Profit drops 29 percent in first quarter at American Eagle Outfitters
Colder-than-normal weather and a weak economy were a bad combination for American Eagle Outfitters Inc.
The South Side clothing retailer wrung up fewer sales in the first-quarter as it struggles to overcome challenges from competitors, such as Urban Outfitters Inc. and Forever 21 Inc., that are seen as more hip to younger shoppers.
CEO Robert Hanson said the weather and a weak economy kept shoppers from spending as much. But industry analyst Craig Johnson said some American Eagle competitors faced the same challenges yet managed to grow.
“People tend to blame the weather a lot, but if you look at some of the competitors, their numbers were up,” said Johnson, president of Customer Growth Partners in New Canaan, Conn.
The sales drop led to a 29 percent decrease in profits for American Eagle, which reported net income of $28 million, or 14 cents a share, down from $39.7 million, or 20 cents a share, last year.
Earnings were reduced by asset write-offs and corporate charges totaling 4 cents a share, the company said. Excluding those items, adjusted net income was 18 cents a share, compared with 22 cents a share in the year-ago quarter. That beat analyst expectations of 17 cents a share and the stock closed up 17 cents at $20.48.
Revenue was $679.5 million, down 4 percent from $708.7 million last year. Same-store sales in the first quarter dropped 5 percent.
Contributing to the decline in profit was a tough comparison to the first quarter last year, when warmer-than-expected weather boosted sales, said Eric Beder, managing director of Brean Capital, a New York investment firm.
Beder said he was not concerned about one quarter of poor performance because American Eagle is focused on long-term objectives of expanding internationally and implementing systems that will allow it to respond more quickly to changes in consumer tastes.
Johnson agreed weather and a tough comparison played a part in the drop. However, American Eagle is losing ground to stores such as Urban Outfitters and Forever 21, he said.
Philadelphia-based Urban Outfitters reported a 14 percent increase in first-quarter sales. Forever 21, a private company based in Los Angeles, is “gobbling up market share,” he said.
Johnson remains optimistic about American Eagle in the long term, but he said it has challenges: “Teen customers are very fickle. A year ago, Eagle was very hot and now it's not.”
American Eagle also announced that it will build a $160 million distribution center in Luzerne County, near Hazleton. The project, which is expected to produce 369 jobs, was given a $400,000 Pennsylvania First Program grant and $166,050 Guaranteed Free Training grant by the state Department of Community and Economic Development.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
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