American Eagle Outfitters (AEO) Lifts Q3 Net Income Outlook

American Eagle Outfitters (NYSE: AEO) expects to report third quarter adjusted EPS of $0.22 per diluted share, above the previous guidance range of $0.17 to $0.19. Including restructuring and asset impairment charges of ($0.17), GAAP earnings are estimated to be $0.05 per share. Last year, the company earned adjusted EPS of $0.19 in the third quarter, which excluded asset impairment charges of ($0.06). The earnings improvement over last year was primarily due to an improvement in markdowns and lower expenses. Third quarter net revenues declined slightly on a comparable sales decline of 5%.

*** The Street sees Q3 EPS of $0.18.

The EPS guidance excludes charges of approximately ($0.17) primarily due to store impairments and corporate overhead reductions related to the company’s profit improvement initiatives. These actions are expected to enable the company to fund key initiatives and generate savings to strengthen future earnings.

“Third quarter earnings exceeded our expectations and margins were ahead of last year. We are encouraged by our ability to reduce promotional activity, particularly given the challenging and highly promotional retail climate,” said Jay Schottenstein, Interim CEO. “The team is making steady progress on merchandise improvements. Yet as we approach the holidays, we remain cautious given the ongoing weakness in mall traffic. The restructuring activities reflect our resolve to strengthen our business to deliver higher profitability and returns to shareholders.”

Third quarter ending inventories are expected to be down, consistent with prior guidance. With greater visibility following Thanksgiving weekend and the kick off to holiday shopping, management will provide fourth quarter guidance with the third quarter earnings release after market close on Thursday, December 4th. The company will host a conference call and real time webcast at 4:15 p.m. Eastern Time on that date. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to http://investors.ae.com to access the webcast and audio replay.

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