,177,389 1,396,924 1,601,583 Operating lease right-of-use assets 1,210,285 1,193,021 1,103,247 Property and equipment, at cost, net of accumulated depreciation 775,969 728,272 641,396 Goodwill, net 271,406 271,416 16,365 Intangible assets, net 98,651 102,701 54,255 Non-current deferred income taxes 37,017 44,167 46,600 Other assets 58,500 50,142 31,576 Total assets $ 3,629,217 $ 3,786,643 $ 3,495,022 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 198,645 $ 231,782 $ 221,471 Current portion of operating lease liabilities 328,348 311,005 288,534 Unredeemed gift cards and gift certificates 51,111 71,365 44,095 Accrued compensation and payroll taxes 50,788 141,817 133,185 Accrued income taxes and other 16,708 16,274 25,365 Other current liabilities and accrued expenses 72,461 70,628 56,568 Total current liabilities 718,061 842,871 769,218 Non-current operating lease liabilities 1,137,656 1,154,481 1,094,386 Long-term debt, net 376,522 341,002 331,680 Other non-current liabilities 24,055 24,617 24,207 Total non-current liabilities 1,538,233 1,520,100 1,450,273 Commitments and contingencies - - - Preferred stock - - - Common stock 2,496 2,496 2,496 Contributed capital 380,959 636,355 630,506 Accumulated other comprehensive loss (40,017 ) (40,845 ) (36,894 ) Retained earnings 2,000,021 2,203,772 2,058,448 Treasury stock (970,536 ) (1,378,106 ) (1,379,025 ) Total stockholders' equity 1,372,923 1,423,672 1,275,531 Total liabilities and stockholders' equity $ 3,629,217 $ 3,786,643 $ 3,495,022 Current ratio 1.64 1.66 2.08 AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share amounts) (unaudited) GAAP Basis 13 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 1,198,124 100.0 % $ 1,194,156 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 828,107 69.1 % 691,765 57.9 % Gross profit 370,017 30.9 % 502,391 42.1 % Selling, general and administrative expenses 307,832 25.7 % 293,939 24.6 % Depreciation and amortization expense 48,171 4.0 % 40,456 3.4 % Operating income 14,014 1.2 % 167,996 14.1 % Debt related charges 60,066 5.1 % - 0.0 % Interest expense, net 3,421 0.3 % 8,921 0.8 % Other income, net (1,839 ) -0.2 % (1,363 ) -0.1 % (Loss) income before income taxes (47,634 ) -4.0 % 160,438 13.4 % (Benefit) provision for income taxes (5,168 ) -0.5 % 38,927 3.2 % Net (loss) income $ (42,466 ) -3.5 % $ 121,511 10.2 % Net (loss) income per basic share $ (0.24 ) $ 0.73 Net (loss) income per diluted share $ (0.24 ) $ 0.58 Weighted average common shares outstanding - basic 180,189 167,491 Weighted average common shares outstanding - diluted 180,189 208,933 GAAP Basis 26 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 2,253,161 100.0 % $ 2,228,769 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 1,495,118 66.4 % 1,290,188 57.9 % Gross profit 758,043 33.6 % 938,581 42.1 % Selling, general and administrative expenses 606,587 26.9 % 558,430 25.1 % Depreciation and amortization expense 95,540 4.2 % 78,727 3.5 % Operating income 55,916 2.5 % 301,424 13.5 % Debt related charges 60,066 2.7 % - 0.0 % Interest expense, net 8,009 0.4 % 17,426 0.7 % Other income, net (6,283 ) -0.3 % (3,223 ) -0.1 % (Loss) income before income taxes (5,876 ) -0.3 % 287,221 13.0 % Provision for income taxes 4,850 0.2 % 70,244 3.2 % Net (loss) income $ (10,726 ) -0.5 % $ 216,977 9.7 % Net (loss) income per basic share $ (0.06 ) $ 1.29 Net (loss) income per diluted share $ (0.06 ) $ 1.04 Weighted average common shares outstanding - basic 174,544 168,036 Weighted average common shares outstanding - diluted 174,544 208,400 AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 30, 2022 Debt relatedcharges Net (loss) income Diluted earningsper common share Effective tax rate Weighted averagecommon sharesoutstanding-diluted GAAP Basis $ 60,066 $ (42,466 ) $ (0.24 ) 10.9 % 180,189 % of Revenue 5.1 % -3.5 % Less: Debt related charges (1) 60,066 49,126 0.28 Dilution(2) 26,512 Non-GAAP Basis $ - $ 6,660 $ 0.04 46.4 % 206,701 % of Revenue 0.0 % 0.6 % (1) Pre-tax debt related charges of $60.1 million related primarily to the induced conversion expense on the exchange of our convertible notes, along with certain other costs related to actions we took to strengthen our capital structure. A portion of the induced conversion expense was not deductible for income tax purposes which resulted in the difference in the effective tax rate. (2) Dilution of 26.5 million shares consists of 25.3 million shares from the Company's 2025 notes and 1.2 million shares of equity awards. As GAAP results were a net (loss), these shares were not included in the diluted earnings per share denominator. AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 31, 2021 Interest expense,net Net income Diluted earningsper common share GAAP Basis $ 8,921 $ 121,511 $ 0.58 % of Revenue 0.8 % 10.2 % Less: Convertible debt (1) 4,956 3,754 0.02 Non-GAAP Basis $ 3,965 $ 125,265 $ 