American Eagle Outfitters Reports Preliminary Fourth Quarter and Fisca

American Eagle Outfitters Reports Preliminary Fourth Quarter and Fiscal 2004 Earnings; Fourth Quarter EPS Rise to a Record $1.40 from Continuing Operations

    Business Editors

    WARRENDALE, Pa.--(BUSINESS WIRE)--March 2, 2005--American Eagle Outfitters, Inc. (NASDAQ: AEOS) today announced its preliminary consolidated financial results for the fourth quarter and year ended January 29, 2005. As further described below:

--	Like many other retailers, the Company is reviewing its accounting practices related to leasing transactions and believes that a restatement of its previously filed annual and quarterly financial statements for certain periods is likely. All results presented in this press release are preliminary and exclude the impact of such review. However, the Company believes that the earnings impact in any given period will not be material.
--	Due to the recent disposition of the Bluenotes business, Bluenotes' results of operations are presented as discontinued operations for all periods.
--	Due to our upcoming stock split distributable on March 7, 2005, all per share data presented below is on a pre-stock split basis, unless otherwise noted.

    In a separate release this morning, the Company announced a February comparable store sales increase of 32.4%. Based on strong February results, the Company is raising its first quarter earnings guidance to a range of $0.52 to $0.54 per share, compared to $0.36 per share from continuing operations last year. The Company's previous first quarter earnings guidance was $0.43 to $0.45 per share.

    Fourth Quarter Ended January 29, 2005

    -- Total sales increased 37.4% to $674.0 million from $490.6
    million for the quarter ended January 31, 2004.

    -- Comparable store sales increased 28.6% when compared to the
    corresponding period last year.

    -- Gross profit as a percent to sales increased to 49.0% from
    38.5% last year due to an improvement in merchandise margins
    as well as the leveraging of rent expense.

    -- Operating income for the quarter increased to $172.2 million,
    or 25.5% as a percent to sales, from $69.9 million, or 14.2%
    as a percent to sales last year.

    -- Income from continuing operations for the quarter increased to
    $107.2 million, or $1.40 per share on a diluted basis, from
    income of $43.2 million, or $0.60 per share on a diluted basis
    last year.

    -- Loss from discontinued operations for the quarter was $6.0
    million, or $0.08 per share on a diluted basis. This amount
    represents the Bluenotes loss from operations for the quarter
    as well as the loss recorded on the sale of assets. Loss from
    discontinued operations was $7.8 million, or $0.11 per share
    on a diluted basis, for the corresponding period last year.

    -- Net income for the quarter increased to $101.2 million, or
    $1.32 per share on a diluted basis, from income of $35.4
    million, or $0.49 per share on a diluted basis last year.

    Year-to-Date for the Twelve Months Ended January 29, 2005

    -- Total sales increased 31.1% to $1.881 billion from $1.435
    billion for the twelve months ended January 31, 2004.

    -- Comparable store sales increased 21.4% when compared to the
    corresponding period last year.

    -- Gross profit as a percent to sales increased to 46.2% from
    37.6% last year due to an improvement in merchandise margins
    as well as the leveraging of rent expense.

    -- Operating income for the period increased to $363.8 million,
    or 19.3% as a percent to sales, from $133.9 million, or 9.3%
    as a percent to sales last year.

    -- Income from continuing operations for the year-to-date period
    increased to $224.9 million, or $2.99 per share on a diluted
    basis, from income of $83.5 million, or $1.16 per share on a
    diluted basis last year.

    -- Loss from discontinued operations for the year-to-date period
    was $10.9 million, or $0.14 per share on a diluted basis. This
    amount represents the Bluenotes loss from operations for the
    year-to-date period as well as the loss recorded on the sale
    of assets. Loss from discontinued operations was $23.5
    million, or $0.33 per share on a diluted basis, for the
    corresponding period last year.

    -- Net income for the year-to-date period increased to $214.0
    million, or $2.85 per share on a diluted basis, from income of
    $60.0 million, or $0.83 per share on a diluted basis last
    year.

