Correspondence 0000929638-23-002727 from AMERICAN EAGLE OUTFITTERS INC (AEO) (CIK 0000919012) (AEO)
AMERICAN EAGLE OUTFITTERS INC (AEO) (CIK 0000919012)
Date: Oct. 5, 2023 · CIK: 0000919012 · Accession: 0000929638-23-002727
AI Filing Summary & Sentiment
File numbers found in text: 001-33338
Referenced dates: September 14, 2023, September 6, 2023
Letter
Securities and Exchange Commission Division of Corporation Finance Filed September 6, 2023 Item 2.02 Form 8-K filed September 6, 2023 Response dated September 6, 2023 File No. 001-33338
Re: American Eagle Outfitters, Inc.
Dear Mr. Rhodes and Mr. Decker:
American Eagle Outfitters, Inc. (the "Company," “we” or “our”), submits this letter in response to comments from the staff (the "Staff") of the United States Securities and Exchange Commission (the "Commission") contained in its letter dated September 14, 2023, relating to the Company’s Form 10-K for the Fiscal Year Ended January 28, 2023 filed with the Commission on March 13, 2023 (the “Form 10-K”), the Company’s Form 10-Q for the Fiscal Quarter Ended July 29, 2023 filed with the Commission on September 6, 2023 (the “Form 10-Q”), the Company’s Item 2.02 Form 8-K filed with the Commission on September 6, 2023 (the “Form 8‑K,” and, collectively with the Form 10-K and the Form 10-Q, the “Filings”), and the Company’s responses to the Commission’s prior comments contained in the Company’s response letter dated September 6, 2023.
For the Staff's convenience, the Staff's comments have been stated below in their entirety in bold, followed by the corresponding responses from the Company. All page references appearing herein are references to the page number of the applicable Filing, unless specifically indicated otherwise. Capitalized terms used but not defined in this letter have the meanings ascribed to such terms in the applicable Filing.
Form 10-Q for the Fiscal Quarter Ended July 29, 2023
Financial Statements
Note 12. Segment Reporting, page 25
1. We read your response to comment 4 and the disclosure revisions you made. Please remove total adjusted operating income, a non-GAAP measure, from your financial
statements. Show us your revised disclosure. Refer to Item 10(e)(1)(ii)(C) of Regulation S‑K.
Response: In response to the Staff’s comment and Item 10(e)(1)(ii)(C) of Regulation S-K, we will revise our disclosures in future filings to remove the subtotal labeled total adjusted operating income. The below is a revised Note 12, “Segment Reporting,” from our Form 10-Q reflecting this change. Note that we have removed the term “adjusted” from the heading of the operating income section and from the Total Segment Adjusted Operating Income line item, as American Eagle and Aerie (our reportable segments) are not adjusted for any period presented.
12. Segment Reporting
In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified two operating segments (American Eagle brand and Aerie brand) that also represent our reportable segments and reflect the Chief Operating Decision Maker’s (defined as our CEO) internal view of analyzing results and allocating resources. Additionally, our Todd Snyder brand, Unsubscribed brand, and Quiet Platforms have been identified as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure, they are presented under the Other caption, as permitted by ASC 280.
General 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, or the operating income in periods where there are no adjustments, of each segment. Adjusted operating income is a non-GAAP financial measure ("non-GAAP" or "adjusted") that is defined by the Company as operating income excluding impairment, restructuring and other charges. Adjusted operating income 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. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. Adjusted operating income on a consolidated basis is presented in the following table to reconcile the segment operating performance measure to operating income as presented on the Consolidated Financial Statements.
