The following discussion and analysis of financial condition and results of operations should be read in conjunction with our Fiscal 2018 Management's Discussion and Analysis of Financial Condition and Results of Operations, which can be found in our Fiscal 2018 Form 10-K.
In addition, the following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements and should be read in conjunction with these statements and notes thereto. This report contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which represent our expectations or beliefs concerning future events, including the following:
• the planned opening of 25 to 30 American Eagle stores (19 opened
year-to-date), 35 to 40 Aerie standalone stores (29 opened year-to-date), and
the opening of 25 to 35 Aerie side-by-side format stores (of which year-to-date 8 have opened with new AE stores and 15 have opened with remodeled AE stores) during Fiscal 2019;
• the success of our efforts to expand internationally, engage in future
franchise/license agreements, and/or growth through acquisitions or joint
ventures;
• the selection of approximately 40 to 50 American Eagle stores in the United
States and
remodeled/refurbished year-to-date);
• the potential closure of approximately 10 to 15 American Eagle (8 closed
year-to-date) and 5 to 10 Aerie stores (2 closed year-to-date), primarily in
• the planned opening of approximately 15 to 20 new international third-party
operated American Eagle stores during Fiscal 2019;
• the success of our core American Eagle and Aerie brands through our
omni-channel and licensed outlets within
• the success of our business priorities and strategies;
• the continued validity of our trademarks;
• our performance during the year-end holiday selling season;
• our ability to predict inventory turnover;
• the accuracy of the estimates and assumptions we make pursuant to our
critical accounting policies;
• the expected payment of a dividend in future periods;
• the possibility that our credit facilities may not be available for future
borrowings;
• the availability of sufficient cash flow to fund anticipated capital
expenditures, dividends, and working capital requirements;
• the possibility that product costs are adversely affected by foreign trade
issues (including import tariffs and other trade restrictions with
other countries), currency exchange rate fluctuations, increasing prices for
raw materials, political instability or for other reasons
• the possibility that changes in global economic and financial conditions, and
resulting impacts on consumer confidence and consumer spending, as well as
other changes in consumer discretionary spending habits; and
• the possibility that we may be required to take additional store impairment
charges related to underperforming stores.
We caution that these forward-looking statements, and those described elsewhere in this report, involve material risks and uncertainties and are subject to change based on factors beyond our control as discussed herein and in Item 1A of our Fiscal 2018 Form 10-K. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. 20
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Key Performance Indicators
Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:
Comparable sales - Comparable sales provide a measure of sales growth for stores and channels open at least one year over the comparable prior year period. In fiscal years following those with 53 weeks, the prior year period is shifted by one week to compare similar calendar weeks. A store is included in comparable sales in the thirteenth month of operation. However, stores that have a gross square footage change of 25% or greater due to a remodel are removed from the comparable sales base, but are included in total sales. These stores are returned to the comparable sales base in the thirteenth month following the remodel. Sales from American Eagle, Aerie, Tailgate, andTodd Snyder stores, as well as sales from AEO Direct and other digital channels, are included in total comparable sales. Sales from licensed stores are not included in comparable sales. Individual American Eagle and Aerie brand comparable sales disclosures represent sales from stores and AEO Direct.
AEO Direct sales are included in the individual American Eagle and Aerie brand comparable sales metric for the following reasons:
• Our approach to customer engagement is "omni-channel," which provides a
seamless customer experience through both traditional and non-traditional
channels, including four wall store locations, web, mobile/tablet devices,
social networks, email, in-store displays, and kiosks. Additionally, we
fulfill online orders at stores through our buy online, ship from store
capability, maximizing store inventory exposure to digital demand. We also
offer reserve online, pickup in store service to our customers and give them
the ability to look up store inventory from all digital channels; and
• Shopping behavior has continued to evolve across multiple channels that work
in tandem to meet customer needs. Management believes that presenting a brand
level performance metric that includes all channels (i.e., stores and AEO
Direct) is the most appropriate, given customer behavior and our omni-channel
model.
Our management considers comparable sales to be an important indicator of our current performance. Comparable sales results are important to achieve leveraging of our costs, including store payroll, store supplies, rent, etc. Comparable sales also have a direct impact on our total net revenue, cash, and working capital. Gross profit - Gross profit measures whether we are optimizing profitability of our sales and inventory. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively, "merchandise costs") and buying, occupancy and warehousing costs. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples. Buying, occupancy, and warehousing costs consist of: compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation.
The inability to obtain acceptable levels of sales, initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.
