http://www.morningstar.com/earnings/52441922-american-eagle-outfitters-aeo-q1-2013.aspx

American Eagle Outfitters AEO
Q1 2013 Earnings Call Transcript

Transcript Call Date 05/22/2013

Operator: Greetings, and welcome to the American Eagle First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Judy Meehan, Vice President of Investor Relations. Thank you. Ms. Meehan, you may begin.

Judy Meehan - IR: Good morning, everyone. Joining me today for our prepared remarks are Robert Hanson, Chief Executive Officer; Roger Markfield, Executive Creative Director; and Mary Boland, Chief Financial and Administrative Officer.

Before we begin today's call, I need to remind you that during this conference call, we will make certain forward-looking statements. These statements are based upon information that represents the Company's current expectations or beliefs. The actual results realized may differ materially from those expectations or beliefs based on risk factors included in our quarterly and annual reports filed with the SEC.

Our comments today will focus on results from continuing operations and exclude non-GAAP adjustments. Please refer to the tables attached to the press release. We have also posted a first quarter financial supplement on our website, which Mary will refer to.

Now, I'll turn the call over to Robert for opening remarks.

Robert L. Hanson - CEO: Good morning, everyone. Thanks for joining us today. As expected the first quarter was difficult, but we remain confident in our strategic direction and ability to deliver. While our execution wasn't fully to our standard, the macro environment presented challenges. Cold weather after last year's record warmth and soft consumer demand for spring apparel impacted store traffic. Within the context, it was tough to generate growth against a very strong quarter last year.

With that said the execution of strong inventory principles, fleet repositioning and the distortion of our online business, led to a high level of profitability. First quarter total revenue declined 4% and consolidated comparable sales declined 5%, coming off a 17% increase last year. Negative comps caused deleverage of fixed costs which increased only slightly to last year and promotions were higher. Despite these pressures, our gross margin improved driven by product cost benefits including supply chain efficiencies. We netted operating profit of $57 million, a rate of sales of 8.4%.

We maintained a healthy financial position ending the period with total cash and investments of $496 million after funding capital expenditures of $46 million and share buybacks totaling $33 million. Adjusted EPS was $0.18 compared to $0.22 last year, a decline of 18%. While disappointed with the decline to the prior year, I'm pleased that our results were within our guidance range and our outlook for the remainder of the year is favorable.

Looking at our merchandise performance for American Eagle Outfitters, we had a mix of wins and misses. Fashion overall performed well and is a point of competitive differentiation for our brand. The team executed well, interpreting current trends, identifying the right styles, fits, fabrics, colors and patterns and making them relevant from our brand for our customers.

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