American Eagle slashes 2Q outlook

American Eagle slashes 2nd-quarter outlook on weak sales, margins

Associated Press

PITTSBURGH (AP) -- Teen retailer American Eagle Outfitters Inc. slashed its second-quarter earnings outlook due to weak sales and margins during the period.

The company's stock fell almost more than 14 percent in after-hours trading Monday following the announcement.

Pittsburgh-based American Eagle said that it expects to earn 10 cents per share for the quarter, versus its prior forecast of earnings of 19 to 21 cents per shares. Analysts polled by FactSet were anticipating earnings of 21 cents per share.

American Eagle said that its revenue decreased 2 percent in the second quarter. Based on its revenue of $739.7 million in the same quarter last year, that suggests it will report second-quarter revenue this year of $724.9 million. That is below analyst forecasts of $760.2 million.

Its revenue from stores open at least a year, including its direct-to-consumer business, fell 7 percent. This is compared to an 8 percent increase last year and forecasts of this measure being flat for the period year-over-year. This is considered a key measure of a retailer's financial performance because it strips away the impact of recently opened or closed stores.

American Eagle's CEO Robert Hanson said that the company is not happy with the results for the period. He pointed to weak traffic in its stores and disappointing sales in its women's department as two of the drivers. He also said the quarter's troubles were exacerbated by a highly promotional retail environment, which intensified over the course of July.

The company increased the number and level of markdowns to compete and help keep its inventory at appropriate levels, but that has taken a toll on its profitability.

American Eagle said it is encouraged by gains in other parts of its business and will try to strengthen its women's business to draw more shoppers.

"The domestic retail environment remains challenging, however, we have a strong sense of urgency and believe we are focused on the right actions to regain traction, deliver strong returns and profitable growth," Hanson said.

American Eagle is expected to give further details when it reports its full quarterly results on Aug. 21.

Shares dropped $2.82 to $17.23 in after-hours trading. Its stock fell 8 cents to close regular trading at $19.97.

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