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American Eagle Q4 Profits Plummet

Shares dropped 7.8 percent in trading Tuesday after the teen retailer said fourth-quarter profits fell 89 percent.

Shares of American Eagle Outfitters Inc. dropped 7.8 percent to $13.10 in trading Tuesday after the teen retailer said fourth-quarter profits fell 89 percent.

For the three months ended Feb. 1, net income was $10.5 million, or 5 cents a diluted share, from $94.8 million, or 47 cents, a year ago. Total net revenues decreased 6.7 percent to $1.04 billion from $1.12 billion. The company said same-store sales fell 7 percent in the quarter.

Jay Schottenstein, interim chief executive officer, said, “The company’s results in 2013 were highly disappointing. While tough macro conditions have persisted in our retail sector, our merchandise and overall customer experience fell short of expectations. We’re taking steps to bring greater focus and excitement to our product offering and better engage our core customers. Our brands remain incredibly strong, and I’m confident in our ability to execute the strategic plan and resume long-term profitable growth.”

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The company said that business conditions “remain challenging, with severe winter weather contributing to weak demand.” It said that based on a high-single-digit decline in comps, management expects first-quarter earnings per share to be about break-even versus adjusted EPS of 18 cents a year ago. The company’s guidance excludes possible asset impairment and restructuring charges.

For the full year, net income fell 64.2 percent to $83 million, or 43 cents a diluted share, from $232.1 million, or $1.19, in the prior year. The earlier year included a 16-cent loss from discontinued operations. Revenues slid 4.9 percent to $3.31 billion from $3.48 billion. Gross margin fell to 33.7 percent of sales from 40 percent in 2012.

Year-end inventory fell 12.3 percent to $291.5 million from $332.5 million.