American Eagle Outfitters Inc 10-Q for FY2026 Q1
American Eagle Outfitters Inc (AEO)
About this 10-Q
American Eagle Outfitters Inc filed this 10-Q on June 5, 2025, covering the quarter ended May 3, 2025 (FY2026 Q1).
Headline figures
Quarter ended May 3, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.09B
- down 4.7% from $1.14B a year earlier
- Net loss
- $64.9M
- compared with net income of $67.75M a year earlier
- Diluted EPS
- -$0.36
- compared with $0.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
Commission File Number:
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
2
AMERICAN EAGLE OUTFITTERS, INC.
TABLE OF CONTENTS
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Page Number |
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4 |
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Item 1. |
7 |
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Consolidated Balance Sheets: May 3, 2025, February 1, 2025, and May 4, 2024 |
7 |
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Consolidated Statements of Operations: 13 weeks ended May 3, 2025 and May 4, 2024 |
8 |
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Consolidated Statements of Comprehensive Income: 13 weeks ended May 3, 2025 and May 4, 2024 |
9 |
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Consolidated Statements of Stockholders' Equity: 13 weeks ended May 3, 2025 and May 4, 2024 |
10 |
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Consolidated Statements of Cash Flows: 13 weeks ended May 3, 2025 and May 4, 2024 |
11 |
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13 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
36 |
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Item 4. |
37 |
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Item 1. |
38 |
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Item 1A. |
38 |
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Item 2. |
38 |
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Item 3. |
Defaults Upon Senior Securities |
N/A |
Item 4. |
Mine Safety Disclosures |
N/A |
Item 5. |
38 |
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Item 6. |
39 |
3
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are based on the views and beliefs of management of American Eagle Outfitters, Inc. (the "Company," "we," "us," and "our"), as well as assumptions and estimates made by management. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not intend to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those contained in this Quarterly Report and in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025 filed with the Securities and Exchange Commission (the "SEC") on March 20, 2025 (the "Fiscal 2024 Form 10-K") that may not be in the control of management. As used herein, "Fiscal 2027" refers to the 52-week period that will end on January 29, 2028. "Fiscal 2025" refers to the 52-week period that will end on January 31, 2026. "Fiscal 2024" refers to the 52-week period ended February 1, 2025. "Fiscal 2023" refers to the 53-week period ended February 3, 2024.
All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," "potential," and similar expressions may identify forward-looking statements. Our forward-looking statements include, but are not limited to, statements about:
4
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:
5
6
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
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May 3, |
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February 1, |
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May 4, |
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(In thousands, except per share amounts) |
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2025 |
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2025 |
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2024 |
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(Unaudited) |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Short-term investments |
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— |
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— |
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Merchandise inventory |
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Accounts receivable, net |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Operating lease right-of-use assets |
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Property and equipment, at cost, net of accumulated depreciation |
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Goodwill, net |
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Non-current deferred income taxes |
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Intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Current portion of operating lease liabilities |
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Accrued compensation and payroll taxes |
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Unredeemed gift cards and gift certificates |
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Accrued income and other taxes |
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Other current liabilities and accrued expenses |
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Total current liabilities |
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Non-current liabilities: |
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Non-current operating lease liabilities |
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Long-term debt, net |
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— |
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— |
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Other non-current liabilities |
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Total non-current liabilities |
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— |
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— |
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— |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Contributed capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Treasury stock, at cost, |
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( |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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$ |
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Refer to Notes to Consolidated Financial Statements
7
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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13 Weeks Ended |
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May 3, |
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May 4, |
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(In thousands, except per share amounts) |
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2025 |
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2024 |
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Total net revenue |
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$ |
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$ |
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Cost of sales, including certain buying, occupancy and |
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Gross profit |
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Selling, general and administrative expenses |
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Impairment and restructuring charges |
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— |
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Depreciation and amortization expense |
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Operating (loss) income |
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$ |
( |
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$ |
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Interest (income), net |
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( |
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( |
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Other (income), net |
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( |
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( |
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(Loss) income before income taxes |
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( |
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(Benefit) provision for income taxes |
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( |
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Net (loss) income |
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$ |
( |
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$ |
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Basic net (loss) income per common share |
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$ |
( |
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$ |
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Diluted net (loss) income per common share |
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$ |
( |
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$ |
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Weighted average common shares outstanding - basic |
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Weighted average common shares outstanding - diluted |
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Refer to Notes to Consolidated Financial Statements
8
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
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13 Weeks Ended |
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May 3, |
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May 4, |
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(In thousands) |
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2025 |
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2024 |
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Net (loss) income |
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$ |
( |
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$ |
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Other comprehensive gain |
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Foreign currency translation gain |
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Other comprehensive gain |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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Refer to Notes to Consolidated Financial Statements
9
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
13 Weeks Ended May 3, 2025 and May 4, 2024
(In thousands, except per share amounts) |
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Shares |
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Common |
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Contributed |
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Retained |
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Treasury |
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Accumulated Other |
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Stockholders' |
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Balance at February 3, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock awards |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock as part of publicly announced programs |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Repurchase of common stock from employees |
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( |
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— |
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- |
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— |
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( |
) |
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— |
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( |
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Reissuance of treasury stock |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Cash dividends declared and dividend equivalents ($ |
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— |
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— |
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( |
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— |
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— |
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( |
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Contributions from non-controlling interests |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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Balance at May 4, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance at February 1, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Stock awards |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock as part of publicly announced programs, including excise tax |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Accelerated share repurchase, including excise tax |
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( |
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( |
) |
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( |
) |
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Repurchase of common stock from employees |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Reissuance of treasury stock |
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— |
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( |
) |
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( |
) |
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— |
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Net (loss) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Cash dividends declared and dividend equivalents ($ |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Contributions from non-controlling interests |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Balance at May 3, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Refer to Notes to Consolidated Financial Statements
10
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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13 Weeks Ended |
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May 3, |
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May 4, |
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(In thousands) |
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2025 |
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2024 |
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Operating activities: |
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Net (loss) income |
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$ |
( |
) |
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$ |
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Adjustments to reconcile net income to net cash from operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Deferred income taxes |
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( |
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( |
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Loss on impairment of assets |
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— |
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Changes in assets and liabilities: |
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Accounts receivable |
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Merchandise inventory |
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( |
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( |
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Operating lease assets |
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( |
) |
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Operating lease liabilities |
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( |
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Other assets |
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( |
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( |
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Accounts payable |
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( |
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( |
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Accrued compensation and payroll taxes |
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( |
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( |
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Accrued and other liabilities |
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( |
) |
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( |
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Net cash (used for) operating activities |
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( |
) |
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( |
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Investing activities: |
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Capital expenditures for property and equipment |
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( |
) |
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( |
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Sale of available-for-sale investments |
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Other investing activities |
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( |
) |
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( |
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Net cash (used for) provided by investing activities |
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( |
) |
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Financing activities: |
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Accelerated share repurchase, including excise tax |
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( |
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— |
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Repurchase of common stock as part of publicly announced programs, including excise tax |
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( |
) |
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( |
) |
Repurchase of common stock from employees |
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( |
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( |
) |
Proceeds from revolving line of credit |
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— |
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Net proceeds from stock options exercised |
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Cash dividends paid |
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( |
) |
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( |
) |
Other financing activities |
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( |
) |
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( |
) |
Net cash (used for) financing activities |
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( |
) |
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( |
) |
Effect of exchange rates changes on cash |
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( |
) |
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( |
) |
Net change in cash and cash equivalents |
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( |
) |
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( |
) |
Cash and cash equivalents - beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents - end of period |
|
$ |
|
|
$ |
|
||
Refer to Notes to Consolidated Financial Statements
11
Index for Notes to the Consolidated Financial Statements
Note 1 |
13 |
|
Note 2 |
13 |
|
Note 3 |
19 |
|
Note 4 |
19 |
|
Note 5 |
20 |
|
Note 6 |
21 |
|
Note 7 |
21 |
|
Note 8 |
21 |
|
Note 9 |
22 |
|
Note 10 |
23 |
|
Note 11 |
23 |
|
Note 12 |
24 |
|
Note 13 |
26 |
12
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Financial Statements
The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc. (the "Company," "we," "us," and "our"), a Delaware corporation, at May 3, 2025 and May 4, 2024 and for the 13 week periods ended May 3, 2025 and May 4, 2024 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report. Therefore, these Consolidated Financial Statements should be read in conjunction with our Fiscal 2024 Form 10-K. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and those described in the notes that follow) considered necessary for a fair presentation have been included. The existence of subsequent events has been evaluated through the filing date of this Quarterly Report.
