American Eagle Outfitters Reports Second Quarter Results

PITTSBURGH--(Business Wire)--
American Eagle Outfitters, Inc. (NYSE: AEO) today announced that earnings for
the second quarter ended August 1, 2009 were $0.14 per diluted share, which
includes a tax benefit of $0.02 per diluted share. In addition, second quarter
EPS includes a $0.02 non-cash, non-operating foreign currency loss. This is
related to holding U.S. dollars in Canada in anticipation of repatriation, which
occurred on August 18, 2009. Second quarter EPS compares to $0.29 per diluted
share for the same period last year. In the third quarter, the company expects a
tax benefit of approximately $0.05 per share related to the repatriation.

"Although business remained challenging during the second quarter, we are making
clear progress on key AE brand initiatives. Most notably, our redesigned denim
collection is receiving an extremely favorable response from customers, and
posting positive results. Additionally, the women`s assortment has continued to
gain traction through the back-to-school season," said Jim O`Donnell, chief
executive officer. "As we look ahead to the holiday season and beyond, I hope to
see steady improvements throughout our entire business, across each brand. We
continue a relentless focus on strengthening our organization with talent and
streamlined processes, as well as our connection to customers. In parallel,
operational efficiency and financial discipline remain the governing principles
of our business."

Second Quarter Results
Total sales for the quarter ended August 1, 2009 decreased 5% to $657.6 million,
compared to $688.8 million for the quarter ended August 2, 2008. Comparable
store sales decreased 10% for the quarter, compared to a 9% decrease last year.

Gross profit for the second quarter was $248.8 million, or 37.8% as a rate to
sales, compared to $289.4 million, or 42.0% as a rate to sales last year. The
merchandise margin declined by 190 basis points, primarily due to higher
markdowns and promotional costs compared to the second quarter last year. As a
rate to sales, buying, occupancy and warehousing costs increased by 230 basis
points due to the de-leveraging of rent related to new stores and the decline in
second quarter comparable store sales.

Selling, general and administrative expense of $167.2 million decreased slightly
from $167.9 million last year. Cost control initiatives remain a priority and
have resulted in savings in the areas of advertising, travel and services
purchased. As a rate to sales, SG&A increased to 25.4% from 24.4% last year, due
in part to negative comparable store sales as well as new store growth.

Operating income for the quarter was $46.3 million, compared to $89.4 million
last year. The operating margin was 7.0% compared to 13.0% last year.

Other expense of $4.1 million compared to other income of $4.0 million last
year. Other expense included a non-cash, non-operating foreign currency loss
related to holding U.S. dollars in Canada in anticipation of repatriation. The
decline in other income/expense was also the result of a significantly lower
rate of return on investments.

Net income was $28.6 million compared to $59.8 million in the second quarter of
last year.

AEO Direct
AEO Direct, which includes ae.com, aerie.com, martinandosa.com, and 77kids.com,
is an important area of growth and profitability. In the second quarter, sales
increased 17%, driven primarily by increased traffic.

Real Estate
In the second quarter, the company opened two AE stores, closed one store and
completed the renovation of five stores. The company also opened three aerie
stores during the quarter. For the year, the company is planning approximately
eight new and 25 remodeled AE stores, and 21 new aerie stores for total square
footage growth of 3%.

Capital Expenditures
Capital expenditures were $38 million compared to $84 million in the second
quarter of last year. The company expects 2009 capital expenditures to be in the
range of $110 to $135 million. Of this amount, approximately one half relates to
new and remodeled stores, including a flagship store in Times Square. The
remaining half relates to the completion of the current distribution center and
headquarters projects, as well as information technology initiatives.

Inventory
Total merchandise inventories at the end of the second quarter were $353
million, compared to $341 million last year, a 3% increase. The increase was the
result of new stores and the growth in AEO Direct. Excluding the direct
business, on a cost per foot basis, inventory decreased 5%. Looking ahead, for
the AE brand, third quarter average weekly inventory on a cost per foot basis is
planned down in the high single-digits. aerie inventory is planned to increase
due to expanded category offerings, which is critical to the growth of this
brand. Consolidated third quarter total average weekly inventory is planned down
in the low single-digits on a cost per foot basis.

Cash and Cash Equivalents, Short-term and Long-term Investments
During the quarter, the company generated strong net cash flow, including
positive cash from operations, as well as auction rate security redemptions at
par totaling $38 million. The company ended the second quarter with total cash
and cash equivalents, short-term and long-term investments of $728 million. This
included $228 million of investments in auction rate securities, net of
impairment.

