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Hot Topic, Buckle See Gains as AEO Net Declines

Going against the grain of many youth-oriented retailers, The Buckle and Hot Topic report 4Q earnings that exceeded year-ago levels.

Hot Topic in the Westfield Topanga shopping center in Woodland Hills, Calif.

Going against the grain of many youth-oriented retailers, The Buckle Inc. and Hot Topic Inc. reported fourth-quarter earnings that exceeded both year-ago levels and analysts’ estimates.

However, American Eagle Outfitters Inc., the largest of the three specialty chains to post results on Wednesday, said lackluster fashion and a weak women’s business contributed to a 76.7 percent fall in its profits for the final quarter of the fiscal year.

 

AMERICAN EAGLE

Net income in the quarter ended Jan. 31 was $32.7 million, or 16 cents a diluted share, compared with $140.5 million, or 66 cents a share, in the year-ago period. Excluding one-time items and charges, the retailer recorded earnings per share of 19 cents.

Net sales slid 9 percent, to $900.7 million from $995.4 million, and were off 16 percent on a comparable-store basis.

“As a company, we cannot accept the substandard performance, recession or not,” said chief executive officer Jim O’Donnell on the company earnings call. “We know what is necessary to succeed, which is first and foremost strengthening in the AE women’s business. We know that our customer responds when we have the right fashion at the right price.”

Stifel Nicolaus retail analyst Richard Jaffe concurred with the ceo’s assessment: “Despite the difficult environment, customers have shown that they are willing to spend if the fashion is right.”

Acknowledging this need, the company in January brought back Roger Markfield as vice chairman and executive creative director, and his impact is expected to be seen in back-to-school assortments. Additionally, the retailer has more planned promotions, like its February event when jeans were under $30, which are preferred to unplanned markdowns that cannibalize the company’s margins.

Fourth-quarter capital expenditures were $39 million, down from $60 million in the year-ago period. This year, they will be reduced to $110 million to $135 million from $265 million.

In 2008, the Pittsburgh-based firm had a 55.2 percent drop in earnings, to $179.1 million, or 86 cents a share, from $400 million, or $1.82 a share in 2007. Revenue shrank 2.2 percent to $2.99 billion from $3.06 billion.

First-quarter EPS is expected to come in between 4 and 7 cents a share. Analysts expected 6 cents a share.

THE BUCKLE

The Buckle Inc.’s fourth-quarter profits jumped 18.2 percent, besting analysts’ estimates by 2 cents, as the retailer was able to further increase sales and price points in both its men’s and women’s businesses.

The Kearney, Neb.-based retailer’s net income jumped to $34.3 million, or 74 cents a share, from $29.1 million, or 63 cents a share, in last year’s period. Excluding a charge of 5 cents a share related to the declining value of some investments, profit was 79 cents a share.

Revenue grew 21.5 percent to $251.4 million from $207 million as quarterly comps jumped 14.3 percent.

Buckle said its men’s business, down to 44.5 percent of the total from 47.5 percent a year ago, increased about 13.5 percent for the quarter, led by denim, woven knit shirts and outerwear. Average price points increased 12 percent to $53.30. Buckle’s women’s business was up about 28 percent for the quarter, led by denim, knit tops, outerwear, accessories and footwear, and accounted for 55.5 percent of sales, versus 52.5 percent a year earlier. Price points increased 5.5 percent, to $44.65.

Buckle’s net income rose 38.8 percent for the year, to $104.4 million, or $2.24 a share, from $75.2 million, or $1.63 a share, in the prior-year period. Sales increased 27.8 percent to $792 million from $619.9 million. Annual comps were up 20.6 percent.

The company said it plans seven new stores in the spring, eight stores for back-to-school and six for the holiday season.

HOT TOPIC

Rock-inspired retailer Hot Topic Inc. registered a 19.2 percent bump in fourth-quarter profits, to $14.2 million, or 32 cents a diluted share, from $11.8 million, or 27 cents a share, a year earlier.

Revenue was up 7.8 percent, to $238 million from $220.7 million, as same-store sales grew 5.2 percent. Sales at the company’s namesake division were up 8.2 percent to $198.7 million, while revenues at Torrid, the company’s plus-size women’s concept, rose 5.8 percent to $39.3 million. Comps rose 6.5 percent at Hot Topic but fell 2.7 percent at Torrid.

On the company conference call, ceo Betsy McLaughlin said that at Hot Topic accessories comps were up 15 percent and fashion accessories up in the midteens. “The women’s category comped up 15 percent, [while the] men’s category comped up 4 percent,” she said.

Earnings climbed 23.3 percent for the year, to $19.7 million, or 45 cents a share, from $16 million, or 36 cents a share, in 2007. Net sales rose 4.5 percent to $761.1 million from $728.1 million. Comps were up 1 percent, led by a 12.1 percent comp increase by Torrid.

The City of Industry, Calif.-based firm said it expects a net loss of 1 cent to net earnings of 1 cent based on a comp increase in the midsingle-digit range. The company said quarterly revenues should be between $168 million and $172 million. Analysts had predicted flat earnings on sales of $168.1 million.