American Eagle Outfitters Beats on Earnings

American Eagle Outfitters

announced its earnings for the third quarter of 2012 Wednesday morning. Net sales increased by 11 percent to a record $910 million, up from $819 million in the same quarter last year. Gross profit increased 21 percent to $379 million. Operating income increased 39 percent to $129 million, and the company's operating margin expanded to 14.1 percent -- their best margin rate in four years. American Eagle's earnings per share on continuing operations rose by 37 percent. It now stands at $0.41 per share compared to $0.30 in the same period last year. Online sales, via AEO Direct, increased 27 percent compared to 21 percent last year. Comparable store sales, including online sales, increased 10 percent compared with 7 percent last year. Total merchandise inventory at the end of the third quarter was worth $481 million, an 11 percent decrease compared to $555 million in merchandise last year. Depreciation and Amortization costs were $31 million, a decrease of 80 basis points to 3.4 percent rate to sales. Capital expenditures for the quarter were $23 million, and $71 million year-to-date. The company projects that capital expenditures will total $100 million for all of fiscal 2012. The company ended the quarter with cash and short-term investments totaling $545 million, after dividend payments totaling $317 million. On August 3, American Eagle sold its children's business 77kids, including its online business, store assets, inventory, and a license to use the name. Year-to-date after-tax losses from this sale totaled approximately $32 million. $4 million of this loss, or $0.02 per share, was incurred in the third quarter and reflected on the balance sheet. For the fourth quarter of 2012, American Eagle expects an EPS in the range of $0.54 to $0.56 per diluted share, which compares favorably to an adjusted EPS of $0.39 from last year. For all of fiscal year 2012, the company expects EPS from continuing operations to fall between $1.38 and $1.40 per share, compared to an adjusted EPS of $0.97 last year. In pre-market hours today, American Eagle was trading above six percent in light of their third quarter results and fourth quarter outlook.