American Eagle Q1 Results Beat View, Issues Upbeat Outlook

(RTTNews) - Teen clothing retailer American Eagle Outfitters, Inc. (AEO) on Wednesday reported an almost eight-fold increase in profit for the first quarter from last year, reflecting higher revenues and margins amid reduced markdowns.

Both revenue and earnings per share for the quarter beat analysts' estimates. Looking ahead, the company forecast earnings for the second quarter mostly above Street view.

Interim CEO Jay Schottenstein said, "Our strong first quarter results reflected outstanding merchandise and customer-focused execution. Both AE and aerie performed well, achieving higher sales and earnings, proving successful in a price promotional retail climate."

The Pittsburgh, Pennsylvania-based shopping mall fixture reported net income for the first quarter of $29.06 million or $0.15 per share, up from $3.87 million or $0.02 per share in the prior-year quarter.

On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $0.12 per share for the quarter. Analysts' estimates typically exclude special items.

Total net revenue for the quarter rose 8 percent to $699.52 million from $646.13 million in the same quarter last year. Analysts' consensus revenue estimate for the quarter was $692.32 million.

Consolidated comparable sales for the quarter increased 7 percent, compared to a 10 percent decline in the year-ago period.

The company's AE total brand reported a 7 percent increase in comparable store sales. Comparable store sales at aerie total brand increased 12 percent.

Gross margin for the quarter rose 260 basis points from the year-ago period to 37.5 percent. A reduction in the markdown rate led to about 290 basis points of merchandise margin expansion, but was partially offset by 30 basis points of buying, occupancy and warehousing deleverage.

Selling, general and administrative expense of $185 million was flat to last year. Operating margin for the quarter expanded 470 basis points from the year-ago period to 6 percent.

Total merchandise inventories at the end of the quarter increased 1 percent to $333 million. At cost per foot, inventory was flat.

Looking ahead to the second quarter, American Eagle forecast earnings in a range of $0.11 to $0.14 per share, based on a high single-digit increase in comparable sales. Wall Street expects the company to earn $0.11 per share for the quarter.

The guidance excludes potential asset impairment and restructuring charges, and compares to earnings per share of $0.03 last year.

Street is currently looking for second-quarter earnings of $0.11 per share on a 4.8 percent increase in revenues to $744.72 million.

AEO closed Tuesday's trading at $15.74, down $0.26 or 1.63 percent on a volume of 12.35 million shares. In Wednesday's pre-market activity, the stock is up $1.11 or 7.05 percent to $16.85.