0.60 % of Revenue 0.3 % 10.5 % (1) Amortization of the non-cash discount on the Company's convertible notes AMERICAN EAGLE OUTFITTERS, INC. RESULTS BY SEGMENT (Dollars in thousands) (unaudited) American Eagle Aerie Corporate andOther(1) Total 13 weeks ended July 30, 2022 Total net revenue $ 777,828 $ 371,683 $ 48,613 $ 1,198,124 Operating income (loss) $ 109,110 $ 11,830 $ (106,926 ) $ 14,014 % of revenue 14.0 % 3.2 % 1.2 % Capital expenditures $ 18,754 $ 30,244 $ 20,466 $ 69,464 13 weeks ended July 31, 2021 Total net revenue $ 845,882 $ 335,795 $ 12,479 $ 1,194,156 Operating income (loss) $ 198,896 $ 70,646 $ (101,546 ) $ 167,996 % of revenue 23.5 % 21.0 % 14.1 % Capital expenditures $ 17,189 $ 16,641 $ 15,569 $ 49,399 American Eagle Aerie Corporate andOther(1) Total 26 Weeks Ended July 30, 2022 Total net revenue $ 1,463,407 $ 693,395 $ 96,359 $ 2,253,161 Operating income (loss) $ 213,015 $ 54,903 $ (212,002 ) $ 55,916 % of revenue 14.6 % 7.9 % 2.5 % Capital expenditures $ 34,524 $ 61,259 $ 32,075 $ 127,858 26 Weeks Ended July 31, 2021 Total net revenue $ 1,573,584 $ 633,282 $ 21,903 $ 2,228,769 Operating income (loss) $ 350,128 $ 140,624 $ (189,328 ) $ 301,424 % of revenue 22.3 % 22.2 % 13.5 % Capital expenditures $ 30,628 $ 27,460 $ 28,117 $ 86,205 (1) Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and Quiet Platforms (net of intersegment eliminations), which have been identified as operating segments but are not material to disclose as separate reportable segments. Corporate operating costs represents certain costs that are not directly attributable to another reportable segment. AMERICAN EAGLE OUTFITTERS, INC. STORE INFORMATION (unaudited) Second Quarter YTD Second Quarter 2022 2022 Consolidated stores at beginning of period 1,141 1,133 Consolidated stores opened during the period AE Brand (2) 4 11 Aerie (incl. OFFL/NE) (3) 23 35 Todd Snyder 1 1 Unsubscribed 1 1 Consolidated stores closed during the period AE Brand (2) (9) (18) Aerie (incl. OFFL/NE) (3) (1) (3) Total consolidated stores at end of period 1,160 1,160 AE Brand (2) 873 Aerie (incl. OFFL/NE) (3) 276 Todd Snyder 6 Unsubscribed 5 Total gross square footage at end of period (in '000) 7,205 7,205 International license locations at end of period (1) 260 260 (1) International license locations (retail stores and concessions) are not included in the consolidated store data or the total gross square footage calculation. (2) AE Brand includes AE stand alone locations, AE/Aerie side-by side locations, AE/OFFL/NE side-by-side locations, and AE/Aerie/OFFL/NE side-by-side locations. (3) Aerie (incl. OFFL/NE) includes Aerie stand alone locations, OFFL/NE stand alone locations, and Aerie/OFFL/NE side-by-side locations. View source version on businesswire.com: https://www.businesswire.com/news/home/20220907006065/en/Contacts Olivia Messina 412-432-3300 LineMedia@ae.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
AEO Inc. Reports Second Quarter 2022 Results. Expanding Actions to Strengthen Financial Performance By: American Eagle Outfitters, Inc. via Business Wire September 07, 2022 at 16:15 PM EDT Second quarter results impacted by challenging consumer backdrop Expanding scope of expense and capital expenditure reductions Significant progress made on right-sizing inventory Pausing quarterly cash dividend to provide additional financial flexibility American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the second quarter ended July 30, 2022. “This is an unprecedented time in retail. As we cycle exceptional demand from last year, a tougher macro environment is impacting consumer spending behavior. Second quarter performance reflected these challenges, constraining revenue and amplifying margin pressure as we fully cleared through excess spring and summer goods,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer. “In a shifting macro environment, we are focused on controlling the controllables. We entered the second half with inventory levels in a much better position and an assortment that is current for the Fall season. Given ongoing external uncertainties, we have taken additional actions to improve financial performance. We have made more expansive expense reductions and are pulling back further on capital expenditures. As an additional cautionary move, we have paused our quarterly cash dividend to strengthen our cash position. Our brands and products remain highly relevant and sought after by our customers. I am confident we will successfully navigate current challenges, and set AEO up for a stronger future.” Second Quarter 2022 Results: Total net revenue of $1.2 billion, flat to the second quarter of 2021. Our supply chain business, Quiet Platforms, contributed approximately 2 percentage points to revenue growth. Brand revenue declined 2%. Aerie revenue of $372 million rose 11% versus second quarter 2021, reflecting a 25% 3-year