Stock slides for teen clothing retailer American Eagle Outfitters

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Investors sent American Eagle Outfitters shares down almost 8 percent on Tuesday, after the South Side teen clothing chain admitted that its room is a bit of a mess.

But company officials defiantly noted that they've survived down cycles and outlasted other teen retailers, and they expect to do so again.

“Over the years, we've had our share of challenges and we've always recovered,” said Roger S. Markfield, the company’s chief creative officer and longtime muse who delayed his retirement after CEO Robert Hanson left in January.

Last year was, as executive chairman and interim CEO Jay Schottenstein said in the company’s pre-market financial release Tuesday, “highly disappointing.” The first quarter of this year so far has been battered by weather-driven store closings that could leave earnings flat and disappoint analysts who, Thomson Reuter said, had been looking, on average, for 13 cents per share.

In its fourth quarter, which ended Feb. 1, American Eagle made a profit of $10.5 million, or 5 cents per share, plummeting from $94.8 million, or 47 cents per share, a year earlier. After adjusting for one-time items, the company earned 27 cents per share — a penny above analysts expectations — compared to 55 cents a year earlier.

Total revenue in the holiday quarter fell 7 percent to $1.04 billion from $1.12 billion a year earlier. Sales in stores open at least a year, a gauge known as comparable store sales, fell 7 percent.

For the full fiscal year, the picture didn't look much better. American Eagle’s profit of $83 million, or 43 cents per share, compared to $232 million, or $1.16 per share, for the previous year. On an adjusted basis, earnings per share of 74 cents came in slightly ahead of analysts’ projections, but were down from $1.39 the previous year..

Sales fell 5 percent to $3.31 billion from $3.48 billion, as sales in stores open at least a year fell 6 percent.

Since taking over as interim CEO, Mr. Schottenstein said he’s been making sure the company’s various divisions are working together, rather than in silos. He said the stores and merchandise didn't look the way they should have last year.

“Our biggest job the last two months is to make sure that everybody’s speaking the same language and everyone’s on the right page and that we have our merchants’ touch involved,” Mr. Schottenstein said. “We've gotten away from having our merchants’ touch on the product.”

Several mall-based teen retailers have performed sluggishly of late, including Abercrombie & Fitch and Aeropostale. Jefferies analyst Randal J. Konik said in a report to investors after Tuesday’s conference call that American Eagle remains the best risk/reward bet in teen retail, even though it could take a quarter or two to find a new chief executive.

The sector is struggling with various issues, including how much shopping will be done in traditional stores vs. digitally through computers and smartphones. American Eagle noted that it has a growing number of stores on short-term leases, which will allow it to adapt as the market evolves.

The role of so-called fast fashion — fashion that capitalizes quickly on trends and gets into stores within weeks — is also up for debate. Mr. Markfield said American Eagle’s strength in jeans gives it a framework to build on as it moves more quickly to chase trends with its tops. And, he said, it has an advantage in having the space and ability to show customers how to create great outfits rather than just filling stores with racks packed with goods.

“Everyone talks about the fast-fashion guys. I remember the old fast-fashion guys — the 5-7-9s, the Chess Kings, the Foxmoors. I don’t see them around anymore, but a lifestyle brand is an indelible brand.”

American Eagle shares closed at $13.10, down $1.11.

Teresa F. Lindeman: or at 412-263-2018.

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