American Eagle Outfitters Inc. reported fourth-quarter results that met Wall Street’s EPS estimates, but beat on revenue projections.
For the three months ended Feb. 3, net income rose 72 percent to $94 million, or 52 cents a diluted share, from $54.6 million, or 30 cents, a year ago. Adjusted EPS was 44 cents, which excludes 8 cents of tax benefit realized from the recent U.S. tax legislation in December.
Total net revenues rose 12 percent to $1.23 billion from $1.10 billion. Consolidated comparable sales in the quarter gained 8 percent. The company said that gross profit rose to $425 million from $389 million. However, the gross margin rate fell 80 basis points to 34.6 percent of revenue, versus 35.4 percent a year ago. The company said the reduction in margin rate reflected higher promotional activity in the quarter.
Wall Street was expecting 44 cents on sales of $1.21 billion.
Jay Schottenstein, chief executive officer, said, “I’m pleased that we ended 2017 with a strong quarter, achieving record sales and an EPS increase over last year. In the fourth quarter, we saw an acceleration in sales, continued sequential margin improvement and EPS growth that was on the high end of our guidance.”
The ceo said that the company’s digital business rose over 20 percent in the quarter, and that “we were encouraged with improved brick and mortar trends, delivering positive sales comps in both American Eagle and Aerie stores.”
He cited American Eagle as having “one of the strongest jeans brands in the market” and Aerie as “one of the fastest growing lifestyle brands.”
Looking ahead, Schottenstein the company “started the spring season with positive momentum, positioning us well for strong results in 2018.”
For the first quarter, the company said it expects comps to rise in the mid-single digits and EPS in the 20 cents to 22 cents range.
Schottenstein during the call to Wall Street analysts said the company is in “excellent financial condition. We ended the year with $414 million in cash and no debt, reflecting confidence in our growth potential and strong free cash flow.“
He said the company saw better sales trends in the brick-and-mortar channel and that it will continue to invest in its store fleet. He also emphasized that the company will “focus on optimizing our business market-by-market to ensure we have the right stores in the right location.” Further, the company is also working on updating its store design to make it more appealing to consumers and provide a “more engaging customer experience.”
The ceo concluded: “I believe now is our time. We have never been stronger as an organization and never as well positioned for sustained success.” He told Wall Street analysts that the Trump administration’s tax reform will provide the company with incremental cash flow, which would enable American Eagle to “reinvest a portion to further growth and shareholder returns.”