Third Quarter 2009 Guidance
Based on management`s current view of sales trends, the company expects third
quarter earnings to be in a range of $0.22 to $0.25 per share, compared to
earnings of $0.30 per share last year. This guidance includes a tax benefit of
approximately $0.05 per share associated with the repatriation of earnings from
Canada. The guidance excludes the possibility of additional impairments or
losses related to investment securities.

Conference Call Information
At 9:00 a.m. Eastern Time on August 27, 2009 the company`s management team will
host a conference call to review the financial results. To listen to the call,
please dial (877) 407-0789 or internationally dial (201) 689-8562. The
conference call will be simultaneously broadcast over the Internet at
www.ae.com. A replay will be available beginning August 27, 2009 at 12:00 p.m.
Eastern Time. To listen to the replay, dial (877) 660-6853, or internationally
dial (201) 612-7415, reference account 3055 and confirmation code 322154. An
audio replay of the conference call will also be available at www.ae.com.

About American Eagle Outfitters, Inc.
American Eagle Outfitters, Inc., through its subsidiaries, ("AEO, Inc.") offers
high-quality, on-trend clothing, accessories and personal care products at
affordable prices. The American Eagle Outfitters brand targets 15 to 25 year old
girls and guys, with 954 stores in the U.S. and Canada and online at www.ae.com.
aerie by american eagle offers Dormwear and intimates collections for the AE
girl, with 133 standalone stores in the U.S. and Canada and online at
www.aerie.com. MARTIN + OSA provides clothing and accessories in the tradition
of hip, classic American style for 28 to 40 year old men and women at its 28
stores and online at www.martinandosa.com. The latest brand, 77kids by american
eagle, is available online only at www.77kids.com. 77kids offers "kid cool,"
durable clothing and accessories for kids ages two to 10. AE.COM, the online
home of the brands of AEO, Inc. ships to more than 60 countries worldwide.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: This release contains forward-looking statements, which represent our
expectations or beliefs concerning future events, specifically regarding third
quarter sales and earnings. All forward-looking statements made by the company
involve material risks and uncertainties and are subject to change based on
factors beyond the company's control. Such factors include, but are not limited
to the risk that the Company`s third quarter sales and earnings expectations may
not be achieved and the risks described in the Risk Factor Section of the
company's Form 10-K and Form 10-Q filed with the Securities and Exchange
Commission. Accordingly, the company's future performance and financial results
may differ materially from those expressed or implied in any such
forward-looking statements. The company does not undertake to publicly update or
revise its forward-looking statements even if future changes make it clear that
projected results expressed or implied will not be realized.

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

August 1, January 31, August 2,
2009 2009 2008
(unaudited) (unaudited)

ASSETS
Cash and cash equivalents $ 500,263 $ 473,342 $ 353,390
Short-term investments 2,525 10,511 26,936
Merchandise inventory 352,819 294,928 341,463
Accounts and note receivable 40,799 41,471 26,697
Prepaid expenses and other 62,432 59,660 64,009
Deferred income taxes 45,605 45,447 46,839
Total current assets 1,004,443 925,359 859,334
Property and equipment, net 745,086 740,240 718,639
Goodwill, net 11,181 10,706 11,370
Long-term investments 225,559 251,007 308,699
Non-current deferred income taxes 1,981 15,001 27,338
Other assets, net 22,064 21,363 19,944
Total Assets $ 2,010,314 $ 1,963,676 $ 1,945,324

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 151,978 $ 152,068 $ 145,507
Notes payable 75,000 75,000 75,000
Accrued compensation and payroll taxes 29,970 29,417 27,157
Accrued rent 66,637 64,695 62,970
Accrued income and other taxes 16,093 6,259 12,159
Unredeemed gift cards and gift certificates 20,920 42,299 29,771
Current portion of deferred lease credits 17,639 13,726 13,988
Other current liabilities 18,845 18,299 19,163
Total current liabilities 397,082 401,763 385,715
Deferred lease credits 98,067 88,314 81,598
Non-current accrued income taxes 25,036 39,898 43,875
Other non-current liabilities 20,272 24,670 28,819
Total non-current liabilities 143,375 152,882 154,292
Commitments and contingencies - - -
Preferred stock - - -
Common stock 2,486 2,485 2,485
Contributed capital 526,487 513,574 506,104
Accumulated other comprehensive income (loss) 15,567 (14,389 ) 26,111
Retained earnings 1,692,990 1,694,161 1,663,156
Treasury Stock (767,673 ) (786,800 ) (792,539 )
Total stockholders' equity 1,469,857 1,409,031 1,405,317
Total Liabilities and Stockholders' Equity $ 2,010,314 $ 1,963,676 $ 1,945,324