The Company operates under the American Eagle® ("AE") and Aerie® brands. We also operate Todd Snyder New York ("Todd Snyder"), a premium menswear brand, and Unsubscribed, which focuses on consciously made slow fashion.
AEO Inc. operates stores in the United States, Canada and Mexico, with merchandise available in more than
Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively. Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels, competitive factors, weather, changes in import tariffs and other trade restrictions, and general economic and political conditions.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and consolidated entities where the Company's ownership percentage is less than
Fiscal Year
Our fiscal year is a 52- or 53-week year that ends on the Saturday nearest to January 31. As used herein, "Fiscal 2025" refers to the 52-week period that will end on January 31, 2026. "Fiscal 2024" refers to the 52-week period ended February 1, 2025. "Fiscal 2023" refers to the 53-week period ended February 3, 2024.
Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.
Recent Accounting Pronouncements
In December 2023, the Financial Standards Board issued Accounting Standards Update ("ASU") 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires increased transparency in tax disclosures, specifically by
expanding requirements for rate reconciliation and income taxes paid information. Additionally, the amendment requires disclosures of income/(loss) from continuing operations before taxes disaggregated between domestic and foreign, and income tax expense/(benefit), disaggregated by federal, state, and foreign. Disclosure requirements about the nature and estimated range of the reasonably possible change in unrecognized tax benefits over the next year have been removed as part of this amendment. The guidance is effective for fiscal years beginning after December 15, 2024. The Company plans to adopt ASU 2023-09 effective for Fiscal 2025.
Refer to Note 10, Income Taxes, to the Consolidated Financial Statements for additional information regarding income taxes.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires disclosure of additional information for specific expense categories in the notes to financial statements for interim and annual periods. Specifically, the amendment requires quantitative disclosure for purchases of inventory, employee compensation, depreciation, and intangible asset amortization within an expense caption. For any remaining amounts within an expense caption, a qualitative description must be included. In all reporting periods, a total selling expense amount must be disclosed, with an annual disclosure of the entity's definition of selling expenses. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company plans to adopt ASU 2024-03 effective for Fiscal 2027.
Foreign Currency Translation
In accordance with FASB Accounting Standards Codification ("ASC") 830, Foreign Currency Matters, the Company translates assets and liabilities denominated in foreign currencies into U.S. dollars ("USD") (the reporting currency) at the exchange rates prevailing at the balance sheet date. The Company translates revenues and expenses denominated in foreign currencies into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the consolidated results of operations, whereas related translation adjustments are reported as an element of other comprehensive income (loss) in accordance with ASC 220, Comprehensive Income.
We are exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. During the 13 weeks ended May 3, 2025, an unrealized gain of $
Cash, Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments classified as available-for-sale include certificates of deposit with an original maturity greater than three months, but less than one year.
Refer to Note 3, Cash and Cash Equivalents and Short-term Investments, to the Consolidated Financial Statements for additional information regarding cash, cash equivalents, and short-term investments.
Accounts Receivable
The Company's receivables are primarily generated from product sales and royalties from our licensees. The primary indicators of the credit quality of our receivables are aging, payment history, economic sector information and outside credit monitoring, and are assessed on a quarterly basis. Our credit loss exposure is mainly concentrated in our accounts receivable portfolio. Our allowance for credit losses is calculated using a loss-rate method based on historical experience, current market conditions and reasonable forecasts. Historically, the Company’s reserves have approximated actual experience.
Merchandise Inventory
Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when control of the merchandise has transferred to the Company.
The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected.
14
The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.
Property and Equipment
Property and equipment is recorded on the basis of cost with depreciation computed utilizing the straight-line method over the asset’s estimated useful life.
Buildings |
|
|
Leasehold improvements |
|
|
Fixtures and equipment Information technology |
|
to |
As of May 3, 2025, the weighted average remaining useful life of our assets was approximately
In accordance with ASC 360, Property, Plant, and Equipment ("ASC 360"), the Company’s management evaluates the value of leasehold improvements, store fixtures, and operating lease right-of-use ("ROU") assets associated with retail stores. The Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded separately as a component of operating income within the Consolidated Statements of Operations.
Our impairment loss calculations require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. The significant assumption used in our fair value analysis is forecasted revenue. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions, our consolidated operating results could be adversely affected.
When the Company closes, remodels, or relocates a store prior to the end of its lease term, the remaining net book value of the assets related to the store is recorded as a write-off of assets within depreciation and amortization expense.
Refer to Note 6. Property and Equipment, Net to the Consolidated Financial Statements for additional information regarding property and equipment, and refer to Note 13. Impairment and Restructuring Charges, to the Consolidated Financial Statements for additional information regarding impairment charges for the 13 weeks ended May 3, 2025. There were
Goodwill and Intangible Assets
The Company’s goodwill is primarily related to the acquisition of its regionalized fulfillment center network, as well as its importing operations and Canadian business, and represents the excess of cost over fair value of net assets of businesses acquired. In accordance with ASC 350, Intangibles – Goodwill and Other, the Company evaluates goodwill for possible impairment at least annually as of the last day of the fiscal year and upon occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of a reporting unit may be below its carrying value. If the carrying value of the reporting unit exceeds the fair value, an impairment charge is recorded in the period of the evaluation based on that difference. The Company last performed an annual goodwill impairment test as of February 1, 2025.
15
Definite-lived intangible assets are initially recorded at fair value, with amortization computed utilizing the straight-line method over the assets’ estimated useful lives. The Company’s definite-lived intangible assets, which consist primarily of trademark assets, are generally amortized over
The Company evaluates definite-lived intangible assets for impairment in accordance with ASC 360 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows is less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value.
Refer to Note 7, Goodwill and Intangible Assets, Net, to the Consolidated Financial Statements for additional information regarding goodwill and intangible assets.
Equity Method Investments
During Fiscal 2024, the Company entered into a Limited Partnership Agreement of ACON Apparel Investors, L.P. (the "Fund"), with ACON Apparel GenPar, LLC. ("ACON") as the general partner. The Company paid $
Construction Allowances
As part of certain lease agreements for retail stores, the Company receives construction allowances from lessors, which are generally comprised of cash amounts. The Company records a receivable and an adjustment to the operating lease ROU asset at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized as part of the single lease cost over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the lessor.
Self-Insurance Liability
The Company uses a combination of insurance and self-insurance mechanisms for certain losses related to employee medical benefits and worker’s compensation. Costs for self-insurance claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Management believes that it has adequately reserved for its self-insurance liability, which is capped by stop-loss contracts with insurance companies. However, any significant variation of future claims from historical trends could cause actual results to differ from the accrued liability.
Leases
The Company leases all store premises, its Canadian distribution center in Mississauga, Ontario, its regional distribution facilities, some of its office space and certain information technology and office equipment. These leases are generally classified as operating leases.
Store leases generally provide for a combination of base rentals and contingent rent based on store sales. Additionally, most leases include lessor incentives such as construction allowances and rent holidays. The Company is typically responsible for tenant occupancy costs including maintenance costs, common area charges, real estate taxes and certain other expenses. When measuring operating lease ROU assets and operating lease liabilities, the Company only includes cash flows related to options to extend or terminate leases once those options are executed.
Some leases have variable payments. However, because they are not based on an index or rate, they are not included in the measurement of operating lease ROU assets and operating lease liabilities.
When determining the present value of future payments for an operating lease that does not have a readily determinable implicit rate, the Company uses its incremental borrowing rate as of the date of initial possession of the leased asset.