Operating income - Our management views operating income as a key indicator of our performance. The key drivers of operating income are comparable sales, gross profit, our ability to control selling, general, and administrative expenses, and our level of capital expenditures. Omni-channel sales performance - Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price ("AUR"), units per transaction, average transaction value, transactions, customer traffic, conversion rates, average unit cost, and comparable gross margin dollars. Inventory turnover - Our management evaluates inventory turnover as a measure of how productively inventory is bought and sold. Inventory turnover is important as it can signal slow moving inventory. This can be critical in determining the need to take markdowns on merchandise. 21 -------------------------------------------------------------------------------- Cash flow and liquidity - Our management evaluates cash flow from operations, investing and financing in determining the sufficiency of our cash position and capital allocation strategies. Cash flow has historically been sufficient to cover our uses of cash. Our management believes that cash flow will be sufficient to fund anticipated capital expenditures, dividends, and working capital requirements. Results of Operations Overview Strong top line performance across brands and channels led to our 19th consecutive quarter of comparable sales growth and record third quarter revenue. We continued to deliver on our strategic pillars, with American Eagle jeans and Aerie demonstrating positive momentum. As we look ahead, our focus is squarely on continuing to capitalize on the strength and momentum of our brands, accelerating the growth of Aerie, and creating shareholder value. Total net revenue increased 6% or$62.7 million for the third quarter of 2019 to$1.066 billion . Consolidated comparable sales, including AEO Direct, increased 5%, following an 8% increase during the same period last year and were positive in both the stores and digital channels. By brand, American Eagle comparable sales increased 2% following a 5% increase over the same period last year. Aerie comparable sales increased 20% compared to a 32% increase over the same period last year. Gross profit increased 2% or$7.6 million to$407.1 million compared to$399.5 million during the same period last year and declined 160 basis points to 38.2% as a percentage of total net revenue. Selling, general, and administrative expenses increased 4%, or$10.5 million , to$259.0 million compared to$248.4 million during the same period last year but improved 50 basis points to 24.3% as a percentage of total net revenue. Net income for the quarter decreased 6% to$80.8 million , or$0.48 per diluted share, compared to$85.5 million , or$0.48 per diluted share, during the same period last year. During the 39 weeks endedNovember 2, 2019 , we returned$182.2 million to shareholders through share repurchases of$112.4 million and cash dividends of$69.8 million . We had$264.5 million in cash and short-term investments as ofNovember 2, 2019 compared to$359.7 million last year. Merchandise inventory at the end of the third quarter was$647.3 million , compared to$591.7 million last year, a 9% increase.
Our business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the current and prior periods are not necessarily indicative of future financial results.
The following table shows the percentage relationship to total net revenue of the listed line items included in our Consolidated Statements of Operations. 13 Weeks Ended 39 Weeks Ended November 2, November 3, November 2, November 3, 2019 2018 2019 2018 Total net revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales, including certain buying, occupancy and warehousing expenses 61.8 60.2 62.8 62.1 Gross profit 38.2 39.8 37.2 37.9 Selling, general and administrative expenses 24.3 24.8 24.8 24.8 Restructuring charges - - 0.1 0.1 Depreciation and amortization expense 4.2 4.2 4.5 4.6 Operating income 9.7 10.8 7.8 8.5 Other income, net 0.2 0.4 0.3 0.2 Income before income taxes 9.9 11.2 8.1 8.7 Provision for income taxes 2.3 2.7 1.9 2.0 Net Income 7.6 % 8.5 % 6.2 % 6.7 % 22
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The following table shows our consolidated store data:
13 Weeks Ended 39 Weeks Ended November 2, November 3, November 2, November 3, 2019 2018 2019 2018 Number of stores: Beginning of period 1,075 1,054 1,055 1,047 Opened 20 7 50 18 Closed (1 ) (4 ) (11 ) (8 ) End of period 1,094 1,057 1,094 1,057 Total gross square feet at end of period (in '000) 6,837 6,662 6,837 6,662 International licensed/franchise stores at end of period (1) 241 223 241 223
(1) International licensed/franchise stores are not included in the consolidated
store data or the total gross square feet calculation.
Our operations are conducted in one reportable segment, consisting of 945 American Eagle retail stores, which include 170 Aerie side-by-side locations, 142 Aerie stand-alone locations and AEO Direct. Additionally, there were five Tailgate and twoTodd Snyder stand-alone locations.
Comparison of the 13 weeks ended
Total net revenue Total net revenue increased 6%, or$62.7 million , to$1.066 billion compared to$1.004 billion last year. Total comparable sales increased 5% for the period compared to an 8% increase last year, and were positive in both the stores and digital channels.
