American Eagle beats by $0.02, reports revs in-line, comps below guidance; guides Q2 EPS/comps below consensus
Reports Q1 (Apr) earnings of $0.02 per share, $0.02 better than the Capital IQ Consensus Estimate of ($0.00); revenues fell 4.8% year/year to $646.1 mln vs the $648.92 mln consensus and Q1 comps -10% vs HSD decline guidance and -8% estimate.
- Margin: Co reports Q1 gross profit rate 34.9% vs ~34.5% estimate. Gross margin reflected the de-leverage of rent on negative comparable sales and increased markdowns, partially offset by favorability in merchandise and design costs.
- Guidance: Co issues downside guidance for Q2, sees EPS of ~$0.00, excluding non-recurring items, vs. $0.04 Capital IQ Consensus Estimate; guidance is based on Q2 comps high single-digit decline vs -3% estimate.
- Expenses/Inventory: In the first quarter, capital expenditures totaled $72 mln. For fiscal 2014, co continues to expect capital expenditures of ~$230 million. Total merchandise inventories at the end of the first quarter declined 3% to $329 mln compared to $341 mlnlast year. At cost per foot, inventory decreased 7%.
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Additional Closures: Following a comprehensive fleet review, the company has identified an additional 150 stores to close in North America over the next three years, including nearly 100 AE stores. For 2014, co is planning to close approximately 50 AE and 20 aerie stores in North America. Beginning in 2015, the company anticipates annualized after-tax savings of ~$10-$15 million related to these store closures. For additional first quarter 2014 actual and fiscal 2014 projected real estate information, see the accompanying table.
- "Results were consistent with our expectations. The quarter reflected weak sales and increased markdowns. We are committed to improved profitability and are working hard to implement our plan to strengthen our brands, channels and operations. Specific actions underway include continuing to build strong omni-channel capabilities, rationalizing our store fleet, reducing expenses, growing international licensed stores, and most importantly, delivering great merchandise and customer experience across our brands. Our focus is on leveraging our strong brands and talented team in order to deliver long-term profitable growth and enhanced value for our shareholders."