revenue CAGR. Comp sales declined 6% versus second quarter 2021. American Eagle revenue of $778 million declined 8% versus second quarter 2021 reflecting a -3% 3-year revenue CAGR. Comp sales declined 10% versus second quarter 2021. Consolidated store revenue declined 2%. Total digital revenue declined 6%. Compared to pre-pandemic first quarter 2019, store revenue increased 1% and digital revenue increased 60%. Gross profit of $370 million declined 26% from $502 million in the second quarter of 2021 and reflected a gross margin rate of 30.9% compared to 42.1% last year. Higher markdowns drove 750 basis points of the rate decline with roughly a third reflecting higher end of season selloffs to fully clear excess spring and summer goods. Higher freight costs impacted the gross margin by approximately 200 basis points and Quiet Platforms had a 60 basis point impact as we integrate and ramp up the platform. Delivery, warehousing costs and rent also increased, offset slightly by lower incentive compensation accruals. Selling, general and administrative expense of $308 million increased 5%. SG&A increased 110 basis points as a rate to sales versus second quarter 2021 primarily due to increased store wages, corporate compensation, professional services and advertising, partially offset by lower incentive compensation accruals. Operating income of $14 million included an approximately $30 million impact from higher end-of-season selloffs, $25 million from higher freight costs and a $9 million loss from Quiet Platforms, and compared to operating income of $168 million in the second quarter of 2021. GAAP EPS of ($0.24). Adjusted EPS of $0.04 excludes $60 million of debt related charges primarily linked to the convertible notes exchange transaction and includes an approximately $1 million addback to net income of interest expense associated with the company’s convertible notes. GAAP average diluted shares outstanding were 180 million. Adjusted average diluted shares outstanding were 207 million, compared to 209 million in the second quarter of 2021. Unrealized dilution associated with the company’s convertible notes was 25 million shares compared to 36 million shares in the second quarter of 2021 reflecting the timing and impact of exchange transactions completed in the quarter. The company also repurchased 17 million shares in the quarter as part of its accelerated share repurchase program. Third quarter weighted average share count is expected to be 198 million shares. Inventory Total ending inventory at cost increased 36% to $687 million compared to $504 million last year. From a brand standpoint, AE and Aerie each drove roughly half of the increase. Total units were up 22%, reflecting better in-stocks and earlier receipts due to improved flow across the supply chain. Store openings over the past 12 months across Aerie and Offline also drove a portion of the inventory increase. Ending second quarter inventory consisted of current BTS and fall merchandise. The company continues to make progress adjusting inventories lower to be in line with demand trends. Third quarter ending inventory is projected to be up in the mid-single digits with fourth quarter inventory expected to be down year-on-year. Capital Expenditures Capital expenditures totaled $69 million in the second quarter and $128 million year-to-date. For the year, management now expects to spend approximately $250 million, compared to prior guidance of $275 million. Shareholder Returns In the first half of the year, the company paid two quarterly cash dividends of $0.18 per share, amounting to approximately $65 million. The company also repurchased approximately 17 million shares through an accelerated share repurchase program totalling $200 million. The total cash returned to shareholders of $265 million was the highest level since 2015. To increase financial flexibility while navigating near-term macro challenges, the company is pausing its quarterly cash dividend. Outlook Quarter-to-date, demand trends remain difficult, with brand revenue down in the high-single digits following exceptional growth and a record Back-to-School season last year. Assuming current trends continue, the third quarter gross-margin rate would be in the mid-30s and fourth quarter in the low-30s. This reflects higher markdowns in anticipation of a more promotional retail environment and the company’s seasonal clearance cadence which is more weighted to the fourth quarter. Management has expanded expense cuts with a focus on store payroll, corporate expense, professional services and advertising. These actions are now expected to drive $100 million in annualized expense reductions to plan, compared to our prior target of $60 million. This translates to SG&A dollars remaining relatively flat to last year in the second half, compared to prior guidance for low-to-mid-single digit