American Eagle Outfitters Inc (AEO)

Interest coverage

		Jan 31, 2025	Oct 31, 2024	Jul 31, 2024	Apr 30, 2024	Feb 3, 2024	Jan 31, 2024	Oct 31, 2023	Oct 28, 2023	Jul 31, 2023	Jul 29, 2023	Apr 30, 2023	Apr 29, 2023	Jan 31, 2023	Jan 28, 2023	Oct 31, 2022	Oct 29, 2022	Jul 31, 2022	Jul 30, 2022	Apr 30, 2022	Jan 31, 2022
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	444,865	311,831	203,883	228,135	275,660	333,864	383,452	302,197	199,667	206,118	214,410	287,852	382,569	264,465	204,897	129,251	87,584	211,751	407,424	575,209
Interest expense (ttm)	US$ in thousands	4,169	4,169	9,129	11,270	4,960	5,911	1,902	-279	3,282	4,741	10,854	14,042	13,352	14,363	67,399	68,109	76,704	81,878	30,390	34,414
Interest coverage		106.71	74.80	22.33	20.24	55.58	56.48	201.60	—	60.84	43.48	19.75	20.50	28.65	18.41	3.04	1.90	1.14	2.59	13.41	16.71

January 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $444,865K ÷ $4,169K
= 106.71

The interest coverage ratio indicates the company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). A higher interest coverage ratio is usually preferred as it demonstrates that the company is generating enough operating income to cover its interest obligations comfortably.

Looking at the historical data for American Eagle Outfitters Inc, the interest coverage ratio has shown fluctuations over time. The ratio was strong, standing at 16.71 on January 31, 2022, and remained above 10 for the next few quarters. However, from July 30, 2022, the interest coverage ratio started to decline significantly, dropping to 1.14 on July 31, 2022. This could be a cause for concern as it suggests that the company's ability to cover its interest expenses with its operating income has weakened.

Following this period of decline, the interest coverage ratio showed some improvement, reaching 43.48 on July 29, 2023, and further increasing to 201.60 on October 31, 2023. Such a high ratio indicates a significant improvement in the company's ability to cover its interest expenses.

In the subsequent periods, the interest coverage ratio fluctuated, but generally remained at satisfactory levels, exceeding 20 for most quarters. The ratio reached its peak at 106.71 on January 31, 2025, indicating a robust ability to cover interest expenses at that point in time.

Overall, while there have been fluctuations in American Eagle Outfitters Inc's interest coverage ratio over the periods analyzed, the company has demonstrated the ability to manage its interest obligations effectively, with some quarters showing marked improvement in covering its interest expenses with its operating income.