Reportable segment information is presented in the following table:
For the 13 weeks ended
For the 26 weeks ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Net Revenue:
American Eagle
$
767,018
$
777,828
$
1,438,110
$
1,463,407
Aerie
$
380,413
$
371,683
$
739,495
$
693,395
Total Segment Net Revenue
$
1,147,431
$
1,149,511
$
2,177,605
$
2,156,802
Other
$
108,318
$
110,393
$
217,675
$
200,077
Intersegment Elimination
$
(54,870
)
$
(61,780
)
$
(113,475
)
$
(103,718
)
Total Net Revenue
$
1,200,879
$
1,198,124
$
2,281,805
$
2,253,161
Adjusted Operating
Income
American Eagle
$
128,664
$
109,110
$
234,203
$
213,015
Aerie
$
57,253
$
11,830
$
112,922
$
54,903
Total Segment Adjusted Operating
Income
$
185,917
$
120,940
$
347,125
$
267,918
Other
$
(10,341
)
$
(11,507
)
$
(26,648
)
$
(27,732
)
Intersegment Elimination
$
-
$
-
$
-
$
-
General corporate expenses
$
(110,286
)
$
(95,419
)
$
(211,081
)
$
(184,270
)
Total Adjusted Operating Income
$
65,290
$
14,014
$
109,396
$
55,916
Less: Impairment, restructuring and other charges(1)
$
-
$
-
$
(21,275
)
$
-
Total Operating Income
$
65,290
$
14,014
$
88,121
$
55,916
Debt related charges
$
-
$
60,066
$
-
$
60,066
Interest expense, net
$
$
3,421
$
1,642
$
8,009
Other income, net
$
(2,150
)
$
(1,839
)
$
(5,461
)
$
(6,283
)
Income before income taxes
$
66,489
$
(47,634
)
$
91,940
$
(5,876
)
Capital Expenditures
American Eagle
$
16,249
$
18,754
$
31,192
$
34,524
Aerie
$
10,889
$
30,244
$
22,077
$
61,259
Other
$
6,154
$
4,107
$
11,730
$
5,132
General corporate expenditures
$
12,810
$
16,359
$
26,960
$
26,943
Total Capital Expenditures
$
46,102
$
69,464
$
91,959
$
127,858
(1) Represents pre-tax impairment, restructuring and other charges related to Quiet Platforms, including $10.8 million of long-lived asset impairment charges, $5.6 million of severance costs, and $4.9 million of contract related charges for the 26 weeks ended July 29, 2023.
The following table presents summarized geographical information:
13 Weeks Ended
26 Weeks Ended
(In thousands)
July 29,
July 30,
July 29,
July 30,
Total net revenue:
United States
$
1,005,197
$
1,027,158
$
1,919,588
$
1,935,323
Foreign (1)
195,682
170,966
362,217
317,838
Total net revenue
$
1,200,879
$
1,198,124
$
2,281,805
$
2,253,161
(1) Amounts represent sales from American Eagle and Aerie international retail stores, and e-commerce sales that are billed to and/or shipped to foreign countries and international franchise royalty revenue.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations, Page 30
2. We read your response to comment 2 and the disclosure revisions you made. In circumstances where there is more than one business reason for a change between periods, please quantify the incremental impact of each individual business reason discussed on the overall change in the line item. For example, when discussing the period over period reasons for changes in each segment's adjusted operating income and general corporate expenses, you do not appear to provide quantification of the business reasons you note or discuss why SG&A costs and depreciation and amortization at the segment level were higher in the current period. Please provide us your revised disclosures. Refer to Item 303 of Regulation S-K. Also, use consistent terminology throughout your filings and refer to each segment's measure of profit as adjusted operating income, like you do in the segment footnote to your financial statements.
Response: In response to the Staff’s comment and Item 303 of Regulation S-K, in future filings where the financial statements reflect material period over period changes in one or more line items, including where material changes within a line item offset one another, we will provide quantification of the business reasons for such material changes within Management's Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Appendix A, attached hereto, which reflects revisions to the “Management's Discussion and Analysis of Financial Condition and Results of Operations” from our Form 10-Q addressing your comment. We have adjusted terminology where relevant for consistency and to align with our revised segment reporting footnote related to comment 1 and we will use consistent terminology throughout our future filings.
Item 2.02 Form 8-K filed September 6, 2023
Exhibit 99.1, page 8
3. You present total segment net revenue, total segment adjusted operating income and total adjusted operating income in your Item 2.02 Form 8-K. Please either remove these non-GAAP measures or provide the disclosures required by Item 10(e) of Regulation S-K. Show us your revised disclosure. Refer to Item 10(e) of Regulation S-K and Question 104.04 of the Non-GAAP Financial Measures Compliance and Disclosure Interpretations.
Response: In response to the Staff’s comment, the below reflects revisions, as they would have appeared in our Item 2.02 Form 8-K furnished on September 6, 2023 to exclude total segment net revenue, total segment adjusted operating income and total adjusted operating income, as well as changes to align with disclosure changes in response to comment 1. In future filings, to the extent that non-GAAP measures are used or referenced in an earnings release attached as an exhibit to an Item 2.02 Form 8-K, we will provide the appropriate disclosures required by Item 10(e) of Regulation S-K.
AMERICAN EAGLE OUTFITTERS, INC.
RESULTS BY SEGMENT
(Dollars in thousands)
(unaudited)
For the 13 weeks ended
For the 26 weeks ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Net Revenue:
American Eagle
$
767,018
$
777,828
$
1,438,110
$
1,463,407
Aerie
$
380,413
$
371,683
$
739,495
$
693,395
Total Segment Net Revenue
$
1,147,431
$
1,149,511
$
2,177,605
$
2,156,802
Other (1)
$
108,318
$
110,393
$
217,675
$
200,077
Intersegment Elimination
$
(54,
Show Raw Text
CORRESP
1
filename1.htm
October 5, 2023
Securities and Exchange Commission
Division of Corporation Finance
100 F. Street, N.E.
Washington, D.C. 20549
Attn: Blaise Rhodes and Rufus Decker
Re: American Eagle Outfitters, Inc.
