Student Name: Both American Eagle Outfitters and Abercrombie and Fitch Financial Reports for 2022 are included below for your review. Industry norms are also included below as a comparison of performance for 2022. After reviewing the reports, complete the chart below for the 2022 and 2021 performance of the 2 companies using the proper calculation for each of these metrics. Complete the column for Industry Norms for 2022. Please be sure to check your formulas for accuracy and ensure that each number is formatted appropriately as either % or number. All metrics should be extended to 1 decimal points. Once this is completed, answer the questions below the grid with a few sentences. Please be sure this exam is taken individually. (Chart - 80 Pts, 2 pts each box) Financial Measure Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2022 American 2021 American 2022 Abercrombie 2021 Abercrombie Eagle Outfitters Eagle Outfitters & Fitch & Fitch Annual Sales % Increase/ (Decrease) Gross Profit Margin % Operating Expense % (S, G, and A) Net Profit Margin% Inventory Turn Current Ratio Quick Ratio Total Debt to Equity Ratio Industry Norms 2019 CAGR Specialty Stores Answer the following questions in a few sentences: (7 pts) 1) a. Evaluate the sales and gross profit performance of the 2 retailers above, comparing their performance to industry norms. Which retailer had a stronger 2022 performance in sales in the last 2 years and why? Which retailer had a stronger gross profit performance? Use the metrics above to support your analysis b. What is your recommendation for plan sales growth and profitability in the next year for these 2 companies? How would you benchmark sales and profit plan for the future? (7 pts) 2) a. Evaluate both companies SG&A performance versus the industry norm for specialty retailers. What opportunities are there to improve performance in the 2 retailers and why? What would your goal be for the future. b. What impact does the SG&A have on the net profit %. Explain the correlation between SG&A and Net Profit %. (6 pts) 3) Evaluate the metrics of the balance sheet and determine which of the 2 retailers have the least debt and the best potential to pay their bills in a timely manner? Use the metrics above to support your response. AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations January 28, (In thousands, except per share amounts) 2023 Total net revenue $4,989,833 For the Years Ended January 29, 2022 $5,010,785 January 30, 2021 $3,759,113 Cost of sales, including certain buying, occupancy and warehousing expenses 3,244,585 3,018,995 2,610,966 Gross profit 1,745,248 1,991,790 1,148,147 Selling, general and administrative expenses 1,269,095 1,222,000 977,264 Impairment, restructuring and COVID-19-related charges Depreciation and amortization expense Operating income (loss) Debt-related charges Interest expense, net Other income, net Income (loss) before income taxes Provision (benefit) for income taxes Net income (loss) Basic net income (loss) per common share 22,209 11,944 279,826 206,897 166,781 247,047 591,065 162,402 (271,345) 64,721 14,297 34,632 24,610 (10,465) (2,489) (3,682) 178,494 558,922 53,358 139,293 (292,273) (82,999) $ 125,136 $ 419,629 $ (209,274) $ 0.69 $ 2.50 $ (1.26) Diluted net income (loss) per common share Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted $ 0.64 $ 2.03 $ (1.26) 181,778 205,226 168,156 206,529 166,455 166,455 Refer to Notes to Consolidated Financial Statements AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Net income (loss) Other comprehensive gain (loss): Foreign currency translation gain (loss) Other comprehensive gain (loss) Comprehensive income (loss) January 28, 2023 $125,136 For the Years Ended January 29, 2022 $419,629 January 30, 2021 $(209,274) 8,215 8,215 $133,351 (97) (97) $419,532 (7,580) (7,580) $(216,854) AMERICAN EAGLE OUTFITTERS, INC. Consolidated Balance Sheets (In thousands, except per share amounts) Assets Current assets: Cash and cash equivalents Merchandise inventory Accounts receivable, net Prepaid expenses and other Total current assets Operating lease right-of-use assets Property and equipment, at cost, net of accumulated depreciation Goodwill Intangible assets, net Non-current deferred income taxes January 28, 2023 January 29, 2022 $ 170,209 $ 434,770 585,083 553,458 242,386 286,683 102,563 122,013 1,100,241 1,396,924 1,086,999 1,193,021 781,514 728,272 264,945 271,416 94,536 102,701 36,483 44,167 56,238 50,142 $3,420,956 $ 3,786,643 Other assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Current portion of operating lease liabilities Unredeemed gift cards and gift certificates $ 234,340 $ 231,782 337,258 311,005 67,618 71,365 Accrued compensation and payroll taxes Accrued income and other taxes 51,912 141,817 10,919 16,274 Other current liabilities and accrued expenses 66,901 70,628 Total current liabilities 768,948 842,871 Non-current liabilities: Non-current operating lease liabilities Long-term debt, net 1,021,200 8,911 1,154,481 Other non-current liabilities 22,734 Total non-current liabilities 1,052,845 341,002 24,617 1,520,100 Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 195,064 and 168,699 shares outstanding, respectively 2,496 Contributed capital Accumulated other comprehensive loss, net of tax 341,775 (32,630) 2,496 636,355 (40,845) Retained earnings 2,137,126 2,203,772 Treasury stock, 54,502 and 80,867 shares, respectively, at cost (849,604) (1,378,106) Total stockholders' equity Total liabilities and stockholders' equity 1,599,163 1,423,672 $3,420,956 $ 3,786,643 Abercrombie & Fitch Co. Consolidated Statements of Operations and Comprehensive (Loss) Income (Thousands, except per share amounts) Fiscal 2022 Fiscal 2021 Fiscal 2020 Net sales Cost of sales, exclusive of depreciation and amortization Gross profit Stores and distribution expense Marketing, general and administrative expense Asset impairment Other operating Income, net Operating income (loss) $ 3,697,751 $ 3,712,768 $ 3,125,384 1,593,213 1,400.773 1,234,179 2,104,538 2,311,995 1,891,205 1,482,931 1,428,323 1,379,948 517,602 536,815 463,843 14,031 12,100 72,937 (2,674) (8,327) (5,054) 92,648 343,084 (20,469) Interest expense, net 25.632 34,110 28,274 Income (loss) before income taxes 67,016 308,974 (48,743) Income tax expense 56,631 38,908 Net income (loss) 10,385 270,066 60,211 (108,954) Less: Net income attributable to noncontrolling interests 7,569 7,056 5,067 Net income (loss) attributable to A&F $ 2,816 $ 263.010 $ (114,021) Net income (loss) per share attributable to A&F Basic $ 0.06 $ 0.05 4.41 S (1.82) 4.20 (1.82) Diluted Weighted-average shares outstanding Basic Diluted Other comprehensive (loss) income 50,307 59,597 62,551 52,327 62,636 62,551 Foreign currency translation, net of tax $ (11,964) $ (22,917) $ 12,195 Derivative financial instruments, net of tax (10,857) 10,518 (5,616) Other comprehensive (loss) income (22,821) (12,399) 6,579 Comprehensive (loss) income (12,436) 257,667 (102,375) Less: Comprehensive income attributable to noncontrolling interests 7.569 Comprehensive (loss) income attributable to A&F $ (20,005) $ 7.056 250,611 $ 5,067 (107,442) Assets Current assets: Cash and equivalents Receivables Inventories Other current assets Total current assets Property and equipment, net Operating lease right-of-use assets Other assets Total assets Liabilities and stockholders' equity Current liabilities: Abercrombie & Fitch Co. Consolidated Balance Sheets (Thousands, except par value amounts) Accounts payable Accrued expenses Short-term portion of operating lease liabilities Income taxes payable Total current liabilities Long-term liabilities: Long-term portion of operating lease liabilities Long-term portion of borrowings, net Other liabilities Total long-term liabilities January 28, 2023 January 29, 2022 $ 517,602 $ 823,139 104,506 69,102 505,621 525,864 100,289 89,654 1,228,018 1,507,759 551,585 508,336 723.550 698,231 209.947 225,165 $ 2,713,100 S 2,939,491 $ 258,895 $ 374,829 413,303 395,815 213,979 222,823 16,023 21,773 902,200 1,015,240 713,361 697,264 296,852 303,574 94,118 86,089 1,104,331 1,086,927 Stockholders' equity Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented 1,033 Paid-in capital 416,255 Retained earnings 2,368,815 1,033 413,190 2,386,156 Accumulated other comprehensive loss, net of tax ("AOCL") (137,527) (114,706) Treasury stock, at average cost: 54,298 and 50,315 shares at January 28, 2023 and January 29, 2022, respectively (1,953,735) (1,859,583) Total A&F stockholders' equity Noncontrolling interests 694,841 11,728 826,090 Total stockholders' equity 706.569 11,234 837,324 Total liabilities and stockholders' equity $ 2,713,100 2,939,491 Annual Industry Norms 2021 Results 3 Year Industry Segment Specialty Department Store Discount Store Annual Sales Var Total Debt vs 2019 12.7% Sales Growth CAGR 3.9% Gross SG&A % Margin % Net Profit % Inventory Turn Current Ratio Quick Ratio to Equity ROA Ratio 32.4% 31.0% 5.8% 4.3 1.23 0.39 2.64 8.9% 2.7% -0.7% 38.8% 31.0% 5.3% 3.8 1.19 0.32 1.72 7.8% 18.2% 6.6% 22.9% 20.3% 3.1% 8.0 0.92 0.23 0.99 7.0% Off Price 16.8% 7.7% 28.2% 17.7% 7.4% 5.9 2.90 2.30 1.46 11.9% Fast Fashion -7.4% 0.4% 55.3% 36.6% 9.3% 3.8 3.30 2.90 0.42 9.4% Ecom 36.4% 15.9% 20.3% 9.2% 1.7% 13.4 1.24 0.92 0.62 1.8%