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American Eagle Outfitters' quarterly profit down 68 percent

| Friday, Dec. 6, 2013, 12:12 p.m.

American Eagle Outfitters' efforts to boost its online sales are paying off but not enough to overcome the weakness that's dogging retailers.

The South Side-based clothing company said profit fell by 68 percent in its third quarter ended Nov. 2 — a performance CEO Robert Hanson characterized as “unsatisfactory.”

The company also was dour on the fourth quarter, which includes the key holiday shopping season, warning that it expected “mid single-digit decline in comparable sales.”

Hanson said 2013 was not “the year we planned for,” and predicted the clothing business will “remain challenging” in 2014.

American Eagle posted net income of $24.9 million, or 13 cents a share, in the 13 weeks ended Nov. 2, down significantly from net income of $78.6 million, or 39 cents a share, in the 13 weeks ended Oct. 27, 2012.

Revenue was $857.3 million, compared with $910.4 million the year before.

Hanson said the company would work to improve merchandise and marketing, reduce expenses and invest to expand sales on the Internet, in factory stores and outside the United States — all in an effort to combat “an intensely promotional North American retail landscape” that is cutting into sales and income.

To jump-start its focus on merchandise, the company said it hired Chad Kessler as chief merchandising and design officer. Kessler, who starts in February, held similar roles at competing clothing companies Urban Outfitters and Abercrombie & Fitch.

Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn., retail consulting firm, wasn't familiar with Kessler but said his experience with Urban Outfitters is a plus because that company “is a great outfit.”

Johnson said American Eagle is seeing weak sales and depressed profit margins because “the entire sector is troubled and facing a huge amount of difficulty” as clothing shoppers expect deep discounts.

But, he said, “Eagle is, we believe, at least beginning to turn the corner.”

Sales at stores open for at least a year were down 5 percent in the quarter, an improvement over the previous quarter when store sales were off by 7 percent.

Sales improved slightly at the start of the Christmas shopping season, Hanson said, though he did not specify a percentage increase. Sales through the company's website between Thanksgiving and Cyber Monday were up, he said, jumping 45 percent year over year.

But, he warned, Christmas online sales have been “promotionally driven, which weakens margins.”

American Eagle's shares tumbled Friday on Wall Street, closing down more than 9 percent at $14.85.

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or anixon@tribweb.com.

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