NEW YORK — Weak mall traffic and promotional pressures pushed American Eagle Outfitters’ third-quarter profits down 11.7 percent.
The Warrendale, Pa.-based specialty retailer said for the three months ended Nov. 2, net income was knocked down to $27.1 million, or 37 cents a diluted share, from $30.7 million, or 42 cents, in the same quarter last year. Earnings exceeded AE’s and Wall Street’s already lowered guidance.
Total consolidated sales for the third quarter rose 3 percent to $374.5 million, from $363.7 million in last year’s quarter, and comparable-store sales, including Canadian units, dropped 7 percent.
The company said the negative comps were attributable to a decline in its average unit retail price, which dropped just over 10 percent in the quarter. Deflation was offset by increases in transactions per average store and units sold per average store and per transaction.
"Our third-quarter results were below our expectations," Roger Markfield, AE’s president and chief merchandising officer, acknowledged on a morning conference call. "It was a challenging environment with heavy promotions in certain categories and very spotty mall traffic in a highly competitive marketplace."
There was one notable exception: "Our women’s fashion was right on, enabling us to achieve a positive low-single-digit comp," Markfield said, citing strength in denim, skirts, graphic T-shirts, accessories and underwear. He also said he is seeing solid results in sweaters, which are producing double-digit comp gains.
On the other hand, he said the men’s business, plagued by a lack of a clear and compelling fashion trends, comped down in the low double-digits. Men’s denim, however, had double-digit comp gains. Markfield said the division is improving and said he believes the momentum will increase with the start of holiday shopping. He declined to say if the trend meant the men’s division was now comping positively.
"We have become a denim destination store and we will continue to have a meaningful denim assortment all year long," Markfield declared.
He said he believes "this Christmas we will get more than our fair share of the holiday spending in our segment of the market." He said he is comfortable AE will be fully in stock in all key holiday items before the Thanksgiving weekend."The merchandise is fashion right and we are perceived more and more as the gift-giving brand," he said, adding that early feedback on the holiday line has been positive.
Laura Weil, chief financial officer, said the later Thanksgiving this year — causing six fewer shopping days — will likely impact that month’s comps 3 to 4 percentage points, but said looking at November and December combined, the effect will be minimal. Comps for November are expected to be flat to down in the single digits, with December faring better.
For the first nine months , income fell 19 percent to $49.9 million, or 68 cents a diluted share, versus income of $61.6 million, or 83 cents. Total sales increased 7.1 percent to 971.6 million from $907.6 million. Comps for the AE stores receded 5 percent and were down 6.2 percent on a consolidated basis.
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