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American Eagle Closing Martin + Osa

Unit, with 28 stores and online business, lost $44M last year.

American Eagle Outfitters INC. said Tuesday that its money-losing Martin + Osa retail concept is shutting down.

This story first appeared in the March 10, 2010 issue of WWD.  Subscribe Today.

The company said “after an extensive evaluation and review of strategic alternatives” the 28 stores and online business are expected to be substantially closed by the end of the second quarter.

“Closing Martin + Osa was a difficult decision, particularly in light of the progress that was made over the past year,” said Jim O’Donnell, chief executive officer. “However, it is in the best interest of our company and stakeholders to focus our efforts on the brands that capitalize on our strengths and have the highest potential. Creating new brands is never an easy endeavor. The valuable lessons and experiences we gained will serve us well, as we continue to develop and launch new lifestyle brands.”

The Pittsburgh-based retailer said it plans to focus on its American Eagle, aerie and 77kids concepts.

Martin + Osa, which offers contemporary apparel and accessories for men and women aged 28 to 40, has failed to gain traction since launching four years ago.

The concept generated an after-tax loss of about $44 million in fiscal 2008, including an estimated noncash impairment charge of $11 million, net of tax.

In December, the company said it was “evaluating” the future of the concept although same-store sales had increased and the bottom line was better. The next month, Martin + Osa president Laura Dubin-Wander departed and was not replaced.

As a result of the closure, the company expects the fiscal 2010 cash outflow, net of associated tax benefits, to be about $10 million to $40 million. This is comprised of pre-tax charges of $32 million to $77 million for severance and lease-related and other charges. In addition, the company estimated $29 million of noncash, pretax impairment charges and inventory writedowns. The charges are expected to be recognized in the first and second quarters.

American Eagle will report its fourth-quarter results today.