Driven by reduced markdowns, American Eagle Outfitters posted a 200 basis points from a year earlier quarter hike in gross profit margins for the third quarter ended November 1, 2014.
Gross profit increased 6 per cent year on year to $315 million and margins rose 200 basis points to 36.9 per cent as percentage of sales.
“The margin improvement was driven primarily by reduced markdowns and was partially offset by 120 basis points of buying, occupancy and warehousing deleverage,” the retailer said.
Total net revenue at the US apparel retailer declined slightly to $854 million in the reporting quarter from $857 million from last year’s third quarter.
However, consolidated comparable sales slipped higher by 5 per cent, same as in the third quarter of 2013.
SG&A expense at $205 million in the quarter under review fell 1 per cent from $206 million last year. As a percentage to revenue, SG&A held flat to same quarter of last year at 24.0 per cent.
According to American Eagle, reductions in overhead and variable expenses were partially offset by continued investments in new stores, as well as increased incentive expense accruals.
Third quarter of 2014 adjusted operating income increased 22 per cent from a year ago quarter to $74 million, while operating margin expanded 160 basis points to 8.7 per cent as a rate to revenue.
Adjusted EPS witnessed a 16 per cent surge to $0.22 as against $0.19 in the corresponding quarter of 2013.
Third quarter GAAP results include a $33 million loss on asset and store impairments. As a result of its fleet review and challenging performance this year, 48 AE and 31 aerie stores were impaired.
GAAP results also include $18 million of restructuring charges related to corporate overhead reductions, including severance and related charges, and office space consolidation.
Total merchandise inventories at the end of the third quarter of 2014 declined 10 per cent to $469 million compared to $519 million last year. At cost per foot, inventory decreased 14 per cent year on year.
Inventories reflect a change to ownership terms as it began taking ownership of inventory at the receiving port rather than the port of departure and excluding the change in terms, inventory at cost per foot decreased 3 per cent.
In the third quarter of 2014, capital expenditures totalled $64 million and for the current fiscal year, the retailer continues to expect capex of $230 million.
American eagle continues to expect capital spending to be approximately $150 million in 2015.
Jay Schottenstein, Interim CEO said, “Our ongoing priority to strengthen our business is reflected in restructuring activities and improved merchandising, customer engagement and building omni-channel capabilities.” (AR)
