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By
Reuters
Published
Mar 11, 2014
Reading time
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American Eagle warns on profit as cold weather hits demand

By
Reuters
Published
Mar 11, 2014

Teen apparel retailer American Eagle Outfitters forecast earnings for the current quarter that fell short of analysts' expectations, saying a severe winter had hurt demand.

The company's shares fell as much as 8.5 percent to $13.00 in premarket trading.

American Eagle, whose chief executive left the company in a surprise move in January, said it expects to break even on a per-share basis in the first quarter.

Analysts on average were expecting a profit of 13 cents per share, according to Reuters.

Rival Urban Outfitters, known for its Anthropologie and Free People brands, said on Monday that it was "very cautious" on its current-quarter performance after reporting lower-than-expected quarterly sales due to the extreme cold weather.

American Eagle, as well as rival teen apparel retailers Abercrombie & Fitch and Aeropostale, have seen sales slump in recent quarters as younger shoppers shift to chains such as Sweden's H&M and Inditex's Zara, which offer trendier and cheaper clothes.

The shorter 2013 holiday shopping season added to the teen retailers' woes, forcing them to resort to heavy discounting to draw in customers.

Gross profit margin, excluding certain asset write-offs, fell to 31.9 percent from 41.2 percent in the fourth quarter ended February 1. Its consolidated comparable store sales declined 7 percent.

"The company's results in 2013 were highly disappointing. While tough macro conditions have persisted in our retail sector, our merchandise and overall customer experience fell short of expectations," interim CEO Jay Schottenstein said in a statement.

Analysts had in the past lauded American Eagle's product selection and had expected the company to do better than other teen apparel retailers because of its stronger brand relevance among shoppers.

However, the company's total revenue fell 7 percent to $1.04 billion in the fourth quarter, slightly above analysts' expectations of $1.03 billion.

American Eagle's net income declined to $10.5 million, or 5 cents per share, from $94.8 million, or 47 cents per share, a year earlier.

On an adjusted basis, the company earned 27 cents per share, above the average analyst estimate of 26 cents per share.

American Eagle's shares have fallen about 33 percent in the past 12 months to Monday's close of $14.21 on the New York Stock Exchange.

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