Current Ratio 2.53 2.30 2.23

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

13 Weeks Ended
August 1, % of August 2, % of
2009 Sales 2008 Sales
Net sales $ 657,596 100.0 % $ 688,815 100.0 %
Cost of sales, including certain buying, occupancy and warehousing expenses 408,763 62.2 % 399,431 58.0 %
Gross profit 248,833 37.8 % 289,384 42.0 %
Selling, general and administrative expenses 167,175 25.4 % 167,898 24.4 %
Depreciation and amortization 35,341 5.4 % 32,059 4.6 %
Operating income 46,317 7.0 % 89,427 13.0 %
Other (expense) income, net (4,147 ) -0.6 % 3,975 0.6 %
Income before income taxes 42,170 6.4 % 93,402 13.6 %
Provision for income taxes 13,598 2.1 % 33,571 4.9 %
Net income $ 28,572 4.3 % $ 59,831 8.7 %

Net income per basic common share $ 0.14 $ 0.29

Net income per diluted common share $ 0.14 $ 0.29

Weighted average common shares outstanding - basic 206,010 204,929
Weighted average common shares outstanding - diluted 209,015 207,504

26 Weeks Ended
August 1, % of August 2, % of
2009 Sales 2008 Sales
Net sales $ 1,269,582 100.0 % $ 1,329,117 100.0 %
Cost of sales, including certain buying, occupancy and warehousing expenses 799,824 63.0 % 776,065 58.4 %
Gross profit 469,758 37.0 % 553,052 41.6 %
Selling, general and administrative expenses 325,867 25.7 % 337,537 25.4 %
Depreciation and amortization 70,235 5.5 % 61,609 4.6 %
Operating income 73,656 5.8 % 153,906 11.6 %
Other (expense) income, net (6,455 ) -0.5 % 10,433 0.8 %
Income before income taxes 67,201 5.3 % 164,339 12.4 %
Provision for income taxes 16,662 1.3 % 60,613 4.6 %
Net income $ 50,539 4.0 % $ 103,726 7.8 %

Net income per basic common share $ 0.25 $ 0.51

Net income per diluted common share $ 0.24 $ 0.50

Weighted average common shares outstanding - basic 205,742 204,962
Weighted average common shares outstanding - diluted 207,974 207,890

Total gross square footage at end of period: 6,430,960 6,092,855

Store count at end of period: 1,114 1,054

AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)

For the 26 Weeks Ended
August 1, August 2,
2009 2008
Operating activities:
Net income $ 50,539 $ 103,726
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 71,268 62,501
Share-based compensation 9,865 12,909
Provision for deferred income taxes 5,980 (583 )
Tax benefit from share-based payments 7,258 241
Excess tax benefit from share-based payments (1,405 ) (279 )
Foreign currency transaction loss 5,685 12
Other-than-temporary impairment 225 -
Realized loss on sale of investment securities 2,749 -
Changes in assets and liabilities:
Merchandise inventory (54,539 ) (55,671 )
Accounts and note receivable 840 5,183
Prepaid expenses and other (2,174 ) (28,593 )
Other assets, net (187 ) 457
Accounts payable 1,311 (12,050 )
Unredeemed gift cards and gift certificates (21,696 ) (24,694 )
Deferred lease credits 12,848 11,354
Accrued compensation and payroll taxes (366 ) (22,296 )
Accrued income and other taxes (5,306 ) (11,704 )
Accrued liabilities (1,989 ) (1,595 )
Total adjustments 30,367 (64,808 )
Net cash provided by operating activities $ 80,906 $ 38,918
Investing activities:
Capital expenditures (72,967 ) (157,486 )
Purchase of investments - (49,929 )
Sale of investments 49,914 374,937
Other investing activities (685 ) (958 )
Net cash (used for) provided by investing activities $ (23,738 ) $ 166,564
Financing activities:
Payments on capital leases (971 ) (798 )
Net proceeds from issuance of notes payable - 75,000
Repurchase of common stock from employees (195 ) (3,409 )
Net proceeds from stock options exercised 4,763 1,668
Excess tax benefit from share-based payments 1,405 279
Cash dividends paid (41,360 ) (40,919 )
Net cash (used for) provided by financing activities $ (36,358 ) $ 31,821
Effect of exchange rates on cash 6,111 26
Net increase in cash and cash equivalents $ 26,921 $ 237,329
Cash and cash equivalents - beginning of period 473,342 116,061
Cash and cash equivalents - end of period $ 500,263 $ 353,390

American Eagle Outfitters, Inc.
Judy Meehan, 412-432-3300

Copyright Business Wire 2009

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