For leases that qualify for the short-term lease exemption, the Company does not record an operating lease liability or operating lease ROU asset. Short-term lease payments are recognized on a straight-line basis over the lease term of 12 months or less.
16
Co-Branded and Private Label Credit Cards
The Company offers a co-branded credit card and a private-label credit card under the AE and Aerie brands. These credit cards are issued by a third-party bank (the "Bank") in accordance with a credit card agreement (the "Agreement"). The Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. We receive funding from the Bank based on the Agreement and card activity, which includes payments for new account activations and usage of the credit cards. We recognize revenue for this funding as we fulfill our performance obligations under the Agreement. This revenue is recorded in other revenue, which is a component of total net revenue in our Consolidated Statements of Operations.
Customer Loyalty Program
The Company offers a highly digitized loyalty program called Real Rewards by American Eagle and Aerie™ (the "Program").
Points earned under the Program on purchases at AE and Aerie are accounted for in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"). The portion of the sales revenue attributed to the reward points is deferred and recognized when the reward is redeemed or when the points expire, using the relative stand-alone selling price method. Additionally, reward points earned using the co-branded credit card on non-AE or Aerie purchases are accounted for in accordance with ASC 606. As the points are earned, a current liability is recorded for the estimated cost of the reward, and the impact of adjustments is recorded in revenue.
The Company defers a portion of the sales revenue attributed to the loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606.
Credit Agreement
In June 2022, the Company entered into an amended and restated credit agreement (the "Credit Agreement"). The Credit Agreement provides senior secured asset-based revolving credit for loans and letters of credit up to $
Refer to Note 8, Long-Term Debt, Net to the Consolidated Financial Statements for additional information regarding long-term debt and other credit arrangements.
Income Taxes
The Company calculates income taxes in accordance with ASC 740, Income Taxes ("ASC 740"), which requires the use of the liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statements carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits, may materially impact the Company’s effective income tax rate.
The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is "more likely than not" that the position is sustainable based on its technical merits.
The calculation of deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance, requires management to make estimates and assumptions. The Company believes that its estimates and assumptions are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income (loss).
Refer to Note 10, Income Taxes, to the Consolidated Financial Statements for additional information regarding income taxes.
17
Revenue Recognition
The Company recognizes revenue pursuant to ASC 606. Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.
The Company recognizes royalty revenue generated from its license or franchise agreements based on a percentage of merchandise sales by the licensee/franchisee. This revenue is recorded as a component of total net revenue when earned and collection is probable.
The Company defers a portion of the sales revenue attributed to loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606. Refer to Customer Loyalty Program above for additional information.
Revenue associated with Quiet Platforms is recognized as the services are performed.
Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses
Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively, "merchandise costs"), Quiet Platforms' costs to service its customers and buying, occupancy and warehousing costs and services.
Design costs are related to the Company's Design Center operations and include compensation, travel and entertainment, supplies and samples for our design teams, as well as rent and depreciation for our Design Center. These costs are included in cost of sales as the respective inventory is sold.
Total net revenue, net of merchandise costs, represents merchandise margin.
Buying, occupancy and warehousing costs and services consist of compensation, employee benefit expenses and travel and entertainment for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased.
Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales. Additionally, selling, general and administrative expenses do not include rent and utilities, operating costs of our distribution centers, and shipping and handling costs related to our e-commerce operations, all of which are included in cost of sales.
18
Interest (Income) Expense, Net
Interest (income) expense, net primarily consists of interest income from cash and cash equivalents and interest expense from Credit Facility borrowings.
Other (Income), Net
Other (income), net consists primarily of foreign currency fluctuations and changes in other non-operating items. Non-controlling interest was not material for any period presented and is included within other (income), net.
Segment Information
The Company has identified two operating segments (American Eagle and Aerie brand) that also represent our reportable segments and reflect our CODM's (defined as our Chief Executive Officer ("CEO")) internal view of analyzing results and allocating resources. Additionally, our Todd Snyder and Unsubscribed brands and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosures they have been included in the Corporate and Other category. For additional information regarding the Company’s segment and geographic information, refer to Note 12, Segment Reporting to the Consolidated Financial Statements.
3. Cash and Cash Equivalents and Short-term Investments
The following table summarizes the fair market values for the Company’s cash, cash equivalents, and short-term investments which are recorded in the Consolidated Balance Sheets:
(In thousands) |
|
May 3, 2025 |
|
|
February 1, 2025 |
|
|
May 4, 2024 |
|
|||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest bearing deposits |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|||
Certificates of deposits |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
Total short-term investments |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
Total cash and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|||
4. Fair Value Measurements
ASC 820, Fair Value Measurement Disclosures ("ASC 820"), defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.
Financial Instruments
Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
The Company’s cash equivalents are Level 1 financial assets and are measured at fair value on a recurring basis, for all periods presented. Refer to Note 3, Cash and Cash Equivalents and Short-term Investments to the Consolidated Financial Statements for additional information regarding cash equivalents and short-term investments.
19
|
|
Fair Value Measurements at May 3, 2025 |
|
|||||||||||||
(In thousands) |
|
Carrying Amount |
|
|
Quoted Market Prices |
|
|
Significant Other |
|
|
Significant |
|
||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Interest bearing deposits |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Long-Term Debt
As of May 3, 2025, the fair value of the Company's $
Refer to Note 8, Long-Term Debt, Net, to the Consolidated Financial Statements for additional information regarding long-term debt and other credit arrangements.
Non-Financial Assets
The Company’s non-financial assets, which include intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur and the Company is required to evaluate the non-financial asset for impairment, a resulting impairment would require that the non-financial asset be recorded at the estimated fair value. The fair value is determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. During the 13 weeks ended May 3, 2025, the Company recorded asset impairment charges of $
The fair value of the Company's ROU assets was based upon market rent assumptions.
The Company evaluates goodwill for possible impairment at least annually as of the last day of the fiscal year and upon occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of a reporting unit may be below its carrying value. The Company last performed an annual goodwill impairment test using Level 3 inputs as defined in ASC 820 as of February 1, 2025.
5. Earnings per Share
The following is a reconciliation between basic and diluted weighted average shares outstanding:
|
|
13 Weeks Ended |
|
|||||
(In thousands) |
|
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Weighted average common shares outstanding: |
|
|
|
|
|
|
||
Basic number of common shares outstanding: |
|
|
|
|
|
|
||
Dilutive effect of stock options and non-vested restricted stock* |
|
|
— |
|
|
|
|
|
Diluted number of common shares outstanding |
|
|
|
|
|
|
||
Anti-Dilutive Shares* |
|
|
|
|
|
|
||
*
20
On March 14, 2025, the Company entered into an accelerated share repurchase agreement (the "ASR Agreement") with Bank of America, N.A. ("Bank of America"). Pursuant to the terms of the ASR Agreement, on March 17, 2025, the Company made an aggregate payment of $
6. Property and Equipment, Net
Property and equipment, net consists of the following:
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
(In thousands) |
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Property and equipment, at cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Less: Accumulated depreciation and impairment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
7. Goodwill and Intangible Assets, Net
Goodwill and definite-lived intangible assets, net consist of the following:
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
(In thousands) |
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Goodwill, gross (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment (2) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Goodwill, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
(In thousands) |
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Intangible assets, gross |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Accumulated impairment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
8. Long-Term Debt, Net
Revolving Credit Facility
In June 2022, the Company entered into an amended and restated Credit Agreement. The Credit Agreement provides senior secured asset-based revolving credit for loans and letters of credit up to $
All obligations under the Credit Facility are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by certain assets of the Company and certain subsidiaries.
As of May 3, 2025, the Company was in compliance with the terms of the Credit Agreement and had $
21
9. Share-Based Payments
The Company accounts for share-based compensation under the provisions of ASC 718, Compensation - Stock Compensation, which requires the Company to measure and recognize compensation expense for all share-based payments at fair value.
Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 weeks ended May 3, 2025 was $
Stock Option Grants
The Company grants time-based stock option awards, which vest over the requisite service period of the award or at an employee's eligible retirement date, if earlier.
|
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
|
|
(In thousands) |
|
|
|
|
|
(In years) |
|
|
(In thousands) |
|
||||
Outstanding - February 1, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
||
Cancelled |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding - May 3, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Vested and expected to vest - May 3, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercisable - May 3, 2025 (1) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
As of May 3, 2025, there was $
The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
|
|
13 Weeks Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
Black-Scholes Option Valuation Assumptions |
|
2025 |
|
|
2024 |
|
||
Risk-free interest rate (1) |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Volatility factor (2) |
|
|
% |
|
|
% |
||
Weighted-average expected term (3) |
|
|
|
|
||||
22
Restricted Stock Grants
Time-based restricted stock awards are comprised of time-based restricted stock units. These awards vest over
Performance-based restricted stock awards include performance-based restricted stock units ("PSU"). Annual PSU grants cliff vest, if at all, at the end of a
The grant date fair value of time-based restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant. A Monte-Carlo simulation was utilized for performance-based restricted stock awards.
A summary of the Company’s restricted stock activity is presented in the following table:
|
|
Time-Based Restricted |
|
|
Performance-Based Restricted |
|
||||||||||
|
|
May 3, 2025 |
|
|
May 3, 2025 |
|
||||||||||
(Shares in thousands) |
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||||
Non-vested - February 1, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Cancelled |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Non-vested - May 3, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of May 3, 2025, there was $
As of May 3, 2025, the Company had
10. Income Taxes
The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended May 3, 2025 was
The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense, which were insignificant for the 13 weeks ended May 3, 2025, and $
11. Legal Proceedings
23
The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies ("ASC 450"), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position, results of operations or consolidated cash flows of the Company. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
12. Segment Reporting
In accordance with ASC 280, Segment Reporting ("ASC 280"), the Company has identified
Unallocated corporate expenses are comprised of general and administrative costs that management does not attribute to any of our operating segments. These costs primarily relate to corporate administration, information and technology resources, finance and human resources functional and organizational costs, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-level activities and projects.
Our CEO analyzes segment results and allocates resources between segments based on the adjusted operating income (loss), or the operating income (loss) in periods where there are no adjustments, of each segment. Adjusted operating income (loss) is a non-GAAP financial measure ("non-GAAP" or "adjusted") that is defined by the Company as operating income excluding impairment and restructuring charges. Adjusted operating income (loss) is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP consolidated financial statements and provides a higher degree of transparency.
Reportable segment information is presented in the following tables:
For the 13 weeks ended May 3, 2025 (In thousands) |
|
American Eagle |
|
|
Aerie |
|
|
Other |
|
|
Intersegment Elimination |
|
|
Total |
|
|||||
Net Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Cost of sales, including certain buying, occupancy and warehousing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total segment operating income |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|||
Unallocated corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Impairment and restructuring charges (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
Total operating (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Interest (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Other (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
(Loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
24
(1)
For the 13 weeks ended May 4, 2024 (In thousands) |
|
American Eagle |
|
|
Aerie |
|
|
Other |
|
|
Intersegment Elimination |
|
|
Total |
|
|||||
Net Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Cost of sales, including certain buying, occupancy and warehousing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total segment operating income |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|||
Unallocated corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Other (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
|
13 Weeks Ended |
|
|||||
|
May 3, |
|
|
May 4, |
|
||
|
2025 |
|
|
2024 |
|
||
Capital Expenditures |
|
|
|
|
|
||
American Eagle |
$ |
|
|
$ |
|
||
Aerie |
$ |
|
|
$ |
|
||
Other |
$ |
|
|
$ |
|
||
General corporate expenditures |
$ |
|
|
$ |
|
||
Total Capital Expenditures |
$ |
|
|
$ |
|
||
We do not allocate assets to the reportable segment level and therefore our CEO does not use segment asset information to make decisions.
Total net revenue for the American Eagle and Aerie reportable segments in the table above represents revenue attributable to each brand's merchandise, which comprises approximately 97% of total net revenue for the 13 weeks ended May 3, 2025.
The following table presents summarized geographical information:
|
13 Weeks Ended |
|
|||||
(In thousands) |
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Total net revenue: |
|
|
|
|
|
||
United States |
$ |
|
|
$ |
|
||
Foreign (1) |
|
|
|
|
|
||
Total net revenue |
$ |
|
|
$ |
|
||
(1)
|
|
13 Weeks Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
(In thousands) |
|
2025 |
|
|
2024 |
|
||
Long-lived assets, net: |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Foreign |
|
|
|
|
|
|
||
Total long-lived assets, net |
|
$ |
|
|
$ |
|
||
25
13. Impairment and Restructuring Charges
The following table represents impairment and restructuring charges. All amounts were recorded within impairment and restructuring on the Consolidated Statements of Operations during the 13 weeks ended May 3, 2025. There were
|
|
13 Weeks Ended |
|
|
|
|
|
May 3, |
|
|
|
(In thousands) |
|
2025 |
|
|
|
Long-lived asset impairment charges (1) |
|
$ |
|
|
|
Employee severance (2) |
|
|
|
|
|
Total impairment and restructuring charges |
|
$ |
|
|
|
The following footnotes relate to impairment and restructuring charges recorded in the 13 weeks ended May 3, 2025:
A rollforward of the restructuring liabilities recognized in the Consolidated Balance Sheet is as follows:
|
|
13 Weeks Ended |
|
|
|
|
|
May 3, |
|
|
|
(In thousands) |
|
2025 |
|
|
|
Accrued liability as of February 1, 2025 |
|
$ |
|
|
|
Add: Costs incurred, excluding non-cash charges |
|
$ |
|
|
|
Less: Cash payments and adjustments |
|
|
( |
) |
|
Accrued liability as of May 3, 2025 |
|
$ |
|
|
|
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A") is intended to help the reader understand the Company, our operations and our present business environment. This MD&A is provided as a supplement to — and should be read in conjunction with — our MD&A for Fiscal 2024, which can be found in Part II, Item 7 of our Fiscal 2024 Form 10-K.
In addition, the following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements and should be read in conjunction with these statements and notes thereto.
Introduction
This MD&A is organized as follows:
|
Recent accounting pronouncements the Company has adopted or is currently evaluating prior to adoption, including the dates of adoption or expected dates of adoption, as applicable, and anticipated effects on the Company’s audited Consolidated Financial Statements, are included in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein.
Executive Overview
We are a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under our American Eagle® and Aerie® brands.
We have two reportable segments, American Eagle and Aerie. Our Chief Operating Decision Maker (defined as our CEO) analyzes segment results and allocates resources based on adjusted operating income (loss), which is a non-GAAP financial measure. See Note 12, Segment Reporting, to the Consolidated Financial Statements included herein for additional information.
Key Performance Indicators
Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:
Comparable Sales — Comparable sales and comparable sales changes provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period. In fiscal years following those with 53 weeks, the prior year period is shifted by one week to compare similar calendar weeks. A store is included in comparable sales in the 13th month of operation. However, stores that have a gross square footage change of 25% or greater due to a remodel are removed from the comparable sales base but are included in total sales. These stores are returned to the comparable sales base in the 13th month following the remodel. Sales from American Eagle, Aerie, Todd Snyder, and Unsubscribed stores, as well as sales from AEO Direct and other digital channels, are included in total comparable sales. Sales from licensed stores are not included in comparable sales. Individual American Eagle and Aerie brand comparable sales disclosures include sales from stores and AEO Direct.
27
Omni-Channel Sales Performance – Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within this MD&A when we believe that they enhance the understanding of the matter being discussed. Investors may find them useful as such. Each of these metrics is defined as follows (except comparable sales, which is defined separately above):
Gross Profit — Gross profit measures whether we are optimizing the profitability of our sales. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs, Quiet Platforms costs to service its customers and buying, occupancy and warehousing costs and services. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples.
Buying, occupancy and warehousing costs and services consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operations.
The inability to obtain acceptable levels of sales, initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross consolidated profit and results of operations.
Operating Income — Our management views operating income as a key indicator of our performance. The key drivers of operating income are net revenue, gross profit, our ability to control selling. general, and administrative ("SG&A") expenses, and our level of capital expenditures.
