American Eagle Same-Store Sales Growth Disappoints --update
November 30 2016 - 1:03PM
Dow Jones News
By Khadeeja Safdar and Austen Hufford
American Eagle Outfitters Inc.'s sales suffered in the third
quarter as shoppers were distracted by going-out-of-business sales
being offered by one of its closest rivals.
The teen retailer said rival Aéropostale Inc.'s store closings
and liquidation sales "clearly had an impact on traffic."
Same-store sales at American Eagle locations near the distressed
retailer's shops fell 2% to 4% from a year earlier.
Aéropostale has been closing stores since filing for chapter 11
bankruptcy protection in the spring. In September, a consortium
that includes mall landlords General Growth Properties Inc. and
Simon Property Group struck a rescue deal that would keep open
several hundred Aéropostale stores. However, the chain has
continued to push liquidation sales, including 70% discounts during
Black Friday, the day after Thanksgiving.
On a conference call Wednesday, American Eagle CEO Jay
Schottenstein said the discounting should normalize when
Aéropostale locations reopen with new inventory. "They'll have to
merchandise it just like they did the way before," he said. "What's
going to be different? Well, only time will tell."
American Eagle posted 2% overall comparable sales growth in the
quarter ended Oct. 29, below the 2.9% that analysts polled by
Thomson Reuters were expecting. At its namesake brand, comparable
sales inched up 0.4%, while at its lingerie brand, Aerie, sales
increased 21%.
Earlier this month, Abercrombie & Fitch Co. posted its third
straight quarter of declining same-store sales amid rebranding
efforts. The retailer cleared inventory through unplanned
promotions after trying to hold the line on discounts in previous
quarters.
Analysts at Jefferies said American Eagle's results were
pressured by both liquidation sales at Aéropostale and higher
promotions at Abercrombie, but the analysts expect the traffic
declines caused by Aéropostale liquidations to ease after the
holidays.
Executives also cited softness in the men's business, which
declined from a year ago. "While I was disappointed with the
performance, I'm working hard with the team to make improvements,"
said Mr. Schottenstein.
Shares dropped 14% to $16.28 in Wednesday afternoon trading as
the company released profit guidance that was below
expectations.
American Eagle expects a fourth-quarter profit between 37 cents
to 39 cents a share, below the 45 cents anticipated by analysts.
Comparable stores sales are expected to be between flat and growing
in the low single digits.
Mr. Schottenstein, the company's longtime chairman, retook the
helm of the retailer in 2014. Recently, the company appointed a new
chief financial officer and named its first chief technology
officer.
For the third quarter, American Eagle reported profit of $75.8
million, or 41 cents a share, compared with a profit of $74.1
million, or 38 cents a share, a year prior. Revenue rose 2.3% to
$940.6 million.
The company said it has flexibility to close underperforming
stores as a result of 500 leases coming up for renewal during the
next three years. At quarter's end, the company had 1,052 total
stores.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
November 30, 2016 12:48 ET (17:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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