By brand, including the respective AEO Direct sales, American Eagle brand
comparable sales increased 2%, or
For the 13 weeks ended
Gross Profit
Gross profit increased 2%, or$7.6 million , to$407.1 million compared to$399.5 million last year. The gross margin rate declined 160 basis points to a rate of 38.2% of total net revenue. The decline primarily reflected increased markdowns. There were$3.0 million and$2.9 million of share-based payment expense included in gross profit for the periods endedNovember 2, 2019 andNovember 3, 2018 , respectively, comprised of both time- and performance-based awards. Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as well as design costs in cost of sales, and others may exclude a portion of these costs from cost of sales, including them in a line item such as selling, general, and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Selling, General, and Administrative Expenses
Selling, general, and administrative ("SG&A") expenses increased 4%, or$10.5 million , to$259.0 million from$248.4 million last year. As a rate to total net revenue, SG&A expenses improved 50 basis points to 24.3%. The increase in expense reflected higher store salaries and professional fees, partially offset by lower incentive expense. There was$2.6 million and$3.3 million of share-based payment expense included in SG&A expenses for the periods endedNovember 2, 2019 andNovember 3, 2018 , respectively, comprised of both time- and performance-based awards. 23
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Restructuring Charges
There were no restructuring charges recorded for the 13 weeks ended
Depreciation and Amortization Expense
Depreciation and amortization expense increased 6%, or$2.6 million , to$45.0 million , compared to$42.4 million last year. As a rate to total net revenue, depreciation and amortization expense was 4.2% this year compared to 4.2% last year. The increase in expense was driven by investments in stores, technology, and e-commerce. Other Income, Net Other income, net decreased to$2.6 million this year, compared to other income of$4.3 million last year. The decrease was primarily attributable to a benefit from a vendor settlement recorded last year.
Provision for Income Taxes
The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for quarterly events. The effective income tax rate for the 13 weeks endedNovember 2, 2019 was 23.6% compared to 24.3% for the 13 weeks endedNovember 3, 2018 . The decrease in the effective income tax rate for the 13 weeks endedNovember 2, 2019 was primarily due to a decrease in unrecognized tax benefits.
Net Income
Net income decreased 6%, or$4.7 million , to$80.8 million , or 7.6% as a percent to total net revenue, from$85.5 million , or 8.5% as a percent to total net revenue last year. Net income per diluted share remained flat at$0.48 per diluted share. The change in net income was attributable to the factors noted above.
Comparison of the 39 weeks ended
Total net revenue Total net revenue increased 7%, or$202.1 million , to$2.994 billion compared to$2.792 billion last year. Total comparable sales increased 4% for the period compared to a 9% increase last year. Included in total net revenue this year is$40.0 million recognized for license royalties from a third-party operator of AE stores inJapan .
By brand, including the respective AEO Direct sales, American Eagle brand
comparable sales increased 1%, or
For the year to date period, consolidated comparable traffic and consolidated total transactions increased in the high-single digits. Units per transaction increased slightly, partially offset by an AUR decrease in the low-single digits.
Gross Profit
Gross profit increased 5%, or$57.5 million , to$1.115 billion compared to$1.057 billion last year. The gross margin rate declined 70 basis points to a rate of 37.2% of revenue. Flow through from the$40 million ofJapan license royalties that occurred during the second quarter of 2019 was the primary driver of the increase, which was offset by increased markdowns and delivery expense. See "International Operations," below. There was$9.4 million and$8.5 million of share-based payment expense included in gross profit for the periods endedNovember 2, 2019 andNovember 3, 2018 , respectively, comprised of both time- and performance-based awards. Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as well as design costs in cost of sales and others may exclude a portion of these costs from cost of sales, including them in a line item such as selling, general, and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses. 24
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Selling, General, and Administrative Expenses
SG&A expenses increased 7%, or$50.1 million , to$742.8 million from$692.6 million last year. As a percentage of total net revenue, SG&A expenses remained flat at 24.8%. Strategic investments in the stores organization, which began midway through 2018, led to increased compensation expense. Advertising and professional services also contributed to the increase from last year. There was$10.6 million and$9.3 million of share-based payment expense included in SG&A expenses for the periods endedNovember 2, 2019 andNovember 3, 2018 , respectively, comprised of both time- and performance-based awards.