Cash Flow and Liquidity — Our management evaluates cash flow from operations and investing and financing activities in determining the sufficiency of our cash position and capital allocation strategies. Cash flow has historically been sufficient to cover our uses of cash. Our management believes that cash flow and liquidity will be sufficient to fund anticipated capital expenditures and working capital requirements for the next twelve months and beyond.
Current Trends and Outlook
Macroeconomic Conditions
During Fiscal 2024 and the 13 weeks ended May 3, 2025, our results were negatively impacted by macro-economic challenges and global inflationary pressures impacting consumer spending behavior, which constrained revenue and increased margin pressure to clear through excess spring and summer inventory. For further information about the risks associated with global economic conditions and the effect of economic pressures on our business, see "Risk Factors" in Part I, Item 1A of our Fiscal 2024 Form 10-K.
Omni-Channel Capabilities
AEO Inc. operates stores in the United States, Canada and Mexico, with merchandise available in more than 30 countries through a global network of license partners. Additionally, the company operates a robust e-commerce business across its brands.
Over the past several years, we have invested in building our technologies and digital capabilities. We focused our investments in three key areas: making significant advances in mobile technology, investing in digital marketing and improving the digital customer experience.
Results of Operations
28
Overview
The first quarter was a challenging period for our business. While the broader macro environment and cold spring weather presented challenges, merchandising strategies did not drive the results we anticipated, leading to higher promotions and excess inventory. As a result, the operating loss reflects an inventory charge of $75 million related to a write-down of spring and summer merchandise, as well as higher than planned promotional activity in the quarter.
Compared to the first 13 weeks of Fiscal 2024:
Diluted loss per share decreased to ($0.36) for the 13 weeks ended May 3, 2025 compared to earnings per share of $0.34 for the 13 weeks ended May 4, 2024.
The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations:
|
|
13 Weeks Ended |
|
|
|
||||||||||||
|
|
May 3, 2025 |
|
|
|
May 4, 2024 |
|
|
|
||||||||
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
(In thousands) |
|
(Percentage of revenue) |
|
|
|
||||
Total net revenue |
|
$ |
1,089,599 |
|
100.0 |
|
% |
|
$ |
1,143,867 |
|
100.0 |
|
% |
|
||
Cost of sales, including certain buying, occupancy and warehouse expenses |
|
|
767,178 |
|
|
70.4 |
|
|
|
|
679,628 |
|
|
59.4 |
|
|
|
Gross profit |
|
|
322,421 |
|
|
29.6 |
|
|
|
|
464,239 |
|
|
40.6 |
|
|
|
Selling, general and administrative expenses |
|
|
338,786 |
|
|
31.1 |
|
|
|
|
333,493 |
|
|
29.2 |
|
|
|
Impairment and restructuring charges (1) |
|
|
17,119 |
|
|
1.6 |
|
|
|
|
- |
|
|
0.0 |
|
|
|
Depreciation and amortization expense |
|
|
51,697 |
|
|
4.7 |
|
|
|
|
52,910 |
|
|
4.6 |
|
|
|
Operating (loss) income(1) |
|
|
(85,181 |
) |
|
(7.8 |
) |
|
|
|
77,836 |
|
|
6.8 |
|
|
|
Interest (income), net |
|
|
(219 |
) |
|
(0.0 |
) |
|
|
|
(3,439 |
) |
|
(0.3 |
) |
|
|
Other (income), net |
|
|
(351 |
) |
|
(0.0 |
) |
|
|
|
(1,396 |
) |
|
(0.1 |
) |
|
|
(Loss) income before income taxes |
|
$ |
(84,611 |
) |
|
(7.8 |
) |
|
|
$ |
82,671 |
|
|
7.2 |
|
|
|
(Benefit) provision for income taxes |
|
|
(19,712 |
) |
|
(1.8 |
) |
|
|
|
14,919 |
|
|
1.3 |
|
|
|
Net (loss) income(1) |
|
$ |
(64,899 |
) |
|
(6.0 |
) |
% |
|
$ |
67,752 |
|
|
5.9 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Refer to "Non-GAAP Information" below for non-GAAP or adjusted financial measures. |
|||||||||||||||||
The following table shows our consolidated store data for the 13 weeks ended May 3, 2025 and May 4, 2024:
|
|
13 Weeks Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Number of stores: |
|
|
|
|
|
|
||
Beginning of period |
|
|
1,172 |
|
|
|
1,182 |
|
Opened |
|
|
6 |
|
|
|
4 |
|
Closed |
|
|
(2 |
) |
|
|
(13 |
) |
End of period |
|
|
1,176 |
|
|
|
1,173 |
|
|
|
|
|
|
|
|
||
Total gross square feet at end of period (in '000) |
|
|
7,232 |
|
|
|
7,221 |
|
International licensed retail stores at end of |
|
|
363 |
|
|
|
315 |
|
29
As of May 3, 2025, we operated 828 American Eagle retail stores, consisting of 182 Aerie side-by-side locations, five locations with AE brand, Aerie brand and OFFLINE™ connected as one store, and six OFFLINE™ side-by-side locations, 321 Aerie stand-alone stores (including 42 OFFLINE™ stand-alone stores and 40 OFFLINE™ side-by-side locations), and AEO Direct. Additionally, there were 20 Todd Snyder stand-alone locations and seven Unsubscribed locations.
Comparison of the 13 weeks ended May 3, 2025 to the 13 weeks ended May 4, 2024
Total Net Revenue
Total net revenue decreased 5% for the 13 weeks ended May 3, 2025 to $1.090 billion, compared to $1.144 billion last year. This included a one point headwind from adverse currency and another point from moving our Hong Kong operations to a license model in Fiscal 2024. Digital revenue decreased 2%, and store revenue decreased 6%. Total comparable sales decreased by 3%, compared to a 7% increase last year. Traffic was up across brands and channels, with declines in average unit retail price and conversion.
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||
|
|
May 3, 2025 |
|
May 4, 2024 |
|
|
|
|||||||
|
|
(In thousands) |
(Percentage) |
|
|
(In thousands) |
(Percentage) |
|
|
|
(In thousands) |
(Percentage) |
|
|
American Eagle |
|
$693,865 |
63.7 |
% |
|
$724,744 |
63.4 |
% |
|
|
$(30,879) |
(4) |
% |
|
Aerie |
|
359,788 |
33.0 |
|
|
372,652 |
32.6 |
|
|
|
(12,864) |
(3) |
|
|
Other |
|
43,970 |
4.0 |
|
|
54,984 |
4.8 |
|
|
|
(11,014) |
(20) |
|
|
Intersegment Eliminations |
|
(8,024) |
(0.7) |
|
|
(8,513) |
(0.7) |
|
|
|
489 |
(6) |
|
|
Total net revenue |
|
$1,089,599 |
100.0 |
% |
|
$1,143,867 |
100.0 |
% |
|
|
$(54,268) |
(5) |
% |
|
American Eagle. The decrease in net revenue was driven by lower average unit retail price. American Eagle comparable sales decreased 2%.
Aerie. The decrease in net revenue was driven by decreased transactions across channels. Aerie comparable sales decreased 4%.
Other. The decrease in net revenue was primarily attributable to $6 million of lower revenue from Todd Snyder, and $5 million of lower revenue from Quiet Platforms due to our change in strategy for this business.
Gross Profit
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|||||||||||||||||
|
|
May 3, 2025 |
May 4, 2024 |
|
|
||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
|
|
(Percentage) |
|
|||||||||||||
Gross Profit |
|
$ |
322,421 |
|
|
|
$ |
464,239 |
|
|
|
|
$ |
(141,818 |
) |
|
|
(31 |
) |
% |
|
Gross Margin |
|
|
29.6 |
|
% |
|
|
40.6 |
|
% |
|
|
-1100 basis points |
|
|
|
|
||||
The 31% decrease in gross profit was primarily driven by a decrease of $66 million in merchandise margin due to lower sales and increased promotional activity, as well as a $75 million inventory charge related to a write-down of spring and summer merchandise.
