On Sept. 9 before the market opened, American Eagle Outfitters (AEO, Financial) released its second quarter results. The company recorded a narrower-than-expected quarterly loss, while revenue surpassed expectations thanks to strong digital performance.
Key highlights from the quarter
The American lifestyle, clothing and accessories retailer recorded a loss per share of 3 cents, down a mammoth 107.69% as compared to the previous year. Analysts had predicted a loss per share of 16 cents. Revenue of $884 million plunged 15% year-over-year but edged past projections of $848 million.
Gross profit came in at $265 million in the reported quarter, down from $383 million, largely reflecting a fall in store revenue coupled with mounting delivery and distribution centre costs in an effort to manage strong e-commerce demand. On the positive side, selling, general and administrative expense dropped $29 million from the prior period to $224 million courtesy of disciplined cost controls.
Chairman and CEO Jay Schottenstein had the following to say on the company's performance:
"In the midst of an unprecedented crisis, we delivered a significant improvement from the first quarter throughout our business – a true testament to the agility, talent and commitment of our team. Aerie was simply outstanding, fueled by strong demand, with revenue rising 32% and record margins, demonstrating the power of the brand and signaling the vast opportunity ahead. Across brands, digital sales accelerated and we successfully reopened stores during the quarter."
The company reported coronavirus-related expenses and restructuring charges of $15 million pre-tax, or $0.05 per share post-tax.
Digital growth
As a result of the pandemic, stores were closed, which is why digital traffic gained momentum during the quarter.
The company recorded digital revenue growth of 48% in the second quarter due to strong demand and as well as timing benefit associated with reversal of provisional fulfilment delays from the first quarter. By brand, American Eagle's digital revenue rose 21%, while Aerie's digital revenue grew a solid 113%.
Financials and capital expenditure
At the end of the quarter, the company had cash and short-term investments of a combined $899 million, aided by operating cash inflow of $173 million during the quarter.
Capital spending for the second quarter amounted to $27 million, while year-to-date expenditures stood at $61 million.
Outlook
The company did not provide any financial forecast. However, it projects capital expenditure to fall within the range of $100 million to $125 million for fiscal 2020.
Disclosure: I do not hold any positions in the stocks mentioned.
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