American Eagle Outfitters Inc. met its revised third-quarter guidance from last month for adjusted diluted earnings per share, but its profits still fell 63.7 percent.
For the three months ended Nov. 1, net income dropped to $9 million, or 5 cents a diluted share, from $24.9 million, or 13 cents a year ago. Excluding restructuring and asset impairment charges, adjusted diluted EPS was 22 cents compared with 19 cents, on an adjusted basis, a year ago. Net sales were essentially flat, down 0.4 percent to $854.3 million from $857.3 million. Comparable-store sales fell 5 percent on top of a 5 percent decline a year ago.
Jay Schottenstein, interim chief executive officer, said, “We managed the business better and were able to reduce markdown rates and control expenses.”
The company’s gross profit rose 6 percent to $315 million, up 200 basis points to 36.9 percent. Margin improvement was driven primarily by reduced markdowns.
The company said total merchandise inventories at the end of the quarter fell 10 percent to $469 million versus $519 million a year ago. The retailer also noted that inventories reflect a change to ownership terms completed late last year, when the company began taking ownership at the receiving port, rather than at the port of departure. American Eagle also said fourth-quarter-ending inventories at cost per foot are expected to be up slightly, following a midteen decline a year ago, to reflect an acceleration of spring merchandise receipts due to the West Coast port slowdown.
For the fourth quarter, the company expects EPS to be 30 to 33 cents, compared with adjusted diluted EPS of 27 cents a year ago. That takes into account a slight decline in revenue and a mid-single-digit decline in comps. Guidance excludes potential asset impairment and restructuring charges.
Shares of American Eagle fell 3.8 percent to $13.81 in Big Board trading and then fell 5.9 percent to $13.00 in early after-market trading. The company reported quarterly results after the markets closed.
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