Propelled by a 20.4 percent sales increase, American Eagle Outfitters Inc. beat Wall Street profit estimates by a penny while Abercrombie & Fitch Inc. raced past estimates on a 35.1 percent sales gain.
NEW YORK — Propelled by a 20.4 percent sales increase, American Eagle Outfitters Inc. beat Wall Street profit estimates by a penny while Abercrombie & Fitch Inc. raced past estimates on a 35.1 percent sales gain.
American Eagle said third-quarter profits jumped 27 percent as revenues were propelled by an increase in average store transactions. The company also said it has found a partner in Japan to begin its first expansion outside of North America and that it plans to launch an intimates subbrand targeted at core American Eagle customers.
In the three months ended Oct. 29, net earnings rose to $73.3 million, or 47 cents a share, from $ 57.9 million, or 38 cents, in the year-ago period. Analysts had been expecting a profit of 46 cents in the most recent quarter. Third-quarter net sales climbed to $577.7 million from $479.6 million a year ago, while same-store sales rose 13.6 percent.
Gross profit margin, however, declined to 46.6 as a percent of sales, from 48.8 percent last year. The firm cited lower merchandise margin, which was offset by the leveraging of rent expense.
In the nine months, American Eagle earned $186.6 million, or $1.19, up 66 percent from $112.4 million, or 75 cents, last year on revenues that jumped 28 percent to $1.5 billion.
Susan McGalla, chief merchandising officer, said on a conference call with analysts that women's knit tops, graphic Ts, denim, pants and intimates performed well during the fall back-to-school quarter, while blazers and woven shirts underperformed.
Regarding international expansion, Jim O'Donnell, chief executive officer, said on the call that the company has "signed a memorandum of understanding to open stores in Japan" with an unnamed business partner.
He said American Eagle will have "majority control over the agreement" and "all of the say as it relates to how we do business and our brand presentation, product assortment and so forth."
O'Donnell also said expansion of the specialty retailer's intimates business is "another significant opportunity" and that the company is "poised to launch intimates as a subbrand" targeted at American Eagle customers. He said the company is testing a "side-by-side format" that will place intimate stores adjacent to American Eagle stores. The company plans to open a total of 40 to 50 new American Eagle-branded stores in the next three to five years.Regarding earnings and sales momentum at American Eagle, Wall Street analysts who follow the company are worried that its growth could start to level off next year, especially as it spends money to launch Martin + Osa and explore an international presence. They are also concerned the company could max out on its operating and merchandise margins.
"Although American Eagle has demonstrated notable merchandising improvements over the past two to three years and demonstrated increased efficiencies, new concepts always pose risk," John Morris, an analyst at Harris Nesbitt, wrote in a Tuesday research report.
In the holiday fourth quarter, Warrendale, Pa.-based American Eagle said its earnings-per-share guidance is for 73 cents to 75 cents, below the consensus estimate for 76 cents. Shares of American Eagle lost 4.7 percent in Tuesday trading, closing at $23.21 on the Nasdaq.
At Abercrombie & Fitch, third-quarter earnings nearly doubled to $71.6 million, or 79 cents a diluted share, versus $39.9 million, or 42 cents, a year ago.
Excluding non-recurring charges, the company would have earned 88 cents in the most recent third quarter, versus 64 cents in the year-ago period. On this basis, analysts had been expecting a profit of 80 cents.
Total revenues increased 35.1 percent to $701.9 million, while consolidated same-store sales jumped 25 percent, led by a 62 percent surge in same-store sales at the Abercrombie kids' division.
Year to date, net earnings gained 51 percent to $169.4 million, or $1.87, from $112.1 million, or $1.16, in the same period last year. Revenues advanced 36.7 percent to $1.82 billion.
Abercrombie said its first international location will open in Canada late next year, while its first European location will open in London in early 2007.
The company upped its full-year 2005 EPS estimate to $3.44 to $3.49, excluding non-recurring items, from a prior estimate for $3.10 to $3.30; analysts' consensus is for $3.30.
Shares of the company closed down 4.4 percent at $56.91 in Tuesday's New York Stock Exchange session.
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)
Breaking News: @hedislimane joins @celine as its new artistic, creative and image director. One of fashion’s preeminent image-makers and trendsetters, Slimane is to join the LVMH brand on Feb. 1 and unveil his first fashion proposition for men and women next September during Paris Fashion Week. It marks a major homecoming for Slimane, who cemented his reputation – and influenced men’s tailoring for more than a decade – as the designer of Dior Homme between 2000 and 2007. He went on to reinvent and ignite the house of Yves Saint Laurent, which he rechristened Saint Laurent, between 2012 and 2016 – all the while maintaining a close relationship with the Arnault family, which controls LVMH and Dior. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
“Personally I believe the Eighties have been the richest and more vivacious period for international fashion,” Giorgio Armani said when asked what his favorite decade of fashion is. It was a moment of disruption and experimentation and only thinking back to the first years of that decade is always an emotion for me, for what they have meant to me and my work.” The influence is clear in @giorgioarmani spring 2018 collection, pictured here, which was full of bright colors and unexpected prints. Read more about which decades designers loved most on WWD.com #wwdfashion #wwddecades (📷: @aitorrosasphoto)
For Lady Gaga’s only Italian show on her “Joanne World Tour,” the singer wore a range of @versace_official outfits. The standout piece: this custom-made bodysuit inspired by the brand’s spring 2018 collection. #wwdfashion (RG: @ladygaga)
@_camillaruth_ is expanding on the wellness-craze concept with @westbourne – a new NYC restaurant that’s both a healthy-minded café as well as a business that gives back to the community. Marcus works with the Robin Hood foundation to give back to The Door, a non-profit providing youth development services, and also hires employees through The Door. Read our full interview with Marcus on giving back through food on WWD.com. #wwdeye (📷: @lexieblacklock)