    At 9:00 a.m. EST, on March 2, 2005, the Company's management team will host a conference call to review the financial results. To listen to the call, dial 877-601-0864 at least ten minutes prior to the start of the call. The conference call will also be simultaneously broadcast over the Internet at www.ae.com. A replay will be available beginning March 2nd at 12:00 p.m. EST through March 16th. To listen to the replay, dial 1-800-642-1687 and reference confirmation code #3521324. An audio replay of the conference call will also be available at www.ae.com.

    Accounting for Lease Transactions

    In connection with the views expressed by the Office of the Chief Accountant of the Securities and Exchange Commission (the "SEC") on February 7, 2005 regarding certain lease accounting issues, the Company, like many other retailers, reviewed its lease accounting practices. As a result, the Company determined that its method of accounting for rent holidays and tenant allowances was not in accordance with the views expressed by the SEC regarding generally accepted accounting principles.
    Historically, the Company has recognized straight line rent expense for leases beginning on the store opening date. This had the effect of excluding the build-out period of its stores from the calculation of the period over which it expenses rent and recognizes construction allowances. The Company is now changing this practice to include the build-out period in our calculations of rent expense and construction allowance amortization.
    Additionally, the Company is changing its classification of construction allowances on its consolidated financial statements to record them as deferred liabilities, which will be amortized as a reduction to rent expense. Furthermore, construction allowances will be presented within operating activities on its consolidated statements of cash flows. Historically, construction allowances have been classified on the Company's consolidated balance sheets as a reduction of property and equipment and the related amortization has been classified as a reduction to depreciation and amortization expense (over the lesser of the useful life or the life of the lease) on the consolidated statements of operations. The Company's consolidated statements of cash flows have historically reflected construction allowances as a reduction of capital expenditures within investing activities.
    The Company, in conjunction with its independent auditors, is in the process of completing its review of the above changes. At this time, the Company has not yet reached a final decision as to whether these changes will require a restatement of prior period financial statements, but believes that a restatement of its consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows for certain periods is likely. The Company believes that the earnings impact in any given period will not be material. Furthermore, these changes will have no impact on the Company's historical or future net cash flow or the timing of payments under the leases.

    Common Stock Split

    As previously disclosed in our press release dated February 4, 2005, the Company's Board of Directors declared a two-for-one common stock split for shareholders of record at the close of business on February 14, 2005, distributable on March 7, 2005. Pro forma post-split share and per share data is presented in the accompanying Consolidated Statements of Operations for informational purposes only.

    Financial Statements Reflecting Discontinued Operations

    As previously disclosed in our Press Release dated December 21, 2004, we disposed of our Bluenotes retail apparel business with an effective date of December 5, 2004. Accordingly, the Bluenotes results of operations for the three and twelve month periods ended January 29, 2005 and January 31, 2004 are classified as discontinued operations in the accompanying Consolidated Statements of Operations.

    American Eagle Outfitters (NASDAQ: AEOS) is a leading lifestyle retailer that designs, markets, and sells its own brand of relaxed, casual clothing for 15 to 25 year olds, providing high-quality merchandise at affordable prices. AE's collection includes modern basics like jeans, cargo pants, and graphic Ts as well as a stylish assortment of cool accessories, outerwear and footwear. American Eagle Outfitters currently operates 777 AE stores in 49 states, the District of Columbia and Puerto Rico, and 69 AE stores in Canada. AE also operates via its Web business, www.ae.com, which offers additional sizes and styles of favorite AE merchandise.