During the 13 weeks ended May 3, 2025 and May 4, 2024, $7.0 million and $6.6 million, respectively of share-based payment expense were included in gross profit, representing both time and performance-based awards.
Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network as well as design costs in cost of sales and others may exclude a portion of these costs from cost of sales, including them in a line item such as SG&A expenses. Refer to Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.
30
Selling, General and Administrative Expenses
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||||||||||
|
|
May 3, 2025 |
May 4, 2024 |
|
|
||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
|||||||||||||||
Selling, general and administrative expenses |
|
$ |
338,786 |
|
|
|
$ |
333,493 |
|
|
|
|
$ |
5,293 |
|
|
|
2 |
|
% |
|
Selling, general and administrative expenses as a percentage of net revenue |
|
|
31.1 |
|
% |
|
|
29.2 |
|
% |
|
|
-190 basis points |
|
|
|
|
|
|
||
The increase in expense was primarily driven by a $7 million increase in advertising year-over-year, with a partial offset from lower compensation.
There was $13.6 million and $14.0 million of share-based payment expense included in SG&A expenses for the 13 weeks ended May 3, 2025 and May 4, 2024, respectively, comprised of both time and performance-based awards.
Impairment and Restructuring
|
13 Weeks Ended |
|
Increase/(Decrease) |
|||||||||||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
|
(Percentage) |
|
|||||||||||||
Impairment and restructuring charges |
|
$ |
17,119 |
|
|
|
$ |
- |
|
|
|
|
$ |
17,119 |
|
|
100 |
|
% |
|
Impairment and restructuring charges as a percentage of net revenue |
|
|
1.6 |
|
% |
|
|
0.0 |
|
% |
|
|
-160 basis points |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
During the 13 weeks ended May 3, 2025, we recorded $17.1 million of impairment and restructuring. We recorded $10.4 million of impairment related to ROU assets, $4.9 million related to fixed assets, and $1.8 million of employee severance.
Depreciation and Amortization Expense
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||||||||||
|
|
May 3, 2025 |
May 4, 2024 |
|
|
||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
||||||||||||||||
American Eagle |
|
$ |
20,168 |
|
|
|
$ |
17,576 |
|
|
|
|
$ |
2,592 |
|
|
|
15 |
|
% |
|
Aerie |
|
|
14,170 |
|
|
|
|
15,254 |
|
|
|
|
|
(1,084 |
) |
|
|
(7 |
) |
|
|
Other |
|
|
17,359 |
|
|
|
|
20,080 |
|
|
|
|
|
(2,721 |
) |
|
|
(14 |
) |
|
|
Total depreciation and amortization expense |
|
$ |
51,697 |
|
|
|
$ |
52,910 |
|
|
|
|
$ |
(1,213 |
) |
|
|
(2 |
) |
% |
|
Total depreciation and amortization expense as a percentage of net revenue |
|
|
4.7 |
|
% |
|
|
4.6 |
|
% |
|
|
-10 basis points |
|
|
|
|
||||
Operating (Loss) Income
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||
|
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||||
|
|
(In thousands) |
(Percentage of revenue) |
|
|
(In thousands) |
(Percentage of revenue) |
|
|
|
(In thousands) |
(Percentage) |
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Eagle |
|
$49,472 |
4.5 |
% |
|
$138,585 |
12.1 |
% |
|
|
$(89,113) |
(64) |
% |
|
Aerie |
|
1,048 |
0.1 |
|
|
61,327 |
5.4 |
|
|
|
(60,279) |
(98) |
|
|
Other |
|
(13,169) |
(1.2) |
|
|
(14,848) |
(1.3) |
|
|
|
1,679 |
(11) |
|
|
General corporate expenses |
|
(105,413) |
|
|
|
(107,228) |
|
|
|
|
1,815 |
|
|
|
Impairment and restructuring charges |
|
(17,119) |
|
|
|
- |
|
|
|
|
(17,119) |
|
|
|
Total Operating (Loss) Income |
|
$(85,181) |
(7.8) |
% |
|
$77,836 |
6.8 |
% |
|
|
$(163,017) |
(209) |
% |
|
31
The decrease in operating (loss) income was primarily driven by lower gross profit, and an increase in impairment and restructuring charges, all of which are explained in detail above.
American Eagle. The decrease was primarily the result of a $78 million decrease in gross profit driven by decreased merchandise margin on the $31 million, or 4%, decline in total net revenue, and increased promotional activity, as well as a $31 million inventory write-down of spring and summer merchandise. SG&A expenses and depreciation and amortization also increased a combined $11 million year-over-year.
Aerie. The decrease was primarily the result of a $58 million decrease in gross profit driven by decreased merchandise margin on the $13 million, or 3%, decline in total net revenue and increased promotional activity, as well as a $44 million inventory write-down of spring and summer merchandise.
Interest (Income), net
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
||||||||||||||||
Interest (income), net |
$ |
(219 |
) |
|
|
$ |
(3,439 |
) |
|
|
|
$ |
(3,220 |
) |
|
|
94 |
|
% |
|
|
Interest (income), net as a percentage of net revenue |
|
(0.0 |
) |
% |
|
|
(0.3 |
) |
% |
|
|
-30 basis points |
|
|
|
||||||
The decrease in interest (income), net is primarily related to $3 million less interest income on deposits year-over-year.
Other (Income), net
|
13 Weeks Ended |
|
Increase/(Decrease) |
||||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||||
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
||||||||
Other (income), net |
$(351) |
|
|
$(1,396) |
|
|
|
$(1,045) |
|
(75) |
% |
|
|
Other (income), net as a percentage of net revenue |
(0.0) |
% |
|
(0.1) |
% |
|
|
-10 basis points |
|
|
|
||
(Benefit) Provision for Income Taxes
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|||||||||||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
||||||||||||||||
(Benefit) provision for income taxes |
|
$ |
(19,712 |
) |
|
|
$ |
14,919 |
|
|
|
|
$ |
(34,631 |
) |
|
|
(232 |
) |
% |
|
(Benefit) provision for incomes taxes as a percentage of net revenue |
|
|
(1.8 |
) |
% |
|
|
1.3 |
% |
|
|
|
-310 basis points |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effective tax rate |
|
|
23.3 |
|
% |
|
|
18.0 |
|
% |
|
|
|
|
|
|
|
|
|
||
The (benefit) provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended May 3, 2025 was 23.3% compared to 18.0% for the 13 weeks ended May 4, 2024. The change in the effective tax rate, as compared to the prior period, is primarily due to share-based payments and tax audit adjustments.
32
Net (Loss) Income
|
|
13 Weeks Ended |
|
Increase/(Decrease) |
|||||||||||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||||||||||||
|
|
(In thousands) |
|
(In thousands) |
(Percentage) |
|
|||||||||||||||
Net (loss) income |
|
$ |
(64,899 |
) |
|
|
$ |
67,752 |
|
|
|
|
$ |
(132,651 |
) |
|
|
(196 |
) |
% |
|
Net (loss) income as a percentage of net revenue |
|
|
(6.0 |
) |
% |
|
|
5.9 |
|
% |
|
|
-1090 basis points |
|
|
|
|
||||
Net loss per diluted share of ($0.36) decreased for the 13 weeks ended May 3, 2025, compared to net income per diluted share of $0.34, for the 13 weeks ended May 4, 2024. The decrease in net income was attributable to the factors noted above.
Non-GAAP Information
The results of operations section above includes operating income and net income per diluted share presented on an adjusted or non-GAAP basis, which are non-GAAP financial measures. These financial measures are not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance when reviewed in conjunction with our GAAP Consolidated Financial Statements and provides a higher degree of transparency. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. The table below reconciles the GAAP financial measure to the non-GAAP financial measures discussed above.
