AMERICAN EAGLE OUTFITTERS, INC.

AMERICAN EAGLE OUTFITTERS, INC.

March 02, 2005 07:30 ET

American Eagle Outfitters Reports Preliminary Fourth Quarter and Fiscal 2004 Earnings; Fourth Quarter EPS Rise to a Record $1.40 from Continuing Operations


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AMERICAN EAGLE OUTFITTERS, INC.

NASDAQ SYMBOL: AEOS

MARCH 2, 2005 - 07:30 ET

American Eagle Outfitters Reports Preliminary Fourth
Quarter and Fiscal 2004 Earnings; Fourth Quarter EPS
Rise to a Record $1.40 from Continuing Operations

WARRENDALE, Pa.--(CCNMatthews - Mar 2, 2005) -

American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced its
preliminary consolidated financial results for the fourth quarter and
year ended January 29, 2005. As further described below:

-- Like many other retailers, the Company is reviewing its accounting
practices related to leasing transactions and believes that a
restatement of its previously filed annual and quarterly financial
statements for certain periods is likely. All results presented in this
press release are preliminary and exclude the impact of such review.
However, the Company believes that the earnings impact in any given
period will not be material.

-- Due to the recent disposition of the Bluenotes business, Bluenotes'
results of operations are presented as discontinued operations for all
periods.

-- Due to our upcoming stock split distributable on March 7, 2005, all
per share data presented below is on a pre-stock split basis, unless
otherwise noted.

In a separate release this morning, the Company announced a February
comparable store sales increase of 32.4%. Based on strong February
results, the Company is raising its first quarter earnings guidance to a
range of $0.52 to $0.54 per share, compared to $0.36 per share from
continuing operations last year. The Company's previous first quarter
earnings guidance was $0.43 to $0.45 per share.

Fourth Quarter Ended January 29, 2005

-- Total sales increased 37.4% to $674.0 million from $490.6 million
for the quarter ended January 31, 2004.

-- Comparable store sales increased 28.6% when compared to the
corresponding period last year.

-- Gross profit as a percent to sales increased to 49.0% from 38.5%
last year due to an improvement in merchandise margins as well as the
leveraging of rent expense.

-- Operating income for the quarter increased to $172.2 million, or
25.5% as a percent to sales, from $69.9 million, or 14.2% as a percent
to sales last year.

-- Income from continuing operations for the quarter increased to
$107.2 million, or $1.40 per share on a diluted basis, from income of
$43.2 million, or $0.60 per share on a diluted basis last year.

-- Loss from discontinued operations for the quarter was $6.0 million,
or $0.08 per share on a diluted basis. This amount represents the
Bluenotes loss from operations for the quarter as well as the loss
recorded on the sale of assets. Loss from discontinued operations was
$7.8 million, or $0.11 per share on a diluted basis, for the
corresponding period last year.

-- Net income for the quarter increased to $101.2 million, or $1.32 per
share on a diluted basis, from income of $35.4 million, or $0.49 per
share on a diluted basis last year.

Year-to-Date for the Twelve Months Ended January 29, 2005

-- Total sales increased 31.1% to $1.881 billion from $1.435 billion
for the twelve months ended January 31, 2004.

-- Comparable store sales increased 21.4% when compared to the
corresponding period last year.

-- Gross profit as a percent to sales increased to 46.2% from 37.6%
last year due to an improvement in merchandise margins as well as the
leveraging of rent expense.

-- Operating income for the period increased to $363.8 million, or
19.3% as a percent to sales, from $133.9 million, or 9.3% as a percent
to sales last year.

-- Income from continuing operations for the year-to-date period
increased to $224.9 million, or $2.99 per share on a diluted basis, from
income of $83.5 million, or $1.16 per share on a diluted basis last year.

-- Loss from discontinued operations for the year-to-date period was
$10.9 million, or $0.14 per share on a diluted basis. This amount
represents the Bluenotes loss from operations for the year-to-date
period as well as the loss recorded on the sale of assets. Loss from
discontinued operations was $23.5 million, or $0.33 per share on a
diluted basis, for the corresponding period last year.

-- Net income for the year-to-date period increased to $214.0 million,
or $2.85 per share on a diluted basis, from income of $60.0 million, or
$0.83 per share on a diluted basis last year.