Form 10-K for
Fiscal Year Ended January 28, 2023
Filed March 13,
2023
Form 10-Q for
Fiscal Quarter Ended July 29, 2023
Filed September
6, 2023
Item 2.02 Form
8-K filed September 6, 2023
Response dated
September 6, 2023
File No.
001-33338
Dear Mr. Rhodes and Mr. Decker:
American Eagle Outfitters, Inc. (the "Company," “we” or “our”), submits this letter in response to comments from the staff (the "Staff") of the United States
Securities and Exchange Commission (the "Commission") contained in its letter dated September 14, 2023, relating to the Company’s Form 10-K for the Fiscal Year Ended January 28, 2023 filed with the Commission on March 13, 2023 (the “Form
10-K”), the Company’s Form 10-Q for the Fiscal Quarter Ended July 29, 2023 filed with the Commission on September 6, 2023 (the “Form 10-Q”), the Company’s Item 2.02 Form 8-K filed with the Commission on September 6, 2023 (the “Form
8‑K,” and, collectively with the Form 10-K and the Form 10-Q, the “Filings”), and the Company’s responses to the Commission’s prior comments contained in the Company’s response letter dated September 6, 2023.
For the Staff's convenience, the Staff's comments have been stated below in their entirety in bold, followed by the corresponding responses from the Company. All page references appearing
herein are references to the page number of the applicable Filing, unless specifically indicated otherwise. Capitalized terms used but not defined in this letter have the meanings ascribed to such terms in the applicable Filing.
Form 10-Q for the Fiscal Quarter Ended July 29, 2023
Financial Statements
Note 12. Segment Reporting, page 25
1. We read your response to comment 4 and the disclosure revisions you made. Please remove total adjusted operating income,
a non-GAAP measure, from your financial
statements. Show us your revised disclosure. Refer to Item 10(e)(1)(ii)(C) of Regulation S‑K.
Response: In response to the Staff’s comment and
Item 10(e)(1)(ii)(C) of Regulation S-K, we will revise our disclosures in future filings to remove the subtotal labeled total adjusted operating income. The below is a revised Note 12, “Segment Reporting,” from our Form 10-Q reflecting this
change. Note that we have removed the term “adjusted” from the heading of the operating income section and from the Total Segment Adjusted Operating Income line item, as American Eagle and Aerie (our reportable segments) are not adjusted for any
period presented.
12. Segment Reporting
In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified two operating segments (American Eagle brand and Aerie brand) that also represent our
reportable segments and reflect the Chief Operating Decision Maker’s (defined as our CEO) internal view of analyzing results and allocating resources. Additionally, our Todd Snyder brand, Unsubscribed brand, and Quiet Platforms have been identified
as separate operating segments; however, as they do not meet the quantitative thresholds for separate disclosure, they are presented under the Other caption, as permitted by ASC 280.
General 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, or the operating income in periods where there are no adjustments, of each segment. Adjusted
operating income is a non-GAAP financial measure ("non-GAAP" or "adjusted") that is defined by the Company as operating income excluding impairment, restructuring and other charges. Adjusted operating income 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. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. Adjusted operating income on a consolidated basis is presented in the following table to reconcile the segment operating performance measure to operating income as presented on the
Consolidated Financial Statements.
2
Reportable segment information is presented in the following table:
For the 13 weeks ended
For the 26 weeks ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Net Revenue:
American Eagle
$
767,018
$
777,828
$
1,438,110
$
1,463,407
Aerie
$
380,413
$
371,683
$
739,495
$
693,395
Total Segment Net Revenue
$
1,147,431
$
1,149,511
$
2,177,605
$
2,156,802
Other
$
108,318
$
110,393
$
217,675
$
200,077
Intersegment Elimination
$
(54,870
)
$
(61,780
)
$
(113,475
)
$
(103,718
)
Total Net Revenue
$
1,200,879
$
1,198,124
$
2,281,805
$
2,253,161
Adjusted Operating
Income
American Eagle
$
128,664
$
109,110
$
234,203
$
213,015
Aerie
$
57,253
$
11,830
$
112,922
$
54,903
Total Segment Adjusted Operating
Income
$
185,917
$
120,940
$
347,125
$
267,918
Other
$
(10,341
)
$
(11,507
)
$
(26,648
)
$
(27,732
)
Intersegment Elimination
$
-
$
-
$
-
$
-
General corporate expenses
$
(110,286
)
$
(95,419
)
$
(211,081
)
$
(184,270
)
Total Adjusted Operating Income
$
65,290
$
14,014
$
109,396
$
55,916
Less: Impairment, restructuring and other charges(1)
$
-
$
-
$
(21,275
)
$
-
Total Operating Income
$
65,290
$
14,014
$
88,121
$
55,916
Debt related charges
$
-
$
60,066
$
-
$
60,066
Interest expense, net
$
951
$
3,421
$
1,642
$
8,009
Other income, net
$
(2,150
)
$
(1,839
)
$
(5,461
)
$
(6,283
)
Income before income taxes
$
66,489
$
(47,634
)
$
91,940
$
(5,876
)
Capital Expenditures
American Eagle
$
16,249
$
18,754
$
31,192
$
34,524
Aerie
$
10,889
$
30,244
$
22,077
$
61,259
Other
$
6,154
$
4,107
$
11,730
$
5,132
General corporate expenditures
$
12,810
$
16,359
$
26,960
$
26,943
Total Capital Expenditures
$
46,102
$
69,464
$
91,959
$
127,858
(1) Represents pre-tax impairment, restructuring and
other charges related to Quiet Platforms, including $10.8 million of long-lived asset impairment charges, $5.6 million of severance costs, and $4.9 million of contract related charges for the 26 weeks ended July 29, 2023.
