American Eagle Outfitters Inc. posted third-quarter results that just missed Wall Street’s consensus estimates.
For the three months ended Oct. 28, net income fell 15.9 percent to $63.7 million, or 36 cents a diluted share, from $75.8 million, or 41 cents, a year ago. Excluding restructuring and related charges, adjusted EPS was 37 cents. Total revenues rose 2.1 percent to $960.4 million from $940.6 million, while consolidated comparable sales gained 3 percent on top of a 2 percent increase last year.
Wall Street was expecting adjusted EPS of 38 cents on revenues of $960.8 million.
Jay Schottenstein, chief executive officer, said, “The third quarter produced record sales, sequential margin improvement and marked eleven straight quarters of comp sales growth. Digital sales continued to grow at a rapid pace, while we also saw store sales strengthen.”
The ceo said he is seeing “strong momentum continue into the fourth quarter,” which is positioning the company “well for the next few critical weeks of the holiday season.”
The company said its gross margin rate of 39 percent for the quarter slipped slightly from the 40.2 percent rate a year ago due to higher promotions and an increase in shipping costs because of the strong digital business. And while there were positives such as selling, general and administrative expense declining by $3 million, along with sales growth in the quarter, lower incentives and expense discipline were partly offset by higher wages.
The company ended the quarter with cash of $258 million, compared with $292 million a year ago. In the past 12 months, the company returned $88 million in share buybacks and $89 million in dividends. Contributing to the lower cash balance was also an investment of $189 million in capital expenditures. Further, inventories rose 8 percent to $534 million at the end of the quarter, reflecting investments in bottoms, women’s tops and Aerie apparel due to strong sales trends.
Looking ahead, the company projected fourth quarter EPS at between 42 cents and 44 cents, based on an expected comparable store sales increase in the mid-single digits, and excluding potential asset impairment and restructuring charges. That’s compared with the year ago EPS of 30 cents, which included asset impairment and restructuring and related charges.