American Eagle Outfitters Reports Strong First Quarter 2015 Results with 7% Comparable Sales Growth and EPS of $0.15 versus $0.02 Last Year

American Eagle Outfitters, Inc. (NYSE:AEO) today reported EPS of $0.15 for the first quarter ended May 2, 2015, a significant increase from EPS of $0.02 for the comparable quarter last year, and above EPS guidance of $0.09 to $0.12. The EPS figures refer to diluted earnings per share.

Jay Schottenstein, Interim CEO commented, “Our strong first quarter results reflected outstanding merchandise and customer-focused execution. Both AE and aerie performed well, achieving higher sales and earnings, proving successful in a price promotional retail climate. We will continue to raise the bar by offering great product quality, innovation, style and value. Across the organization, we are focused on the market opportunity to leverage our competitive strengths in merchandising, new technologies and capabilities to gain further market share and deliver earnings growth.”

First Quarter 2015 Results

• Total net revenue increased 8% to $700 million from $646 million last year.
• Consolidated comparable sales increased 7%, compared to a 10% decrease last year.
• Gross profit increased 16% to $262 million and rose 260 basis points to 37.5% as a rate to revenue. A reduction in the markdown rate led to approximately 290 basis points of merchandise margin expansion, which was partially offset by 30 basis points of buying, occupancy and warehousing deleverage.
• Selling, general and administrative expense of $185 million was flat to last year. As a rate to revenue, SG&A leveraged 210 basis points to 26.5% compared to 28.6% last year. Our expense reduction initiatives offset increases in incentive and variable selling expense, driven by strong sales performance.
• Operating income increased to $42 million from $8 million last year, and the operating margin expanded 470 basis points to 6.0% as a rate to revenue.
• Other income of $6 million is primarily comprised of currency gains related to cash held in Canadian dollars.
• EPS of $0.15, a significant increase from EPS of $0.02 last year.

Inventory
Total merchandise inventories at the end of the first quarter increased 1% to $333 million compared to $329 million last year. At cost per foot, inventory was flat. Second quarter 2015 ending inventory at cost per foot is expected to be up in the mid single-digits due to merchandise investments and positive sales trends.

Capital Expenditures
In the first quarter, capital expenditures totaled $42 million. For fiscal 2015, the company continues to expect capital expenditures of approximately $150 million, which includes the chain-wide roll-out of the point of sale system, supporting technologies and the completion of our new fulfillment center, as well as new and remodeled store investments.

Store Information
In the quarter, the company opened four new factory stores, including one in Mexico, and closed six locations, including three AE and three aerie stores. Ten international licensed stores opened during the quarter, including five stores in Japan, four stores in Israel and the first store in Qatar. For additional first quarter 2015 actual and fiscal 2015 projected store information, see the accompanying table.

Cash and Investments
The company ended the quarter with total cash and investments of $327 million compared to $328 million last year.

Second Quarter Outlook
Based on a high single digit increase in comparable sales, management expects second quarter 2015 EPS to be approximately $0.11 to $0.14. This guidance excludes potential asset impairment and restructuring charges, and compares to EPS of $0.03 last year.

Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast at 11:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to http://investors.ae.com to access the webcast and audio replay. Also, a financial results presentation is posted on the company’s website.

Non-GAAP Measures
The company has provided merchandise margin, a non-GAAP financial measure defined as gross margin excluding buying, occupancy and warehousing costs. This measure is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. This amount is not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the Company's business and operations.

About American Eagle Outfitters, Inc.
American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters® and Aerie® brands. The company operates more than 1,000 stores in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 111 international stores operated by licensees in 17 countries. For more information, please visit www.ae.com.

"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, including second quarter 2015 results. 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 risk that the company’s operating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company's Form 10-K and Form 10-Q filed 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.

(1) AEO Direct is included in consolidated and total brand comparable sales.

(1) International license stores are not included in the consolidated store data or the total gross square footage calculation.

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