At 9:00 a.m. EST, on March 2, 2005, the Company's management team will
host a conference call to review the financial results. To listen to the
call, dial 877-601-0864 at least ten minutes prior to the start of the
call. The conference call will also be simultaneously broadcast over the
Internet at www.ae.com. A replay will be available beginning March 2nd
at 12:00 p.m. EST through March 16th. To listen to the replay, dial
1-800-642-1687 and reference confirmation code #3521324. An audio replay
of the conference call will also be available at www.ae.com.

Accounting for Lease Transactions

In connection with the views expressed by the Office of the Chief
Accountant of the Securities and Exchange Commission (the "SEC") on
February 7, 2005 regarding certain lease accounting issues, the Company,
like many other retailers, reviewed its lease accounting practices. As a
result, the Company determined that its method of accounting for rent
holidays and tenant allowances was not in accordance with the views
expressed by the SEC regarding generally accepted accounting principles.

Historically, the Company has recognized straight line rent expense for
leases beginning on the store opening date. This had the effect of
excluding the build-out period of its stores from the calculation of the
period over which it expenses rent and recognizes construction
allowances. The Company is now changing this practice to include the
build-out period in our calculations of rent expense and construction
allowance amortization.

Additionally, the Company is changing its classification of construction
allowances on its consolidated financial statements to record them as
deferred liabilities, which will be amortized as a reduction to rent
expense. Furthermore, construction allowances will be presented within
operating activities on its consolidated statements of cash flows.
Historically, construction allowances have been classified on the
Company's consolidated balance sheets as a reduction of property and
equipment and the related amortization has been classified as a
reduction to depreciation and amortization expense (over the lesser of
the useful life or the life of the lease) on the consolidated statements
of operations. The Company's consolidated statements of cash flows have
historically reflected construction allowances as a reduction of capital
expenditures within investing activities.

The Company, in conjunction with its independent auditors, is in the
process of completing its review of the above changes. At this time, the
Company has not yet reached a final decision as to whether these changes
will require a restatement of prior period financial statements, but
believes that a restatement of its consolidated balance sheets,
consolidated statements of operations and consolidated statements of
cash flows for certain periods is likely. The Company believes that the
earnings impact in any given period will not be material. Furthermore,
these changes will have no impact on the Company's historical or future
net cash flow or the timing of payments under the leases.

Common Stock Split

As previously disclosed in our press release dated February 4, 2005, the
Company's Board of Directors declared a two-for-one common stock split
for shareholders of record at the close of business on February 14,
2005, distributable on March 7, 2005. Pro forma post-split share and per
share data is presented in the accompanying Consolidated Statements of
Operations for informational purposes only.

Financial Statements Reflecting Discontinued Operations

As previously disclosed in our Press Release dated December 21, 2004, we
disposed of our Bluenotes retail apparel business with an effective date
of December 5, 2004. Accordingly, the Bluenotes results of operations
for the three and twelve month periods ended January 29, 2005 and
January 31, 2004 are classified as discontinued operations in the
accompanying Consolidated Statements of Operations.

American Eagle Outfitters (NASDAQ: AEOS) is a leading lifestyle retailer
that designs, markets, and sells its own brand of relaxed, casual
clothing for 15 to 25 year olds, providing high-quality merchandise at
affordable prices. AE's collection includes modern basics like jeans,
cargo pants, and graphic Ts as well as a stylish assortment of cool
accessories, outerwear and footwear. American Eagle Outfitters currently
operates 777 AE stores in 49 states, the District of Columbia and Puerto
Rico, and 69 AE stores in Canada. AE also operates via its Web business,
www.ae.com, which offers additional sizes and styles of favorite AE
merchandise.

"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: This release contains forward-looking statements, which
represent our expectations or beliefs concerning future events,
specifically regarding our lease accounting review and first quarter
earnings. All forward-looking statements made by the Company involve
material risks and uncertainties and are subject to change based on
factors beyond the Company's control. Such factors include, but are not
limited to, the finalization of our lease accounting review and the risk
that our first quarter sales, markdowns and/or earnings expectations may
not be achieved, and those other risks described in the Company's
filings with the Securities and Exchange Commission. Accordingly, the
Company's future performance and financial results may differ materially
from those expressed or implied in any such forward-looking statements.
The Company does not undertake to publicly update or revise its
forward-looking statements even if future changes make it clear that
projected results expressed or implied will not be realized.



