NEW YORK — The hottest specialty apparel retailers got even hotter in the first quarter, despite concerns over poor weather and the Easter holiday calendar shift.
As American Eagle Outfitters Inc. more than doubled its quarterly profits, Urban Outfitters Inc. came in with a 62.7 percent surge in net earnings and Pacific Sunwear of California posted a 17.6 percent quarterly profit increase.
Thanks to full-price selling of trend-right denim, pants, knit tops, shorts and accessories, American Eagle said net earnings jumped to $55.3 million, or 35 cents a diluted share — beating both its own and analysts' expectations by a penny — from $25.3 million, or 17 cents, in the year-earlier quarter. Net revenues in the period ended April 30 popped 36.7 percent to $454 million, while same-store sales increased 27.1 percent.
"We continued to remain focused on the disciplines of the business, such as strong merchandise assortments which continue to drive our positive comps, translating into the reduction in markdowns compared to last year," said Jim O'Donnell, chief executive officer of American Eagle, in a post-earnings conference call. Gross profits as a percent of sales expanded 420 basis points to 48.9 percent from 44.7 percent last year.
"American Eagle delivered another outstanding quarter, reflecting the best fashion-value equation it its space," Lazard Capital Markets analyst Todd Slater wrote in a Thursday research report.
Shares of the retailer nevertheless ended Thursday trading down 6.2 percent at $26.44 on New York Stock Exchange as investors questioned whether the company can maintain the earnings acceleration it has seen over the past year.
O'Donnell, however, said on the call that "future growth prospects" are a "top priority" for the company, yet he remained mum on the company's new concept, which is still expected to launch in the fall of 2006.
American Eagle announced plans for a new concept in November. Analysts suspect that it will cater to an audience slightly older than the company's core 15-to-25 age group.
The company forecast second-quarter earnings to be 32 cents to 33 cents a share, ahead of analysts' expectation for 31 cents. American Eagle plans to open 42 stores this year, and remodel 50 to 55.Urban Outfitters, meanwhile, posted net earnings in the first quarter ended April 30 that totaled $27.4 million, or 32 cents a diluted share, ahead of the Wall Street consensus for earnings of 30 cents. The quarter's results compared with a profit of $16.9 million, or 20 cents, in the year-ago period.
Total revenues were $231.3 million, an increase of 35.8 percent from $170.3 million in the first quarter of 2004. By division, sales at Urban Outfitters stores rose 32.5 percent to $104.1 million, while sales at Anthropologie swelled 31.1 percent to $87.3 million. Direct-to-consumer sales increased 54.4 percent to $28.7 million, and sales at the company's largely wholesale operation, Free People, were $11.2 million, up 70.8 percent.
Consolidated comparable-store sales rose 11 percent during the quarter, made up of a 9 percent rise at Anthropologie stores, a 45 percent comp increase at Free People locations and a 13 percent rise at Urban Outfitters.
"The company's success and its competitive advantage are derived from our ability to build strong, emotionally compelling brands," said Richard Hayne, chairman and president of Urban Outfitters, on a conference call.
In order to get closer to its customers' needs, Glen Senk, president of Anthropologie, said on the call that the division will be testing during the second quarter a by-appointment stylist program in about a dozen stores because "customers need help putting outfits together or putting rooms together."
Shares of Urban Outfitters added 4.1 percent to $49.74 in Thursday's Nasdaq session.
Finally, thanks to strict inventory and expense management, Pacific Sunwear increased its quarterly earnings to $17.6 million, or 23 cents a share, matching analysts' estimates. Comparatively, the company had a profit of $15 million, or 19 cents, in the first quarter of 2004.
The company, which added $100 million to its current share repurchase program on Thursday, said net revenues were up 14 percent at $280 million, while consolidated same-store sales increased 3 percent.
Shares of Pacific Sunwear closed Thursday Nasdaq trading down 4.8 percent at $20.35.
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