American Eagle Outfitters Q2 Profit Falls 70%, But Still Beats Estimates

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AEOPittsburgh—American Eagle Outfitters reported today that its second quarter profit dropped 70% as sales weakened and some expenses rose. But the teen retailer still managed to beat estimates.

In the three month ended August 2, earnings amounted to $5.8 million, or 3 cents a share, compared with earnings of $19.6 million, or 10 cents a share, in the year ago period. The company had projected break-even results as did analysts.

‘Ahead of Our Expectations’

Total net revenue declined 2% to $711 million from $727 million last year, which beat analysts’ consensus for $689.5 million in sales.

Comparable store sales were down 7% following a 7% decline a year earlier.

Gross margin narrowed to 33.4% from 33.8%. This reflected the de-leverage of buying, occupancy and warehouse costs on negative comparable sales, which was largely outset by favorability in merchandise and design costs.

Selling, general and administrative expenses increased to $190.1 million from $186.3 million. Depreciation and amortization expense climbed to $35.4 million from $29.7 million.

Jay Schottenstein, interim chief executive, said: “Although the second quarter results were slightly ahead of our expectations, they do not reflect our potential. We did, however, make significant progress on our priorities to build a sustainable path to higher profitability.

Based on a mid single-digit decline in comparable sales, American Eagle expects its third quarter earnings per-share to be about 17 to 19 cents compared to adjusted earnings of 19 cents last year. Analysts predict 18 cents a share.

FBR & Co. analyst Susan Anderson noted: “Overall we view this as a good report in a difficult environment, which we believe will be received by investors. In addition to Aeropostale’s positive pre-announcement, we think this could be further evidence that teen retailing is beginning to stabilize.”

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