growth. Conference Call and Supplemental Financial Information Management will host a conference call and real time webcast today at 4:30 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.aeo-inc.com to access the webcast and audio replay. Additionally, a financial results presentation is posted on the company’s website. About American Eagle Outfitters, Inc. American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 270 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including third quarter and annual fiscal 2022 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," “potential,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results for fiscal 2022 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity. AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited) July 30, 2022 January 29, 2022 July 31, 2021 ASSETS Cash and cash equivalents $ 98,214 $ 434,770 $ 773,994 Short-term investments - - 50,000 Merchandise inventory 687,046 553,458 503,507 Accounts receivable, net 220,803 286,683 155,361 Prepaid expenses and other 171,326 122,013 118,721 Total current assets 1,177,389 1,396,924 1,601,583 Operating lease right-of-use assets 1,210,285 1,193,021 1,103,247 Property and equipment, at cost, net of accumulated depreciation 775,969 728,272 641,396 Goodwill, net 271,406 271,416 16,365 Intangible assets, net 98,651 102,701 54,255 Non-current deferred income taxes 37,017 44,167 46,600 Other assets 58,500 50,142 31,576 Total assets $ 3,629,217 $ 3,786,643 $ 3,495,022 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 198,645 $ 231,782 $ 221,471 Current portion of operating lease liabilities 328,348 311,005 288,534 Unredeemed gift cards and gift certificates 51,111 71,365 44,095 Accrued compensation and payroll taxes 50,788 141,817 133,185 Accrued income taxes and other 16,708 16,274 25,365 Other current liabilities and accrued expenses 72,461 70,628 56,568 Total current liabilities 718,061 842,871 769,218 Non-current operating lease liabilities 1,137,656 1,154,481 1,094,386 Long-term debt, net 376,522 341,002 331,680 Other non-current liabilities 24,055 24,617 24,207 Total non-current liabilities 1,538,233 1,520,100 1,450,273 Commitments and contingencies - - - Preferred stock - - - Common stock 2,496 2,496 2,496 Contributed capital 380,959 636,355 630,506 Accumulated other comprehensive loss (40,017 ) (40,845 ) (36,894 ) Retained earnings 2,000,021 2,203,772 2,058,448 Treasury stock (970,536 ) (1,378,106 ) (1,379,025 ) Total stockholders' equity 1,372,923 1,423,672 1,275,531 Total liabilities and stockholders' equity $ 3,629,217 $ 3,786,643 $ 3,495,022 Current ratio 1.64 1.66 2.08 AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share amounts) (unaudited) GAAP Basis 13 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 1,198,124 100.0 % $ 1,194,156 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 828,107 69.1 % 691,765 57.9 % Gross profit 370,017 30.9 % 502,391 42.1 % Selling, general and administrative expenses 307,832 25.7 % 293,939 24.6 % Depreciation and amortization expense 48,171 4.0 % 40,456 3.4 % Operating income 14,014 1.2 % 167,996 14.1 % Debt related charges 60,066 5.1 % - 0.0 % Interest expense, net 3,421 0.3 % 8,921 0.8 % Other income, net (1,839 ) -0.2 % (1,363 ) -0.1 % (Loss) income before income taxes (47,634 ) -4.0 % 160,438 13.4 % (Benefit) provision for income taxes (5,168 ) -0.5 % 38,927 3.2 % Net (loss) income $ (42,466 ) -3.5 % $ 121,511 10.2 % Net (loss) income per basic share $ (0.24 ) $ 0.73 Net (loss) income per diluted share $ (0.24 ) $ 0.58 Weighted average common shares outstanding - basic 180,189 167,491 Weighted average common shares outstanding - diluted 180,189 208,933 GAAP Basis 26 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 2,253,161 100.0 % $ 2,228,769 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 1,495,118 66.4 % 1,290,188 57.9 % Gross profit 758,043 33.6 % 938,581 42.1 % Selling, general and administrative expenses 606,587 26.9 % 558,430 25.1 % Depreciation and amortization expense 95,540 4.2 % 78,727 3.5 % Operating income 55,916 2.5 % 301,424 13.5 % Debt related charges 60,066 2.7 % - 0.0 % Interest expense, net 8,009 0.4 % 17,426 0.7 % Other income, net (6,283 ) -0.3 % (3,223 ) -0.1 % (Loss) income before income taxes (5,876 ) -0.3 % 287,221 13.0 % Provision for income taxes 4,850 0.2 % 70,244 3.2 % Net (loss) income $ (10,726 ) -0.5 % $ 216,977 9.7 % Net (loss) income per basic share $ (0.06 ) $ 1.29 Net (loss) income per diluted share $ (0.06 ) $ 1.04 Weighted average common shares outstanding - basic 174,544 168,036 Weighted average common shares outstanding - diluted 174,544 208,400 AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 30, 2022 Debt relatedcharges Net (loss) income Diluted earningsper common share Effective tax rate Weighted averagecommon sharesoutstanding-diluted GAAP Basis $ 60,066 $ (42,466 ) $ (0.24 ) 10.9 % 180,189 % of Revenue 5.1 % -3.5 % Less: Debt related charges (1) 60,066 49,126 0.28 Dilution(2) 26,512 Non-GAAP Basis $ - $ 6,660 $ 0.04 46.4 % 206,701 % of Revenue 0.0 % 0.6 % (1) Pre-tax debt related charges of $60.1 million related primarily to the induced conversion expense on the exchange of our convertible notes, along with certain other costs related to actions we took to strengthen our capital structure. A portion of the induced conversion expense was not deductible for income tax purposes which resulted in the difference in the effective tax rate. (2) Dilution of 26.5 million shares consists of 25.3 million shares from the Company's 2025 notes and 1.2 million shares of equity awards. As GAAP results were a net (loss), these shares were not included in the diluted earnings per share denominator. AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 31, 2021 Interest expense,net Net income Diluted earningsper common share GAAP Basis $ 8,921 $ 121,511 $ 0.58 % of Revenue 0.8 % 10.2 % Less: Convertible debt (1) 4,956 3,754 0.02 Non-GAAP Basis $ 3,965 $ 125,265 $ 0.60 % of Revenue 0.3 % 10.5 % (1) Amortization of the non-cash discount on the Company's convertible notes AMERICAN EAGLE OUTFITTERS, INC. RESULTS BY SEGMENT (Dollars in thousands) (unaudited) American Eagle Aerie Corporate andOther(1) Total 13 weeks ended July 30, 2022 Total net revenue $ 777,828 $ 371,683 $ 48,613 $ 1,198,124 Operating income (loss) $ 109,110 $ 11,830 $ (106,926 ) $ 14,014 % of revenue 14.0 % 3.2 % 1.2 % Capital expenditures $ 18,754 $ 30,244 $ 20,466 $ 69,464 13 weeks ended July 31, 2021 Total net revenue $ 845,882 $ 335,795 $ 12,479 $ 1,194,156 Operating income (loss) $ 198,896 $ 70,646 $ (101,546 ) $ 167,996 % of revenue 23.5 % 21.0 % 14.1 % Capital expenditures $ 17,189 $ 16,641 $ 15,569 $ 49,399 American Eagle Aerie Corporate andOther(1) Total 26 Weeks Ended July 30, 2022 Total net revenue $ 1,463,407 $ 693,395 $ 96,359 $ 2,253,161 Operating income (loss) $ 213,015 $ 54,903 $ (212,002 ) $ 55,916 % of revenue 14.6 % 7.9 % 2.5 % Capital expenditures $ 34,524 $ 61,259 $ 32,075 $ 127,858 26 Weeks Ended July 31, 2021 Total net revenue $ 1,573,584 $ 633,282 $ 21,903 $ 2,228,769 Operating income (loss) $ 350,128 $ 140,624 $ (189,328 ) $ 301,424 % of revenue 22.3 % 22.2 % 13.5 % Capital expenditures $ 30,628 $ 27,460 $ 28,117 $ 86,205 (1) Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and Quiet Platforms (net of intersegment eliminations), which have been identified as operating segments but are not material to disclose as separate reportable segments. Corporate operating costs represents certain costs that are not directly attributable to another reportable segment. AMERICAN EAGLE OUTFITTERS, INC. STORE INFORMATION (unaudited) Second Quarter YTD Second Quarter 2022 2022 Consolidated stores at beginning of period 1,141 1,133 Consolidated stores opened during the period AE Brand (2) 4 11 Aerie (incl. OFFL/NE) (3) 23 35 Todd Snyder 1 1 Unsubscribed 1 1 Consolidated stores closed during the period AE Brand (2) (9) (18) Aerie (incl. OFFL/NE) (3) (1) (3) Total consolidated stores at end of period 1,160 1,160 AE Brand (2) 873 Aerie (incl. OFFL/NE) (3) 276 Todd Snyder 6 Unsubscribed 5 Total gross square footage at end of period (in '000) 7,205 7,205 International license locations at end of period (1) 260 260 (1) International license locations (retail stores and concessions) are not included in the consolidated store data or the total gross square footage calculation. (2) AE Brand includes AE stand alone locations, AE/Aerie side-by side locations, AE/OFFL/NE side-by-side locations, and AE/Aerie/OFFL/NE side-by-side locations. (3) Aerie (incl. OFFL/NE) includes Aerie stand alone locations, OFFL/NE stand alone locations, and Aerie/OFFL/NE side-by-side locations. View source version on businesswire.com: https://www.businesswire.com/news/home/20220907006065/en/Contacts Olivia Messina 412-432-3300 LineMedia@ae.com
Second quarter results impacted by challenging consumer backdrop Expanding scope of expense and capital expenditure reductions Significant progress made on right-sizing inventory Pausing quarterly cash dividend to provide additional financial flexibility
