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Outfitters Post Divergent Results

NEW YORK — Pennsylvania’s two retail Outfitters traveled different paths during the first quarter, with Urban Outfitters excelling with differentiated looks for the post-teen and American Eagle Outfitters disappointing with what it deemed...

NEW YORK — Pennsylvania’s two retail Outfitters traveled different paths during the first quarter, with Urban Outfitters excelling with differentiated looks for the post-teen and American Eagle Outfitters disappointing with what it deemed an overassorted spring selection.

This story first appeared in the May 16, 2003 issue of WWD.  Subscribe Today.

At Philadelphia, Pa.-based UO, net income vaulted 34.4 percent to $6.4 million, or 32 cents a diluted share, for the three months ended April 30, versus income of $4.8 million, or 26 cents, in the period last year. Earnings surpassed Wall Street’s average expectations of 29 cents. Overall sales for the quarter leapt 13.8 percent to $107 million over $94.1 million and rose 2 percent on a same-store sales basis. By division, comps improved 5 percent at Urban Retail stores, but were down 2 percent at Anthropologie. Direct-to-consumer sales jumped 35 percent.

Calling the quarter “outstanding,” Richard?Hayne, chairman and president of UO, said, “Our strategic strength of creating a differentiated and compelling shopping environment combined with our ability to predict customer demand for products once again helped us to overcome the difficulties we faced this quarter.”

Regarding Anthropologie’s comp decline, Hayne said the store converted to spring merchandise earlier than last year and, beset with colder weather, struggled in the beginning of the period. However, he said, as the weather warmed toward the end of quarter, its comps improved “remarkably.” In addition, the unit had the high hurdle of a 27 percent comp increase in the year-ago quarter.

The company said May sales are running modestly ahead of its plans for a low-single-digit increase. It also said it expects earnings to grow by at least 20 percent for the year and sales to increase by 20 percent.

“Despite significant obstacles, we continue to grow comps and produced record first-quarter sales and earnings and grew earnings faster than sales as gross margins grew significantly,” Hayne said.

On the other hand, Warrdendale, Pa.-based AE reported income plunged 49.7 percent to $6.4 million, or 9 cents a diluted share, at the high end of its previously lowered guidance, for the three months ended May 3. In last year’s quarter, AE reported income of $12.7 million, or 17 cents. Overall sales for the quarter rose 5 percent to $291.9 million over $277.9 million, including $15.8 million from the Bluenotes/Thriftys chain. Total comps declined 6.5 percent, with AE down 5.8 percent and Bluenotes down 15.3 percent. Women’s and men’s were both below plan at the AE unit, with women’s down by low-single digits and men’s by low-double digits. The gross margin rate declined 330 basis points.

“We aren’t at all pleased with our financial results,” Roger?Markfield,?president and co-chief executive, said. “Our spring assortment was fashion-right from a merchandise and trend standpoint. However, we carried too much inventory for what ended up to be a very challenging retail environment.”

In reaction, Markfield said the retailer, which operates 702 stores, will tighten inventories for the back half of the year. He said the back-to-school and fall assortments will be better focused and more narrow in scope than those of spring, and the color palette will be clearer and cleaner.

Regarding women’s merchandise, Markfield said although spring fashion overall was on trend with romantic military being the dominant theme, he said the women’s assortment was too broad, particularly in the tops category. The firm, he noted, went after high-fashion secondary looks too aggressively and the color range was too wide. “We ended up being more promotional, causing a decline in the average unit retail,” Markfield said.

The firm declined to comment on second-quarter guidance, saying it believed “visibility is limited.” It also said May trends are tracking slightly down, an improvement over recent results.

While the firm’s quarterly performances varied, both advanced in Nasdaq trading Thursday. American Eagle shares rose 56 cents, or 3.7 percent, to close at $15.91 while UO’s tacked on 97 cents, or 3 percent, to end the day’s session at $33.27.