    "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 our lease accounting review and first quarter 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 finalization of our lease accounting review and the risk that our first quarter sales, markdowns and/or earnings expectations may not be achieved, and those other risks described in the Company's filings 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. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)

January 29, January 31, 2005 2004 ----------- ----------- (Unaudited) ASSETS Cash, cash equivalents and short-term investments $ 589,607 $ 337,812 Merchandise inventory 137,991 120,586 Other current assets 94,501 67,225 ----------- ----------- Total current assets 822,099 525,623 ----------- ----------- Property and equipment, net 287,525 278,689 Goodwill, net 10,136 10,136 Other assets, net 103,913 50,623 ----------- ----------- Total Assets $ 1,223,673 $ 865,071 ----------- ----------- ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 76,344 $ 71,330 Accrued compensation and payroll taxes 36,008 14,409 Accrued rent 34,242 30,985 Accrued income and other taxes 33,926 28,669 Unredeemed stored value cards and gift certificates 32,724 25,785 Current portion of note payable - 4,832 Other current liabilities 19,376 13,025 ----------- ----------- Total current liabilities 232,620 189,035 ----------- ----------- Note payable - 13,874 Other non-current liabilities 20,608 18,492 ----------- ----------- Total non-current liabilities 20,608 32,366 ----------- ----------- Total stockholders' equity 970,445 643,670 ----------- ----------- Total Liabilities and Stockholders' Equity $ 1,223,673 $ 865,071 ----------- ----------- ----------- -----------

Current Ratio 3.53 2.78

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

Three Months Ended Twelve Months Ended ----------------------- ----------------------- January 29, January 31, January 29, January 31, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited)

Net sales $ 674,024 $ 490,580 $ 1,881,241 $ 1,435,436 Cost of sales, including certain buying, occupancy and warehousing expenses 343,743 301,850 1,012,148 895,444 ----------- ----------- ----------- ----------- Gross profit 330,281 188,730 869,093 539,992 Selling, general and administrative expenses 142,246 105,408 446,503 354,749 Depreciation and amortization 15,867 13,440 58,820 51,355 ----------- ----------- ----------- ----------- Operating income 172,168 69,882 363,770 133,888 Other income, net 3,343 469 4,129 2,016 ----------- ----------- ----------- ----------- Income before income taxes 175,511 70,351 367,899 135,904 Provision for income taxes 68,273 27,181 143,019 52,418 ----------- ----------- ----------- ----------- Income from continuing operations, net of tax 107,238 43,170 224,880 83,486 Loss from discontinued operations, net of income tax benefit (6,027) (7,816) (10,889) (23,486) ----------- ----------- ----------- ----------- Net income $ 101,211 $ 35,354 $ 213,991 $ 60,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Basic per share amounts: Income from continuing operations $ 1.46 $ 0.61 $ 3.10 $ 1.17 Loss from discontinued operations (0.08) (0.11) (0.15) (0.33) ----------- ----------- ----------- ----------- Net income per basic share $ 1.38 $ 0.50 $ 2.95 $ 0.84 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Diluted per share amounts: Income from continuing operations $ 1.40 $ 0.60 $ 2.99 $ 1.16 Loss from discontinued operations (0.08) (0.11) (0.14) (0.33) ----------- ----------- ----------- ----------- Net income per diluted share $ 1.32 $ 0.49 $ 2.85 $ 0.83 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Weighted average common shares outstanding -- basic 73,547 71,179 72,575 71,113 Weighted average common shares outstanding -- diluted 76,701 72,251 75,122 72,207

Note: All share and per share data above is presented on a pre-stock split basis. After giving effect to the two-for-one stock split declared on February 4, 2005, and to be distributed on March 7, 2005, share and per share amounts would be as follows:

Basic per share amounts (post-split): Income from continuing operations $ 0.73 $ 0.30 $ 1.55 $ 0.59 Loss from discontinued operations (0.04) (0.05) (0.08) (0.17) ----------- ----------- ----------- ----------- Net income per basic share $ 0.69 $ 0.25 $ 1.47 $ 0.42 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Diluted per share amounts (post-split): Income from continuing operations $ 0.70 $ 0.30 $ 1.50 $ 0.58 Loss from discontinued operations (0.04) (0.05) (0.07) (0.16) ----------- ----------- ----------- ----------- Net income per diluted share $ 0.66 $ 0.25 $ 1.43 $ 0.42 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Weighted average common shares outstanding -- basic (post-split) 147,094 142,358 145,150 142,226 Weighted average common shares outstanding -- diluted (post-split) 153,402 144,502 150,244 144,414

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Total gross square footage at end of period: 4,540,095 4,239,497

