NEW YORK — Once again in the third quarter, the two Pennsylvania “Outfitters” shared little but a common word in their names.
This story first appeared in the November 14, 2003 issue of WWD. Subscribe Today.
While a “major miss” in its sales plan contributed to a whopping 62.5 percent evaporation of American Eagle Outfitters’ quarterly profits, Urban Outfitters’ income jumped by 75.5 percent.
The Warrendale, Pa.-based retailer, AE, posted income of $10.1 million, or 14 cents a diluted share, for the three months ended Nov. 1. Excluding a noncash goodwill impairment charge of $8 million, or 11 cents, related to the poor performance of the Bluenotes division, income was $18.1 million, or 25 cents. Results came in ahead of management’s guidance, updated last week, of 22 to 24 cents. Last year, it earned $27.1 million, or 37 cents.
Overall sales for the quarter decreased 0.2 percent to $373.8 million from $374 million, including $22.8 million from the Bluenotes/Thriftys operation. Comparable-store sales declined 10.3 percent, with AE stores down 10.4 percent.
“Misses in merchandise have been a major issue for our company,” James O’Donnell, chief executive, said on a conference call. “It is absolutely critical to our future success that we improve in this area.”
The company, which runs 911 stores, including 736 AE stores, detailed a revised merchandising strategy for 2004 aimed at the 15- to 25-year-old high school and college consumer, with Roger Markfield, president of the American Eagle division, heading up the merchandising and marketing processes.
“Nobody here is pleased by our recent performance,” Markfield said. “We are taking a very hard look at our merchandising process and structure and making significant changes.”
Those include elimination of redundant operations, the earlier setting of merchandise direction, the rebuilding of underperforming categories and a reduction in the number of floor sets.
On Thursday, the company appointed Michael Leedy to the new post of executive vice president of strategic planning, reporting to O’Donnell. Nordstrom veteran Michael Tam has joined the company to succeed Leedy as executive vice president of marketing, reporting to Markfield.
AE also cautioned investors that it will come to a decision about the troubled Bluenotes division in 2004. It also said it plans to slow square footage expansion for 2004 to between 8 and 9 percent, versus the 10 percent planned in 2003, assuming 45 to 50 new stores.
Laura Weil, chief financial officer, said she is encouraged by the recent pickup in business, with comps down in the low-single digits, well above October’s whopping 18.7 percent nosedive. However, AE didn’t provide earnings or sales guidance for the fourth quarter, saying it is early in the season.
For the nine months, income fell back 50.6 percent to $24.6 million, or 34 cents a share, compared with income of $49.9 million, or 68 cents, in the like period last year. Year-to-date sales for the period rose 3.2 percent to $1 billion from $971.6 million, while comps declined 7.6 percent, with AE down 7.4 percent.
On the other side of the state, Philadelphia-based UO said for the three months ended Oct. 31, income rose 75.5 percent to $14.1 million, or 35 cents a diluted share, 4 cents ahead of the most recent consensus estimate by analysts. That compares with income of $8 million, or 20 cents, in the same period last year.
Sales escalated 29.3 percent to $142.3 million over $110.1 million and 17 percent on a same-store sales basis. By division, comps rose 15 percent at Urban Outfitters Retail and 19 percent at Anthropologie. Direct-to-consumer sales rose 48 percent.
Richard Hayne, chairman and president, said on a call that the sales momentum in the quarter was driven by four new stores, solid comp growth generated by full-price sales and a slight increase in the average unit retail price.
Hayne said the company, which operates 106 stores, including 58 UO and 47 Anthropologie units, should continue to deliver a 20 percent compounded annual sales growth rate, even if current trends slow periodically. He said he believes the UO brand can support 150 stores and Anthropologie can grow to 200 stores.
For the nine months, income shot up 57.3 percent to $29.9 million, or 75 cents a diluted share, compared with income of $19 million, or 50 cents. Sales vaulted 22 percent to $372.2 million from $305.2 million.