AMERICAN EAGLE SEES PERIOD NET BELOW ESTIMATE

Byline: Vicki M. Young

NEW YORK — American Eagle Outfitters expects to hit some turbulence.
The company’s first-quarter earnings will be less than the consensus of 31 cents per share that Wall Street analysts had been expecting.
The specialty retail chain said it expected first-quarter earnings to be between 26 cents and 28 cents. Earnings for the 1999 quarter came to 25 cents per share.
The company attributed the shortfall from Wall Street estimates to unseasonably cold weather throughout the period and the underperformance of certain categories, such as its dress business.
Shares of American Eagle on Friday closed at 17, down 2 5/16, on the New York Stock Exchange, plunging through its 52-week low of 18 5/8. Its high was 58 1/2, reached last October.
Part of its problem is the crowd it hangs out with: Other retailers in the same sector, like Abercrombie & Fitch, have been hurt in recent months. However, the news that American Eagle will miss its consensus is just more cold water from a retailer that had been hot over the past year.
But George Kolber, vice chairman and chief operating officer, said in a phone interview with WWD on Friday, “Our fundamentals are good. We had abnormal cold weather, and the [sales] flow is different from school to school.”
Kolber was referring to the periods when schools close for spring break.
“Some schools were closed last week, others were closed this week,” Kolber explained. American Eagle targets consumers between ages 14 and 30, with many of its core customers attending high schools and colleges throughout the U.S.
The operating chief expects top sellers in the summer to include tanks, swimsuits and T-shirts.
By the end of last week, at least three investment firms downgraded the specialty retailer because of its earnings projection. Deutsche Banc Alex. Brown’s downgrade on Friday was to “buy” from “strong buy,” while Robinson Humphrey moved the stock to “outperform” from “buy.” Bear Stearns on Thursday downgraded the stock to “neutral” from “attractive.”
Kolber, however, characterizes the latest dip as just temporary.
“The economy is still good and our customer has money to spend,” he said.
Kolber also doesn’t see an impact on American Eagle’s business from rising fuel costs.
“I’ve heard about concerns that people would rather put gas in their tank than clothes on their back,” he said. “But I’ve seen that gasoline prices have started coming down.”
Kolber isn’t even fazed by the buzz in the financial community that interest rates would go higher, along with the rate of inflation perhaps increasing.
“We benefit [when that happens], given our price points as affordable fashion for high school and college kids. Inflation helps us at the expense of our competitors who have higher-priced merchandise.”
He said that the company is continuing with its scheduled promotions and is still on track to open 90 stores this year. “Our cash flow in the stores is positive in the first year in operation,” Kolber noted.
One area where the company had seen increases in its numbers is the amount of traffic visiting the firm’s Web site.
“We see huge increases from last year. The Internet is an integral part of our business. Because we sell our own brand, our stores help drive people onto our site. We’ve also found that many go to the site to see what’s new and then head to our stores to see and feel the item,” the chief operating officer said.
Gilbert Harrison, chairman of Financo and a member of American Eagle’s board, told WWD Friday, “People underestimate what a retail company is able to do through the Internet. With an e-mail address on every mailer and shopping bag, there’s tremendous leverage in getting the brand out there.”