American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the second quarter ended July 30, 2022. “This is an unprecedented time in retail. As we cycle exceptional demand from last year, a tougher macro environment is impacting consumer spending behavior. Second quarter performance reflected these challenges, constraining revenue and amplifying margin pressure as we fully cleared through excess spring and summer goods,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer. “In a shifting macro environment, we are focused on controlling the controllables. We entered the second half with inventory levels in a much better position and an assortment that is current for the Fall season. Given ongoing external uncertainties, we have taken additional actions to improve financial performance. We have made more expansive expense reductions and are pulling back further on capital expenditures. As an additional cautionary move, we have paused our quarterly cash dividend to strengthen our cash position. Our brands and products remain highly relevant and sought after by our customers. I am confident we will successfully navigate current challenges, and set AEO up for a stronger future.” Second Quarter 2022 Results: Total net revenue of $1.2 billion, flat to the second quarter of 2021. Our supply chain business, Quiet Platforms, contributed approximately 2 percentage points to revenue growth. Brand revenue declined 2%. Aerie revenue of $372 million rose 11% versus second quarter 2021, reflecting a 25% 3-year revenue CAGR. Comp sales declined 6% versus second quarter 2021. American Eagle revenue of $778 million declined 8% versus second quarter 2021 reflecting a -3% 3-year revenue CAGR. Comp sales declined 10% versus second quarter 2021. Consolidated store revenue declined 2%. Total digital revenue declined 6%. Compared to pre-pandemic first quarter 2019, store revenue increased 1% and digital revenue increased 60%. Gross profit of $370 million declined 26% from $502 million in the second quarter of 2021 and reflected a gross margin rate of 30.9% compared to 42.1% last year. Higher markdowns drove 750 basis points of the rate decline with roughly a third reflecting higher end of season selloffs to fully clear excess spring and summer goods. Higher freight costs impacted the gross margin by approximately 200 basis points and Quiet Platforms had a 60 basis point impact as we integrate and ramp up the platform. Delivery, warehousing costs and rent also increased, offset slightly by lower incentive compensation accruals. Selling, general and administrative expense of $308 million increased 5%. SG&A increased 110 basis points as a rate to sales versus second quarter 2021 primarily due to increased store wages, corporate compensation, professional services and advertising, partially offset by lower incentive compensation accruals. Operating income of $14 million included an approximately $30 million impact from higher end-of-season selloffs, $25 million from higher freight costs and a $9 million loss from Quiet Platforms, and compared to operating income of $168 million in the second quarter of 2021. GAAP EPS of ($0.24). Adjusted EPS of $0.04 excludes $60 million of debt related charges primarily linked to the convertible notes exchange transaction and includes an approximately $1 million addback to net income of interest expense associated with the company’s convertible notes. GAAP average diluted shares outstanding were 180 million. Adjusted average diluted shares outstanding were 207 million, compared to 209 million in the second quarter of 2021. Unrealized dilution associated with the company’s convertible notes was 25 million shares compared to 36 million shares in the second quarter of 2021 reflecting the timing and impact of exchange transactions completed in the quarter. The company also repurchased 17 million shares in the quarter as part of its accelerated share repurchase program. Third quarter weighted average share count is expected to be 198 million shares. Inventory Total ending inventory at cost increased 36% to $687 million compared to $504 million last year. From a brand standpoint, AE and Aerie each drove roughly half of the increase. Total units were up 22%, reflecting better in-stocks and earlier receipts due to improved flow across the supply chain. Store openings over the past 12 months across Aerie and Offline also drove a portion of the inventory increase. Ending second quarter inventory consisted of current BTS and fall merchandise. The company continues to make progress adjusting inventories lower to be in line with demand trends. Third quarter ending inventory is projected to be up in the mid-single digits with fourth quarter inventory expected to be down year-on-year. Capital Expenditures Capital expenditures totaled $69 million in the second quarter and $128 million year-to-date. For the year, management now expects to spend approximately $250 million, compared to prior guidance of $275 million. Shareholder Returns In the first half of the year, the company paid two quarterly cash dividends of $0.18 per share, amounting to approximately $65 million. The company also repurchased approximately 17 million shares through an accelerated share repurchase program totalling $200 million. The total cash returned to shareholders of $265 million was the highest level since 2015. To increase financial flexibility while navigating near-term macro challenges, the company is pausing its quarterly cash dividend. Outlook Quarter-to-date, demand trends remain difficult, with