Restructuring Charges
Restructuring charges were$4.3 million , or 0.1% as a rate to total net revenue, for the 39 weeks endedNovember 2, 2019 . These charges were primarily the result of corporate severance charges and closure costs for our company-owned and operated stores inChina . Restructuring charges were$1.6 million or 0.1% as a rate to total net revenue for the 39 weeks endedNovember 3, 2018 . These charges were primarily the result of corporate severance charges.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 6%, or$7.6 million , to$134.7 million , compared to$127.1 million last year. As a rate to total net revenue, depreciation and amortization expense was 4.5% this year compared to 4.6% last year. The increase in expense was driven by investments in stores, technology, and e-commerce. Other Income, Net Other income, net increased to$10.7 million this year, compared to other income of$5.7 million last year. The increase was primarily attributable to increased interest income and foreign currency fluctuations.
Provision for Income Taxes
The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for quarterly events. The effective income tax rate for the 39 weeks endedNovember 2, 2019 was 23.4% compared to 23.1% for the 39 weeks endedNovember 3, 2018 . The increase in the effective income tax rate for the 39 weeks endedNovember 2, 2019 was primarily due to an increase in unrecognized tax benefits and less favorable excess tax benefits from share-based payments in accordance with ASU 2016-09.
Net Income
Net income increased$0.8 million , to$186.5 million , or 6.2% as a percent to total net revenue, from$185.7 million , or 6.7% as a percent to total net revenue last year. Net income per diluted share increased 5% to$1.09 , including$0.02 of restructuring charges. Last year net income per diluted share was$1.04 , including$0.01 of restructuring charges. The change in net income was attributable to the factors noted above.
International Operations
We have agreements with multiple third party operators to expand our brands internationally. Through these agreements, a series of franchised, licensed, or other brand-dedicated American Eagle and Aerie stores have opened and will continue to open in areas includingEastern Europe , theMiddle East , Central, andSouth America ,Northern Africa and parts ofAsia . These agreements do not involve a significant capital investment or operational involvement from us. We continue to increase the number of countries in which we enter into these types of arrangements as part of our strategy to expand internationally. We plan to terminate the agreement with our Japanese license partner and are currently exploring options for our future business model to best serve customers and continue AEO's growth inJapan . As ofNovember 2, 2019 , we had 241 stores operated by our third party operators in 24 countries. International third party operated stores are not included in the consolidated store data or the total gross square feet calculation.
As of
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Fair Value Measurements
ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.
Financial Instruments
Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
• Level 1 - Quoted prices in active markets.
• Level 2 - Inputs other than Level 1 that are observable, either directly or
indirectly.
• Level 3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.
As ofNovember 2, 2019 , we held certain assets that are required to be measured at fair value on a recurring basis. These include cash and cash equivalents and short-term investments.
In accordance with ASC 820, the following table represents the fair value
hierarchy of our financial assets (cash equivalents and investments) measured at
fair value on a recurring basis as of
Fair
Value Measurements at
Quoted Market Prices in Active Markets for Significant Identical Significant Other Unobservable Assets Observable Inputs Inputs (In thousands) Carrying Amount (Level 1) (Level 2) (Level 3)
Cash and cash equivalents: Cash$ 134,602 $ 134,602 - - Interest bearing deposits 79,912 79,912 - - Total cash and cash equivalents$ 214,514 $ 214,514 $ - $ - Short-term investments Certificates of Deposit 50,000 50,000 - - Total short-term investments 50,000 50,000 - - Total$ 264,514 $ 264,514 - -
Liquidity and Capital Resources
Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology and e-commerce upgrades and investments, distribution center improvements and expansion and the return of value to shareholders through the repurchase of common stock and the payment of dividends. Historically, these uses of cash have been funded with cash flow from operations and existing cash on hand. Also, we maintain an asset-based revolving credit facility that allows us to borrow up to$400 million , which will expire inJanuary 2024 . Additionally, our uses of cash include the development of the Aerie brand, investments in technology and omni-channel capabilities, and our international expansion efforts. We also made key investments in the customer experience and our associates, including store payroll and higher wages, as well as incremental advertising expenses. We expect to be able to fund our future cash requirements through current cash holdings, as well as cash generated from operations. Our growth strategy includes fortifying our brands and further e-commerce and store expansion or acquisitions. We periodically consider and evaluate these options to support future growth. In the event we do pursue such options, we could require additional equity or debt financing. There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase our profitability. 26
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The following sets forth certain measures of our liquidity:
November 2, February 2, November 3, 2019 2019 2018
Working Capital (in thousands)
1.33 1.93 1.85 Working capital decreased$235.2 million compared toFebruary 2, 2019 and decreased$247.9 million compared to last year. The adoption of ASC 842 decreased working capital by$226.5 million , due to the addition of$279.2 million of operating lease liabilities (current portion), offset by$52.7 million of current deferred rent balances. Compared to last year, the remaining$21.4 million decrease in working capital was primarily driven by a$95.2 million decrease in cash and short-term investments and a$23.3 million increase in accounts payable, partially offset by a$55.7 million increase in inventory, a$28.2 million increase in accounts receivable, and a$13.5 million decrease in accrued compensation.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled$178.2 million and$243.6 million for the 39 weeks endedNovember 2, 2019 andNovember 3, 2018 , respectively. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash for operations was for the payment of operational costs.