GAAP to Non-GAAP Reconciliation |
|
|||||||||||||||
(Dollars in thousands, except per share amounts) |
|
|||||||||||||||
|
|
13 Weeks Ended |
|
|||||||||||||
|
|
May 3, 2025 |
|
|||||||||||||
|
|
Operating Loss |
|
|
Benefit for Income Taxes |
|
|
Net Loss |
|
|
Earnings per Diluted Share |
|
||||
GAAP Basis |
|
$ |
(85,181 |
) |
|
$ |
(19,712 |
) |
|
$ |
(64,899 |
) |
|
$ |
(0.36 |
) |
% of Revenue |
|
|
(7.8 |
) |
% |
|
|
|
|
(6.0 |
) |
% |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Impairment and restructuring charges (1) |
|
|
17,119 |
|
|
|
|
|
|
13,131 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax effect of the above (2) |
|
|
|
|
$ |
3,988 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-GAAP Basis |
|
$ |
(68,062 |
) |
|
$ |
(15,724 |
) |
|
$ |
(51,768 |
) |
|
$ |
(0.29 |
) |
% of Revenue |
|
|
(6.2 |
) |
% |
|
|
|
|
(4.8 |
) |
% |
|
|
||
(1) Refer to Note 13, Impairment and Restructuring Charges, to the Consolidated Financial Statements included herein for additional information.
(2) The tax effect of excluded items is the difference between the tax benefit calculated on a GAAP basis and on a non-GAAP basis.
International Operations
We have agreements with multiple third-party operators to expand our brands internationally. Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given geographic area and to source products from us. International licensees' rights include the right to own and operate retail stores and may include rights to sell in wholesale markets, shop-in-shop concessions and operate online marketplace businesses. As of May 3, 2025, our international licensing partners operated in 363 licensed retail stores and concessions, as well as wholesale markets, online brand sites, and online marketplaces in approximately 30 countries.
33
As of May 3, 2025, we had 100 and 90 Company-owned stores in Canada and Mexico, respectively.
Liquidity and Capital Resources
Our uses of cash have historically been for working capital, the construction of new stores and remodeling of existing stores, information technology and e-commerce upgrades and investments, distribution center improvements and expansion, and the return of value to stockholders through the repurchase of common stock and the payment of dividends. Additionally, our uses of cash have included the development of the Aerie brand, investments in technology and omni-channel capabilities, and our international expansion efforts.
Historically, our uses of cash have been funded with cash flow from operations and existing cash on hand. We also maintain an asset-based revolving credit facility that allows us to borrow up to $700 million, which will expire in June 2027. As of May 3, 2025, the Company had $110.0 million in borrowings under the Credit Facility. Refer to Note 8, Long-Term Debt, Net, to the Consolidated Financial Statements included herein for additional information regarding our long-term debt.
As of May 3, 2025, we had approximately $87.9 million in cash and cash equivalents. We expect to be able to fund our future cash requirements through current cash holdings and available liquidity.
The following sets forth certain measures of our liquidity:
|
|
May 3, |
|
|
Working Capital (in thousands) |
|
|
300,367 |
|
Current Ratio |
|
|
1.38 |
|
The following table sets forth net cash flows in operating, investing, and financing activities for the 13 weeks ended May 3, 2025 and May 4, 2024:
|
13 Weeks Ended |
Increase/(Decrease) |
||||||||||||
|
May 3, 2025 |
|
May 4, 2024 |
|
||||||||||
|
(In thousands) |
|
||||||||||||
Total cash (used for) provided by: |
|
|
|
|
|
|
|
|
|
|
||||
Operating activities |
|
$ |
(54,672 |
) |
|
$ |
(38,111 |
) |
|
|
$ |
(16,561 |
) |
|
Investing activities |
|
|
(11,833 |
) |
|
|
59,221 |
|
|
|
|
(71,054 |
) |
|
Financing activities |
|
|
(154,134 |
) |
|
|
(74,214 |
) |
|
|
|
(79,920 |
) |
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
(470 |
) |
|
|
(472 |
) |
|
|
|
2 |
|
|
(Decrease) in cash and cash equivalents |
|
$ |
(221,109 |
) |
|
$ |
(53,576 |
) |
|
|
$ |
(167,533 |
) |
|
Cash Flows (Used For) Operating Activities
Our major source of cash from operations for both periods was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs.
Cash Flows (Used for) Provided by Investing Activities
Investing activities for the 13 weeks ended May 3, 2025 primarily consisted of capital expenditures of $61.6 million, partially offset by the sale of available-for-sale investments of $50.0 million.
Investing activities for the 13 weeks ended April May 4, 2024 primarily consisted of the sales of available-for-sale investments of $100.0 million, partially offset by capital expenditures of $36.2 million.
Cash Flows (Used for) Financing Activities
Cash used for financing activities for the 13 weeks ended May 3, 2025 consisted primarily of $201.5 million, including excise taxes, used to repurchase the Company's common stock under the ASR Agreement (as defined below), $31.3 million, including commissions and excise taxes, used for the repurchase of common stock under our publicly announced program, and $21.7 million for cash dividends paid at a quarterly rate of $0.125 per share.
34
Cash used for financing activities for the 13 weeks ended May 4, 2024 consisted primarily of $34.9 million used for the repurchase of common stock under our publicly announced programs, and $24.6 million for cash dividends paid at a quarterly rate of $0.125 per share.
Revolving Credit Facility
In June 2022, we entered into an amended and restated Credit Agreement, which provides senior secured asset-based revolving credit for loans and letters of credit up to $700 million, subject to customary borrowing base limitations. The Credit Facility expires on June 24, 2027.
All obligations under the Credit Facility are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by certain assets of the Company and certain subsidiaries.
As of May 3, 2025, the Company was in compliance with the terms of the Credit Agreement and had borrowings of $110.0 million and $12.0 million outstanding in stand-by letters of credit. As of May 4, 2024, the Company was in compliance with the terms of the Credit Agreement and had no borrowings and $12.0 million outstanding in stand-by letters of credit.
Capital Expenditures for Property and Equipment
For the 13 weeks ended May 3, 2025, capital expenditures totaled $61.6 million. See below for a breakdown of expenditures:
|
13 Weeks Ended |
Increase/(Decrease) |
|||||||||||||||||
|
May 3, 2025 |
|
May 4, 2024 |
|
|||||||||||||||
|
(In thousands) |
(In thousands) |
(Percentage) |
||||||||||||||||
Store, fixture, and visual investments |
|
$ |
28,466 |
|
|
$ |
20,532 |
|
|
|
$ |
7,934 |
|
|
|
39 |
|
% |
|
Information technology initiatives |
|
|
11,998 |
|
|
|
12,978 |
|
|
|
|
(980 |
) |
|
|
(8 |
) |
|
|
Supply chain infrastructure |
|
|
11,427 |
|
|
|
2,116 |
|
|
|
|
9,311 |
|
|
|
440 |
|
|
|
Other home office projects |
|
|
9,715 |
|
|
|
583 |
|
|
|
|
9,132 |
|
|
|
1566 |
|
|
|
Capital Expenditures |
|
$ |
61,606 |
|
|
$ |
36,209 |
|
|
|
$ |
25,397 |
|
|
|
70 |
|
% |
|
For Fiscal 2025, we expect capital expenditures to be approximately $275 million related to the continued support of our expansion efforts, stores, information technology upgrades to support growth and investments in e-commerce, as well as to support and enhance our supply chain. We expect to be able to fund our capital expenditures through current available liquidity and cash generated from operations.
See below for a breakdown for stores remodeled and new stores opened in the 13 weeks ended May 3, 2025 and May 4, 2024:
|
13 Weeks Ended |
|
|
||||||||
|
May 3, 2025 |
May 4, 2024 |
|
|
|||||||
|
New Stores |
|
Remodels |
|
New Stores |
|
Remodels |
|
|
||
American Eagle (1) |
|
1 |
|
11 |
|
|
3 |
|
- |
|
|
Aerie (2) |
|
3 |
|
2 |
|
|
1 |
|
- |
|
|
Todd Snyder |
|
1 |
|
- |
|
|
- |
|
- |
|
|
Unsubscribed |
|
1 |
|
- |
|
|
- |
|
- |
|
|
Total stores |
|
6 |
|
13 |
|
|
4 |
|
- |
|
|
(1) American Eagle includes AE stand-alone stores, Aerie side-by-side stores connected to an AE brand location, AE, Aerie, and OFFLINE locations connected as one store, and OFFLINE side-by-side stores connected to an AE brand location
(2) Aerie includes Aerie stand-alone, OFFLINE stand-alone, and OFFLINE side-by-side stores connected to an Aerie brand location
Share Repurchases
On March 11, 2025, the Company’s Board of Directors (the "Board") authorized 50 million additional shares for repurchase as part of its existing share repurchase program, which was previously announced in February 2024.