brand revenue down in the high-single digits following exceptional growth and a record Back-to-School season last year. Assuming current trends continue, the third quarter gross-margin rate would be in the mid-30s and fourth quarter in the low-30s. This reflects higher markdowns in anticipation of a more promotional retail environment and the company’s seasonal clearance cadence which is more weighted to the fourth quarter. Management has expanded expense cuts with a focus on store payroll, corporate expense, professional services and advertising. These actions are now expected to drive $100 million in annualized expense reductions to plan, compared to our prior target of $60 million. This translates to SG&A dollars remaining relatively flat to last year in the second half, compared to prior guidance for low-to-mid-single digit growth. Conference Call and Supplemental Financial Information Management will host a conference call and real time webcast today at 4:30 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.aeo-inc.com to access the webcast and audio replay. Additionally, a financial results presentation is posted on the company’s website. About American Eagle Outfitters, Inc. American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 270 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including third quarter and annual fiscal 2022 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," “potential,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company's financial performance and could cause actual results for fiscal 2022 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity. AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited) July 30, 2022 January 29, 2022 July 31, 2021 ASSETS Cash and cash equivalents $ 98,214 $ 434,770 $ 773,994 Short-term investments - - 50,000 Merchandise inventory 687,046 553,458 503,507 Accounts receivable, net 220,803 286,683 155,361 Prepaid expenses and other 171,326 122,013 118,721 Total current assets 1,177,389 1,396,924 1,601,583 Operating lease right-of-use assets 1,210,285 1,193,021 1,103,247 Property and equipment, at cost, net of accumulated depreciation 775,969 728,272 641,396 Goodwill, net 271,406 271,416 16,365 Intangible assets, net 98,651 102,701 54,255 Non-current deferred income taxes 37,017 44,167 46,600 Other assets 58,500 50,142 31,576 Total assets $ 3,629,217 $ 3,786,643 $ 3,495,022 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 198,645 $ 231,782 $ 221,471 Current portion of operating lease liabilities 328,348 311,005 288,534 Unredeemed gift cards and gift certificates 51,111 71,365 44,095 Accrued compensation and payroll taxes 50,788 141,817 133,185 Accrued income taxes and other 16,708 16,274 25,365 Other current liabilities and accrued expenses 72,461 70,628 56,568 Total current liabilities 718,061 842,871 769,218 Non-current operating lease liabilities 1,137,656 1,154,481 1,094,386 Long-term debt, net 376,522 341,002 331,680 Other non-current liabilities 24,055 24,617 24,207 Total non-current liabilities 1,538,233 1,520,100 1,450,273 Commitments and contingencies - - - Preferred stock - - - Common stock 2,496 2,496 2,496 Contributed capital 380,959 636,355 630,506 Accumulated other comprehensive loss (40,017 ) (40,845 ) (36,894 ) Retained earnings 2,000,021 2,203,772 2,058,448 Treasury stock (970,536 ) (1,378,106 ) (1,379,025 ) Total stockholders' equity 1,372,923 1,423,672 1,275,531 Total liabilities and stockholders' equity $ 3,629,217 $ 3,786,643 $ 3,495,022 Current ratio 1.64 1.66 2.08 AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share amounts) (unaudited) GAAP Basis 13 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 1,198,124 100.0 % $ 1,194,156 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 828,107 69.1 % 691,765 57.9 % Gross profit 370,017 30.9 % 502,391 42.1 % Selling, general and administrative expenses 307,832 25.7 % 293,939 24.6 % Depreciation and amortization expense 48,171 4.0 % 40,456 3.4 % Operating income 14,014 1.2 % 167,996 14.1 % Debt related charges 60,066 5.1 % - 0.0 % Interest expense, net 3,421 0.3 % 8,921 0.8 % Other income, net (1,839 ) -0.2 % (1,363 ) -0.1 % (Loss) income before income taxes (47,634 ) -4.0 % 160,438 13.4 % (Benefit) provision for income taxes (5,168 ) -0.5 % 38,927 3.2 % Net (loss) income $ (42,466 ) -3.5 % $ 121,511 10.2 % Net (loss) income per basic share $ (0.24 ) $ 0.73 Net (loss) income per diluted share $ (0.24 ) $ 0.58 Weighted average common shares outstanding - basic 180,189 167,491 Weighted average common shares outstanding - diluted 180,189 208,933 GAAP Basis 26 Weeks Ended July 30, 2022 % ofRevenue July 31, 2021 % ofRevenue Total net revenue $ 2,253,161 100.0 % $ 2,228,769 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 1,495,118 66.4 % 1,290,188 57.9 % Gross profit 758,043 33.6 % 938,581 42.1 % Selling, general and administrative