Cash Flows from Investing Activities
Investing activities for the 39 weeks endedNovember 2, 2019 primarily consisted of$149.9 million of capital expenditures for property and equipment, partially offset by$42.1 million of net short-term investment sales. Investing activities for the 39 weeks endedNovember 3, 2018 primarily included$143.9 million of capital expenditures for property and equipment and$79.9 million of net short-term investment purchases, classified as available-for-sale.
Cash Flows from Financing Activities
Cash used for financing activities for the 39 weeks endedNovember 2, 2019 consisted primarily of$112.4 million used for the repurchase of 6.3 million shares of common stock under publicly announced programs,$69.8 million for cash dividends paid at a quarterly rate of$0.1375 per share, and$8.0 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments. Cash used for financing activities for the 39 weeks endedNovember 3, 2018 consisted primarily of$71.3 million for cash dividends paid at a quarterly rate of$0.1375 per share,$70.3 million used for the purchase of 3.3 million shares of common stock under publicly announced programs and$19.1 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments, partially offset by net proceeds from stock options exercised of$15.5 million .
Credit Facilities
InJanuary 2019 , the Company entered into an amended and restated Credit Agreement ("Credit Agreement") for five-year, syndicated, asset-based revolving credit facilities (the "Credit Facilities"). The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to$400 million , subject to customary borrowing base limitations. The Credit Facilities provide increased financial flexibility and take advantage of a favorable credit environment. All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by a first-priority security interest in certain working capital assets of the borrowers and guarantors, consisting primarily of cash, receivables, inventory, and certain other assets and have been further secured by first-priority mortgages on certain real property.
As of
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Capital Expenditures for Property and Equipment
Capital expenditures for the 39 weeks endedNovember 2, 2019 were$149.9 million and included$96.2 million related to investments in our stores, including 20 new AEO stores (7 AE, 12 Aerie, 1 Todd Snyder), 18 remodeled and refurbished stores, and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology initiatives ($21.7 million ), e-commerce ($23.8 million ) and other home office projects ($8.2 million ). For Fiscal 2019, we expect aggregate capital expenditures to be in the range of$200 million to$215 million in support of our expansion efforts, store investments, including selective remodels of high performing, long-term locations, information technology upgrades to support growth and investments in e-commerce. Stock Repurchases During the 39 weeks endedNovember 2, 2019 , as part of our publicly announced share repurchase program, we repurchased 6.3 million shares for$112.4 million , at a weighted average price of$17.74 per share. During the 39 weeks endedNovember 3, 2018 , as part of our publicly announced share repurchase program, we repurchased 3.3 million shares for$70.3 million , at a weighted average price of$21.31 per share. As ofNovember 2, 2019 , 5.4 million shares remained available under the program authorized by our Board inApril 2016 that expires onJanuary 30, 2021 . During the 39 weeks endedNovember 2, 2019 , our Board authorized the repurchase of 30.0 million shares under a new share repurchase program, which expires onFebruary 3, 2024 , bringing our total share repurchase authorization to 35.4 million shares. During the 39 weeks endedNovember 2, 2019 andNovember 3, 2018 , we repurchased approximately 0.4 million and 0.9 million shares, respectively, from certain employees at market prices totaling$8.0 million and$19.1 million , respectively. These shares were repurchased for the payment of taxes, in connection with the vesting of share-based payments, as permitted under our equity incentive plans. The aforementioned shares repurchased have been recorded as treasury stock. Dividends During the 13 weeks endedNovember 2, 2019 , our Board declared a quarterly cash dividend of$0.1375 per share, which was paid onOctober 25, 2019 . The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes inU.S. taxation and other relevant factors. It is anticipated that any future dividends paid will be declared on a quarterly basis.
Critical Accounting Policies
Our critical accounting policies are described in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the year endedFebruary 2, 2019 contained in our Fiscal 2018 Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q. Our critical accounting policies and estimates did not change materially during the 39-week period endedNovember 2, 2019 , except for the adoption of ASU 2016-02, "Leases (Topic 842)", onFebruary 3, 2019 . The application of our critical accounting policies may require our management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Our management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
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