American Eagle woes hit stock

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Shares of American Eagle Outfitters slid more than 9 percent Friday, after the South Side teen clothing retailer reported the fiscal third quarter had been rough and the current one wasn't starting off strong.

CEO Robert Hanson, who labeled the company's recent performance unsatisfactory, described the competition as challenging and lamented the heavy use of discounts and promotions to hang onto market share. That, he noted, doesn't help profit margins.

American Eagle's profit of $24.9 million, or 13 cents per share, in the three months ended Nov. 2 compared to $78.6 million, or 39 cents per share, during the same period a year earlier. Adjusted for one-time events, earnings per share hit 19 cents, a 54 percent drop from last year's 41 cents.

Revenue dropped 6 percent to $857 million in the third quarter, down from $910 million during the same period a year ago, while sales in stores that have been open at least a year, including the online operation, fell 5 percent.

Earlier in the week, rival Aeropostale reported a 15 percent third-quarter sales drop and talked about having to be more promotional than planned. Two weeks ago, Abercrombie & Fitch reported sales fell 12 percent in the third quarter. Over the Thanksgiving-Black Friday weekend, deep discounts were common at teen clothing stores.

The nation's retail industry overall is coping with sluggish spending by consumers, which could hurt the holiday sales season. High teen unemployment and intense competition are seen as factors in the teen clothing sector's struggles.

Although online sales were strong over the holiday weekend, American Eagle is expecting sales at stores open at least a year to be down in the fiscal fourth quarter compared to last year. Earnings are expected to be in the range of 26 to 30 cents per share, lower than the 39-cent target set by analysts polled by Thomson Financial.

Management continues to look at cost-cutting and efficiency, as well as improving the speed at which the operation responds to fashion trends. "We expect 2014 to continue to be challenging," said Mr. Hanson.

American Eagle also announced Friday that it had tapped Chad Kessler as its new executive vice president, chief merchandising and design officer for the American Eagle brand. Mr. Kessler, who was most recently chief merchandising officer for Philadelphia-based retailer Urban Outfitters, will replace Fred Grover, who is retiring.

American Eagle shares closed at $14.85, down $1.55.

Teresa F. Lindeman: tlindeman@post-gazette.com or at 412-263-2018.


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