35
Including this additional authorization, as of May 3, 2025, the Company had a total of 54.0 million shares remaining authorized for repurchase through February 3, 2029.
On March 14, 2025, the Company entered into an accelerated share repurchase agreement (the "ASR Agreement") with Bank of America, N.A. ("Bank of America") to repurchase an aggregate of $200 million of the Company’s common stock.
Pursuant to the terms of the ASR Agreement, on March 17, 2025, the Company made an aggregate payment of $200 million to Bank of America and received an aggregate initial delivery of approximately 14.5 million shares of its common stock, representing approximately 80% of the total shares that are expected to be repurchased under the ASR agreement. The exact number of shares the Company ultimately will repurchase under the ASR Agreement will be based generally on the average of the daily volume-weighted average price per share of the common stock during the repurchase period, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, under certain circumstances, Bank of America may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required either to deliver shares of common stock or to make a cash payment to Bank of America. Final settlement of the transactions under the ASR Agreement is expected to occur by the end of the second quarter of Fiscal 2025.
During the 13 weeks ended May 3, 2025 and May 4, 2024, we repurchased approximately 0.7 million and 0.5 million shares, respectively, from certain employees at market prices totaling $7.9 million and $13.2 million, respectively. These shares were repurchased for the payment of taxes, in connection with the vesting of share-based payments, as permitted under our equity incentive plans.
The aforementioned repurchased shares have been recorded as treasury stock.
Dividends
During the 13 weeks ended May 3, 2025, the Board declared a quarterly cash dividend of $0.125 per share on March 13, 2025, which was paid on April 25, 2025.
The Company maintains the right to defer the record and payment dates of any declared dividends, depending upon, among other factors, business performance and the macroeconomic environment. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes in United States taxation, and other relevant factors.
Critical Accounting Estimates
Our critical accounting policies and estimates are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the year ended February 1, 2025 contained in our Fiscal 2024 Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Consolidated Financial Statements in this Quarterly Report. The application of our critical accounting policies and estimates may require our management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Our management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are primarily exposed to the impact of foreign exchange rate risk primarily through our Canadian and Mexican operations where the functional currency is the Canadian dollar and Mexican peso, respectively. The impact of all other foreign currencies is currently immaterial to our consolidated financial results. An unrealized gain of $14 million is included in accumulated other comprehensive income during the 13 weeks ended May 3, 2025. Our market risk profile as of February 1, 2025 is disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Fiscal 2024 Form 10-K, and was unchanged as of May 3, 2025.
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ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the management of American Eagle Outfitters, Inc. (the "Management"), including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In connection with the preparation of this Quarterly Report, as of May 3, 2025, the Company performed an evaluation under the supervision and with the participation of our Management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing, and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our Management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are involved, from time to time, in actions associated with or incidental to our business, including, among other things, matters involving consumer privacy, trademark and other intellectual property, licensing, importation of products, taxation, and employee relations. As of the date of this Quarterly Report, we believe that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our consolidated financial position or results of operations. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact that are not in accord with management's evaluation of the possible liability or outcome of such litigation or claims. Consistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental proceedings with a governmental entity as a party where the company reasonably believes such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1.0 million or more. Applying this threshold, there are no environmental matters to disclose for this period.
Refer to Note 11, Legal Proceedings, to the Consolidated Financial Statements included herein for additional information.
ITEM 1A. RISK FACTORS.
Risk factors that affect our business and financial results are discussed within Part I, Item 1A of our Fiscal 2024 Form 10-K. There have been no material changes to our risk factors as disclosed in the Fiscal 2024 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Issuer Purchases of Equity Securities
The following table provides information regarding our repurchases of our common stock during the 13 weeks ended May 3, 2025:
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Total |
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Total Number of |
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Maximum Number of |
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||||
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Number of |
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Average |
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Shares Purchased as |
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Shares that May |
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Shares |
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Price Paid |
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Part of Publicly |
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Yet Be Purchased |
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Period |
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Purchased |
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Per Share |
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Announced Programs |
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Under the Program |
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(1) |
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(2) |
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(1) |
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(1) (3) |
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Month #1 (February 2, 2025 through March 1, 2025) |
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2,206,230 |
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$ |
15.35 |
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|
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2,000,000 |
|
|
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18,500,000 |
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Month #2 (March 2, 2025 through April 5, 2025) |
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|
14,788,376 |
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|
|
13.77 |
|
|
|
14,466,546 |
|
|
|
54,033,453 |
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Month #3 (April 6, 2025 through May 3, 2025) |
|
|
126,081 |
|
|
|
10.92 |
|
|
|
— |
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|
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54,033,453 |
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Total |
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17,120,687 |
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|
$ |
13.96 |
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|
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16,466,546 |
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54,033,453 |
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ITEM 5: OTHER INFORMATION
(c) Rule 10b5-1 Trading Plans
During the fiscal quarter ended May 3, 2025, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act)
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ITEM 6. EXHIBITS.
Exhibit 10.1 |
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* Exhibit 31.1 |
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Certification by Jay L. Schottenstein pursuant to Rule 13a-14(a) or Rule 15d-14(a) |
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* Exhibit 31.2 |
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Certification by Michael A. Mathias pursuant to Rule 13a-14(a) or Rule 15d-14(a) |
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** Exhibit 32.1 |
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** Exhibit 32.2 |
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* Exhibit 101 |
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The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended May 3, 2025, formatted as inline eXtensible Business Reporting Language ("XBRL"): (i) Consolidated Balance Sheets as of May 3, 2025, February 1, 2025, and May 4, 2024 (ii) Consolidated Statements of Operations for the 13 weeks ended May 3, 2025 and May 4, 2024, (iii) Consolidated Statements of Comprehensive Income for the 13 weeks ended May 3, 2025 and May 4, 2024, (iv) Consolidated Statements of Stockholders’ Equity for the 13 weeks ended May 3, 2025 and May 4, 2024, and (v) Consolidated Statements of Cash Flows for the 13 weeks ended May 3, 2025 and May 4, 2024. |
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* Exhibit 104 |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended May 3, 2025, formatted in inline XBRL |
^ Management contract or compensatory plan or arrangement.
* Filed with this report.
** Furnished with this report.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 5, 2025
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American Eagle Outfitters, Inc. (Registrant) |
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By: |
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/s/ Jay L. Schottenstein |
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Jay L. Schottenstein |
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Chief Executive Officer |
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(Principal Executive Officer) |
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By: |
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/s/ Michael A. Mathias |
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Michael A. Mathias |
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Executive Vice President, Chief Financial Officer |
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(Principal Financial Officer) |
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40
Exhibit 31.1
CERTIFICATIONS
I, Jay L. Schottenstein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Eagle Outfitters, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: June 5, 2025 |
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/s/ Jay L. Schottenstein |
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Jay L. Schottenstein |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATIONS
I, Michael A. Mathias, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Eagle Outfitters, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: June 5, 2025 |
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/s/ Michael A. Mathias |
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Michael A. Mathias |
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Executive Vice President, Chief Financial Officer (Principal Financial Officer) |
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Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of American Eagle Outfitters, Inc. (the “Company”) on Form 10-Q for the period ended May 3, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay L. Schottenstein, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: June 5 ,2025 |
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/s/ Jay L. Schottenstein |
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Jay L. Schottenstein |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of American Eagle Outfitters, Inc. (the “Company”) on Form 10-Q for the period ended May 3, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Mathias, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: June 5, 2025 |
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/s/ Michael A. Mathias |
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Michael A. Mathias |
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Executive Vice President, Chief Financial Officer |
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(Principal Financial Officer) |
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