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Specialty Retailers’ Earnings, Sales Soar

NEW YORK — Urban hip, suburban prep or fashion-forward contemporary woman — regardless of style, specialty retailers Urban Outfitters Inc., American Eagle Outfitters Inc. and Bebe Stores Inc. struck on hot product assortments for spring...

NEW YORK — Urban hip, suburban prep or fashion-forward contemporary woman — regardless of style, specialty retailers Urban Outfitters Inc., American Eagle Outfitters Inc. and Bebe Stores Inc. struck on hot product assortments for spring and early summer, sending sales and earnings soaring.

Pennsylvania-based teen retailers American Eagle and Urban Outfitters had similar results for the second quarter, with both companies posting double-digit sales gains for the quarter and six-month periods, translating into triple-digit increases in earnings for both.

For American Eagle, rising sales and dramatically reduced costs ignited earnings. For the three months ended July 31, earnings rocketed 265.5 percent to $29.6 million, or 40 cents a diluted share, besting Wall Street’s consensus estimate of 38 cents a share. Comparatively, the company reported earnings of $8.1 million, or 11 cents a share, in the same period a year ago.

Sales rose 22.8 percent to $413.8 million from $337.1 million, with a 12.7 percent gain in comparable-store sales for the quarter.

“Our merchandise assortments are fashion-ripe and are perfectly geared to our 15- to 25-year-old target customer,” said James O’Donnell, chief executive officer of AE, during the company conference call. “We continue to have focus assortments with brand-defining key items that have been driving the significant improvement of our business.”

In contrast to Abercrombie & Fitch, whose executives said the retailer is missing out on potential sales during the quarter due to a lack of denim offerings, AE’s denim lines have been hot across the board.

“The cornerstone of the line is denim, which is and has been quite strong for us in both men’s and women’s,” said Roger Markfield, president of AE, during the call. “It has been a strategic goal of the company to be the very best in denim with the best styles, fit, quality and value for our target customer.”

Further fueling profits was a drastic reduction in costs. Cost of sales plunged 670 basis points to $249.5 million, or 60.3 percent of sales, compared with costs of $225.9 million, or 67 percent of sales, in the year-ago period.

Results were even greater for the first six months, with earnings exploding 277.3 percent to $54.7 million, or 74 cents a diluted share, compared with earnings of $14.5 million, or 20 cents, in the same period a year ago.

This story first appeared in the August 13, 2004 issue of WWD.  Subscribe Today.

Philadelphia-based Urban Outfitters saw earnings vault 116.6 percent to $20.5 million, or 25 cents a diluted share, also beating Wall Street’s consensus estimate of 23 cents a share. In the same period a year ago the company recorded earnings of $9.5 million, or 12 cents a share.

Sales rose 54.2 percent to $189.5 million from $122.9 million, with overall comps rising 26 percent. Urban stores led sales with a 49.5 percent increase to $90.8 million, while Anthropologie posted a 54.1 percent rise to $73.8 million. The company’s direct-to-consumer segment posted a 99.6 percent gain to reach $18.4 million in sales.

“Once again, the apparel and accessory categories were the strongest performers, but all categories were nicely positive,” said Richard A. Hayne, chairman and president of Urban Outfitters, during the company conference call.

For the six-month period, earnings spiked 135.7 percent to $37.4 million, or 45 cents a share, against earnings of $15.9 million, or 20 cents, in the corresponding period a year ago.

Sales jumped 56.5 percent to $359.8 million from $229.9 million. Urban stores, again, led sales with a 50.1 percent increase to $169.4 million. The direct segment advanced 97.4 percent to $37 million compared with sales of $18.7 million last year.

While targeting a decidedly different customer base, Bebe found success in much the same manner — namely through higher sales and lower costs. Second-quarter earnings for the Brisbane, Calif.-based specialty retailer soared 157.6 percent to $8.4 million, or 21 cents a diluted share, overreaching Wall Street’s consensus estimate of 18 cents a share. Comparatively, earnings for the corresponding period a year ago came in at $3.3 million, or 8 cents a share.

Cost of sales sank 530 basis points to $49.3 million, or 53 percent of sales, against costs of $46.7 million, or 58.3 percent of sales, in the year-ago period.

For Greg Scott, who was appointed ceo of Bebe six months ago, the future of the company lies in developing new denim and accessories lines. “We’ve introduced branded fashion denim this July and we’ve seen amazing response from our customer,” Scott told analysts on the company conference call. Scott went on to say that the company will introduce new accessories to the market in September. The company also has hired a handbag designer, the results of which are expected to be seen in January.

Bebe finished up the year with earnings rising 75.2 percent to $33.8 million, or 85 cents a share, compared with earnings of $19.3 million, or 50 cents, in the year-ago period.

Sales advanced 15.1 percent to $372.3 million from $323.5 million.