AMERICAN EAGLE OUTFITTERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

January 29, January 31,
2005 2004
----------- -----------
(Unaudited)
ASSETS
Cash, cash equivalents and short-term
investments $ 589,607 $ 337,812
Merchandise inventory 137,991 120,586
Other current assets 94,501 67,225
----------- -----------
Total current assets 822,099 525,623
----------- -----------
Property and equipment, net 287,525 278,689
Goodwill, net 10,136 10,136
Other assets, net 103,913 50,623
----------- -----------
Total Assets $ 1,223,673 $ 865,071
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 76,344 $ 71,330
Accrued compensation and payroll taxes 36,008 14,409
Accrued rent 34,242 30,985
Accrued income and other taxes 33,926 28,669
Unredeemed stored value cards and gift
certificates 32,724 25,785
Current portion of note payable - 4,832
Other current liabilities 19,376 13,025
----------- -----------
Total current liabilities 232,620 189,035
----------- -----------
Note payable - 13,874
Other non-current liabilities 20,608 18,492
----------- -----------
Total non-current liabilities 20,608 32,366
----------- -----------
Total stockholders' equity 970,445 643,670
----------- -----------
Total Liabilities and Stockholders'
Equity $ 1,223,673 $ 865,071
----------- -----------
----------- -----------

Current Ratio 3.53 2.78


AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)

Three Months Ended Twelve Months Ended
----------------------- -----------------------
January 29, January 31, January 29, January 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)

Net sales $ 674,024 $ 490,580 $ 1,881,241 $ 1,435,436
Cost of sales,
including certain
buying, occupancy
and warehousing
expenses 343,743 301,850 1,012,148 895,444
----------- ----------- ----------- -----------
Gross profit 330,281 188,730 869,093 539,992
Selling, general and
administrative
expenses 142,246 105,408 446,503 354,749
Depreciation and
amortization 15,867 13,440 58,820 51,355
----------- ----------- ----------- -----------
Operating income 172,168 69,882 363,770 133,888
Other income, net 3,343 469 4,129 2,016
----------- ----------- ----------- -----------
Income before income
taxes 175,511 70,351 367,899 135,904
Provision for income
taxes 68,273 27,181 143,019 52,418
----------- ----------- ----------- -----------
Income from
continuing
operations, net of
tax 107,238 43,170 224,880 83,486
Loss from
discontinued
operations, net of
income tax benefit (6,027) (7,816) (10,889) (23,486)
----------- ----------- ----------- -----------
Net income $ 101,211 $ 35,354 $ 213,991 $ 60,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic per share
amounts:
Income from
continuing
operations $ 1.46 $ 0.61 $ 3.10 $ 1.17
Loss from
discontinued
operations (0.08) (0.11) (0.15) (0.33)
----------- ----------- ----------- -----------
Net income per basic
share $ 1.38 $ 0.50 $ 2.95 $ 0.84
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Diluted per share
amounts:
Income from
continuing
operations $ 1.40 $ 0.60 $ 2.99 $ 1.16
Loss from
discontinued
operations (0.08) (0.11) (0.14) (0.33)
----------- ----------- ----------- -----------
Net income per
diluted share $ 1.32 $ 0.49 $ 2.85 $ 0.83
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Weighted average
common shares
outstanding --
basic 73,547 71,179 72,575 71,113
Weighted average
common shares
outstanding --
diluted 76,701 72,251 75,122 72,207

Note: All share and per share data above is presented on a pre-stock
split basis. After giving effect to the two-for-one stock split
declared on February 4, 2005, and to be distributed on March 7, 2005,
share and per share amounts would be as follows:

Basic per share
amounts
(post-split):
Income from
continuing
operations $ 0.73 $ 0.30 $ 1.55 $ 0.59
Loss from
discontinued
operations (0.04) (0.05) (0.08) (0.17)
----------- ----------- ----------- -----------
Net income per basic
share $ 0.69 $ 0.25 $ 1.47 $ 0.42
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Diluted per share
amounts
(post-split):
Income from
continuing
operations $ 0.70 $ 0.30 $ 1.50 $ 0.58
Loss from
discontinued
operations (0.04) (0.05) (0.07) (0.16)
----------- ----------- ----------- -----------
Net income per
diluted share $ 0.66 $ 0.25 $ 1.43 $ 0.42
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Weighted average
common shares
outstanding --
basic (post-split) 147,094 142,358 145,150 142,226
Weighted average
common shares
outstanding --
diluted (post-split) 153,402 144,502 150,244 144,414