expenses 606,587 26.9 % 558,430 25.1 % Depreciation and amortization expense 95,540 4.2 % 78,727 3.5 % Operating income 55,916 2.5 % 301,424 13.5 % Debt related charges 60,066 2.7 % - 0.0 % Interest expense, net 8,009 0.4 % 17,426 0.7 % Other income, net (6,283 ) -0.3 % (3,223 ) -0.1 % (Loss) income before income taxes (5,876 ) -0.3 % 287,221 13.0 % Provision for income taxes 4,850 0.2 % 70,244 3.2 % Net (loss) income $ (10,726 ) -0.5 % $ 216,977 9.7 % Net (loss) income per basic share $ (0.06 ) $ 1.29 Net (loss) income per diluted share $ (0.06 ) $ 1.04 Weighted average common shares outstanding - basic 174,544 168,036 Weighted average common shares outstanding - diluted 174,544 208,400 AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 30, 2022 Debt relatedcharges Net (loss) income Diluted earningsper common share Effective tax rate Weighted averagecommon sharesoutstanding-diluted GAAP Basis $ 60,066 $ (42,466 ) $ (0.24 ) 10.9 % 180,189 % of Revenue 5.1 % -3.5 % Less: Debt related charges (1) 60,066 49,126 0.28 Dilution(2) 26,512 Non-GAAP Basis $ - $ 6,660 $ 0.04 46.4 % 206,701 % of Revenue 0.0 % 0.6 % (1) Pre-tax debt related charges of $60.1 million related primarily to the induced conversion expense on the exchange of our convertible notes, along with certain other costs related to actions we took to strengthen our capital structure. A portion of the induced conversion expense was not deductible for income tax purposes which resulted in the difference in the effective tax rate. (2) Dilution of 26.5 million shares consists of 25.3 million shares from the Company's 2025 notes and 1.2 million shares of equity awards. As GAAP results were a net (loss), these shares were not included in the diluted earnings per share denominator. AMERICAN EAGLE OUTFITTERS, INC. GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended July 31, 2021 Interest expense,net Net income Diluted earningsper common share GAAP Basis $ 8,921 $ 121,511 $ 0.58 % of Revenue 0.8 % 10.2 % Less: Convertible debt (1) 4,956 3,754 0.02 Non-GAAP Basis $ 3,965 $ 125,265 $ 0.60 % of Revenue 0.3 % 10.5 % (1) Amortization of the non-cash discount on the Company's convertible notes AMERICAN EAGLE OUTFITTERS, INC. RESULTS BY SEGMENT (Dollars in thousands) (unaudited) American Eagle Aerie Corporate andOther(1) Total 13 weeks ended July 30, 2022 Total net revenue $ 777,828 $ 371,683 $ 48,613 $ 1,198,124 Operating income (loss) $ 109,110 $ 11,830 $ (106,926 ) $ 14,014 % of revenue 14.0 % 3.2 % 1.2 % Capital expenditures $ 18,754 $ 30,244 $ 20,466 $ 69,464 13 weeks ended July 31, 2021 Total net revenue $ 845,882 $ 335,795 $ 12,479 $ 1,194,156 Operating income (loss) $ 198,896 $ 70,646 $ (101,546 ) $ 167,996 % of revenue 23.5 % 21.0 % 14.1 % Capital expenditures $ 17,189 $ 16,641 $ 15,569 $ 49,399 American Eagle Aerie Corporate andOther(1) Total 26 Weeks Ended July 30, 2022 Total net revenue $ 1,463,407 $ 693,395 $ 96,359 $ 2,253,161 Operating income (loss) $ 213,015 $ 54,903 $ (212,002 ) $ 55,916 % of revenue 14.6 % 7.9 % 2.5 % Capital expenditures $ 34,524 $ 61,259 $ 32,075 $ 127,858 26 Weeks Ended July 31, 2021 Total net revenue $ 1,573,584 $ 633,282 $ 21,903 $ 2,228,769 Operating income (loss) $ 350,128 $ 140,624 $ (189,328 ) $ 301,424 % of revenue 22.3 % 22.2 % 13.5 % Capital expenditures $ 30,628 $ 27,460 $ 28,117 $ 86,205 (1) Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and Quiet Platforms (net of intersegment eliminations), which have been identified as operating segments but are not material to disclose as separate reportable segments. Corporate operating costs represents certain costs that are not directly attributable to another reportable segment. AMERICAN EAGLE OUTFITTERS, INC. STORE INFORMATION (unaudited) Second Quarter YTD Second Quarter 2022 2022 Consolidated stores at beginning of period 1,141 1,133 Consolidated stores opened during the period AE Brand (2) 4 11 Aerie (incl. OFFL/NE) (3) 23 35 Todd Snyder 1 1 Unsubscribed 1 1 Consolidated stores closed during the period AE Brand (2) (9) (18) Aerie (incl. OFFL/NE) (3) (1) (3) Total consolidated stores at end of period 1,160 1,160 AE Brand (2) 873 Aerie (incl. OFFL/NE) (3) 276 Todd Snyder 6 Unsubscribed 5 Total gross square footage at end of period (in '000) 7,205 7,205 International license locations at end of period (1) 260 260 (1) International license locations (retail stores and concessions) are not included in the consolidated store data or the total gross square footage calculation. (2) AE Brand includes AE stand alone locations, AE/Aerie side-by side locations, AE/OFFL/NE side-by-side locations, and AE/Aerie/OFFL/NE side-by-side locations. (3) Aerie (incl. OFFL/NE) includes Aerie stand alone locations, OFFL/NE stand alone locations, and Aerie/OFFL/NE side-by-side locations. View source version on businesswire.com: https://www.businesswire.com/news/home/20220907006065/en/