The following table presents summarized geographical information:
13 Weeks Ended
26 Weeks Ended
(In thousands)
July 29,
2023
July 30,
2022
July 29,
2023
July 30,
2022
Total net revenue:
United States
$
1,005,197
$
1,027,158
$
1,919,588
$
1,935,323
Foreign (1)
195,682
170,966
362,217
317,838
Total net revenue
$
1,200,879
$
1,198,124
$
2,281,805
$
2,253,161
3
(1) Amounts represent sales from American Eagle and Aerie international retail stores, and e-commerce sales that are billed to
and/or shipped to foreign countries and international franchise royalty revenue.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations, Page 30
2. We read your response to comment 2 and the disclosure revisions you made. In circumstances where there is more than one business reason for a change between periods, please quantify
the incremental impact of each individual business reason discussed on the overall change in the line item. For example, when discussing the period over period reasons for changes in each segment's adjusted operating income and general corporate
expenses, you do not appear to provide quantification of the business reasons you note or discuss why SG&A costs and depreciation and amortization at the segment level were higher in the current period. Please provide us your revised
disclosures. Refer to Item 303 of Regulation S-K. Also, use consistent terminology throughout your filings and refer to each segment's measure of profit as adjusted operating income, like you do in the segment footnote to your financial statements.
Response: In response to the Staff’s comment and
Item 303 of Regulation S-K, in future filings where the financial statements reflect material period over period changes in one or more line items, including where material changes within a line item offset one another, we will provide quantification
of the business reasons for such material changes within Management's Discussion and Analysis of Financial Condition and Results of Operations. Please refer to Appendix A, attached hereto, which reflects revisions to the “Management's Discussion and
Analysis of Financial Condition and Results of Operations” from our Form 10-Q addressing your comment. We have adjusted terminology where relevant for consistency and to align with our revised segment reporting footnote related to comment 1 and we
will use consistent terminology throughout our future filings.
Item 2.02 Form 8-K filed September 6, 2023
Exhibit 99.1, page 8
3. You present total segment net revenue, total segment adjusted operating income and total adjusted operating income in your Item 2.02 Form 8-K. Please either remove these non-GAAP
measures or provide the disclosures required by Item 10(e) of Regulation S-K. Show us your revised disclosure. Refer to Item 10(e) of Regulation S-K and Question 104.04 of the Non-GAAP Financial Measures Compliance and Disclosure Interpretations.
Response: In response to the Staff’s comment, the below reflects revisions, as they would have appeared in our
Item 2.02 Form 8-K furnished on September 6, 2023 to exclude total segment net revenue, total segment adjusted operating income and total adjusted operating income, as well as changes to align with disclosure changes in response to comment 1. In
future filings, to the extent that non-GAAP measures are used or referenced in an earnings release attached as an exhibit to an Item 2.02 Form 8-K, we will provide the appropriate disclosures required by Item 10(e) of Regulation S-K.
4
AMERICAN EAGLE OUTFITTERS, INC.
RESULTS BY SEGMENT
(Dollars in thousands)
(unaudited)
For the 13 weeks ended
For the 26 weeks ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Net Revenue:
American Eagle
$
767,018
$
777,828
$
1,438,110
$
1,463,407
Aerie
$
380,413
$
371,683
$
739,495
$
693,395
Total Segment Net Revenue
$
1,147,431
$
1,149,511
$
2,177,605
$
2,156,802
Other (1)
$
108,318
$
110,393
$
217,675
$
200,077
Intersegment Elimination
$
(54,