----------------------------------------------------------------------

Total gross square
footage at end of
period: 4,540,095 4,239,497

Store count at end of
period: 846 805

----------------------------------------------------------------------

AMERICAN EAGLE OUTFITTERS, INC.
QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS
UPDATED TO REFLECT DISCONTINUED OPERATIONS

Under generally accepted accounting principles, we are required to
reclassify previously reported prior period financial statements to
reflect the discontinued operations on a basis comparable to the
current presentation. This includes the requirement to reclassify
quarterly financial statement information that will be included in our
2004 Annual Report on Form 10-K. We are providing updated Quarterly
Consolidated Statements of Operations (unaudited), which reclassify
the Bluenotes results of operations as discontinued operations, in
advance of filing our 2004 Annual Report on Form 10-K. These updated
historical Statements of Operations are being presented for
informational purposes only.

Quarters Ended
-----------------------------------
October 30, July 31, May 1,
2004 2004 2004
----------- ----------- -----------
(Dollars and shares in thousands, (Unaudited) (Unaudited) (Unaudited)
except per share amounts)

Net sales $ 479,585 $ 395,402 $ 332,230
Cost of sales, including certain
buying, occupancy and
warehousing expenses 247,954 234,273 186,178
----------- ----------- -----------
Gross profit 231,631 161,129 146,052
Selling, general and
administrative expenses 119,567 94,965 89,725
Depreciation and amortization 14,948 14,544 13,461
----------- ----------- -----------
Operating income 97,116 51,620 42,866
Other income (expense), net (645) 491 940
----------- ----------- -----------
Income before income taxes 96,471 52,111 43,806
Provision for income taxes 37,615 20,159 16,972
----------- ----------- -----------
Income from continuing
operations, net of tax 58,856 31,952 26,834
Loss from discontinued
operations, net of income tax
benefit (807) (2,328) (1,727)
----------- ----------- -----------
Net income $ 58,049 $ 29,624 $ 25,107
----------- ----------- -----------
----------- ----------- -----------

Basic per share amounts:
Income from continuing operations $ 0.81 $ 0.44 $ 0.37
Loss from discontinued operations (0.01) (0.03) (0.02)
----------- ----------- -----------
Net income per basic share $ 0.80 $ 0.41 $ 0.35
----------- ----------- -----------
----------- ----------- -----------

Diluted per share amounts:
Income from continuing operations $ 0.78 $ 0.43 $ 0.36
Loss from discontinued operations (0.01) (0.03) (0.02)
----------- ----------- -----------
Net income per diluted share $ 0.77 $ 0.40 $ 0.34
----------- ----------- -----------
----------- ----------- -----------

Weighted average
common shares
outstanding --
basic 73,002 72,251 71,506
Weighted average
common shares
outstanding --
diluted 75,785 74,164 73,247

Note: All share and per share data above is presented on a pre-stock
split basis. After giving effect to the two-for-one stock split
declared on February 4, 2005, and to be distributed on March 7, 2005,
share and per share amounts would be as follows:

Basic per share amounts
(post-split):
Income from continuing operations $ 0.40 $ 0.22 $ 0.19
Loss from discontinued operations - (0.02) (0.01)
----------- ----------- -----------
Net income per basic share $ 0.40 $ 0.20 $ 0.18
----------- ----------- -----------
----------- ----------- -----------

Diluted per share amounts
(post-split):
Income from continuing operations $ 0.39 $ 0.22 $ 0.18
Loss from discontinued operations (0.01) (0.02) (0.01)
----------- ----------- -----------
Net income per diluted share $ 0.38 $ 0.20 $ 0.17
----------- ----------- -----------
----------- ----------- -----------

Weighted average
common shares
outstanding --
basic (post-split) 146,004 144,502 143,012
Weighted average
common shares
outstanding --
diluted (post-split) 151,570 148,328 146,494



-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    American Eagle Outfitters, Inc.
    Laura Weil/Judy Meehan, 724-776-4857