Store count at end of period: 846 805

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AMERICAN EAGLE OUTFITTERS, INC. QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS UPDATED TO REFLECT DISCONTINUED OPERATIONS

Under generally accepted accounting principles, we are required to reclassify previously reported prior period financial statements to reflect the discontinued operations on a basis comparable to the current presentation. This includes the requirement to reclassify quarterly financial statement information that will be included in our 2004 Annual Report on Form 10-K. We are providing updated Quarterly Consolidated Statements of Operations (unaudited), which reclassify the Bluenotes results of operations as discontinued operations, in advance of filing our 2004 Annual Report on Form 10-K. These updated historical Statements of Operations are being presented for informational purposes only.

Quarters Ended ----------------------------------- October 30, July 31, May 1, 2004 2004 2004 ----------- ----------- ----------- (Dollars and shares in thousands, (Unaudited) (Unaudited) (Unaudited) except per share amounts)

Net sales $ 479,585 $ 395,402 $ 332,230 Cost of sales, including certain buying, occupancy and warehousing expenses 247,954 234,273 186,178 ----------- ----------- ----------- Gross profit 231,631 161,129 146,052 Selling, general and administrative expenses 119,567 94,965 89,725 Depreciation and amortization 14,948 14,544 13,461 ----------- ----------- ----------- Operating income 97,116 51,620 42,866 Other income (expense), net (645) 491 940 ----------- ----------- ----------- Income before income taxes 96,471 52,111 43,806 Provision for income taxes 37,615 20,159 16,972 ----------- ----------- ----------- Income from continuing operations, net of tax 58,856 31,952 26,834 Loss from discontinued operations, net of income tax benefit (807) (2,328) (1,727) ----------- ----------- ----------- Net income $ 58,049 $ 29,624 $ 25,107 ----------- ----------- ----------- ----------- ----------- -----------

Basic per share amounts: Income from continuing operations $ 0.81 $ 0.44 $ 0.37 Loss from discontinued operations (0.01) (0.03) (0.02) ----------- ----------- ----------- Net income per basic share $ 0.80 $ 0.41 $ 0.35 ----------- ----------- ----------- ----------- ----------- -----------

Diluted per share amounts: Income from continuing operations $ 0.78 $ 0.43 $ 0.36 Loss from discontinued operations (0.01) (0.03) (0.02) ----------- ----------- ----------- Net income per diluted share $ 0.77 $ 0.40 $ 0.34 ----------- ----------- ----------- ----------- ----------- -----------

Weighted average common shares outstanding -- basic 73,002 72,251 71,506 Weighted average common shares outstanding -- diluted 75,785 74,164 73,247

Note: All share and per share data above is presented on a pre-stock split basis. After giving effect to the two-for-one stock split declared on February 4, 2005, and to be distributed on March 7, 2005, share and per share amounts would be as follows:

Basic per share amounts (post-split): Income from continuing operations $ 0.40 $ 0.22 $ 0.19 Loss from discontinued operations - (0.02) (0.01) ----------- ----------- ----------- Net income per basic share $ 0.40 $ 0.20 $ 0.18 ----------- ----------- ----------- ----------- ----------- -----------

Diluted per share amounts (post-split): Income from continuing operations $ 0.39 $ 0.22 $ 0.18 Loss from discontinued operations (0.01) (0.02) (0.01) ----------- ----------- ----------- Net income per diluted share $ 0.38 $ 0.20 $ 0.17 ----------- ----------- ----------- ----------- ----------- -----------

Weighted average common shares outstanding -- basic (post-split) 146,004 144,502 143,012 Weighted average common shares outstanding -- diluted (post-split) 151,570 148,328 146,494

--30--JR/sf*

CONTACT: American Eagle Outfitters, Inc. Laura Weil/Judy Meehan, 724-776-4857

KEYWORD: PENNSYLVANIA INDUSTRY KEYWORD: CONSUMER/HOUSEHOLD APPAREL/TEXTILES RETAIL EARNINGS CONFERENCE CALLS SOURCE: American Eagle Outfitters, Inc.

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