Clothing store American Eagle Outfitters Inc. on Wednesday posted a 66 percent drop in its second-quarter net income as it was forced to slash prices on summer items and issued a weak forecast for the current back-to-school quarter.
"The second quarter was a challenging period, resulting in a miss to our sales and profit plans," CEO Jim O'Donnell said in a statement. "Given the inconsistencies in business trends and unpredictable consumer behavior, we have intensified our actions to improve efficiencies, streamline our process and strengthen profitability."
For the three months ended in late July the teen retailer earned $9.7 million, or 5 cents per share. That's down from last year's net income of $28.6 million, or 14 cents per share. Excluding one-time costs related to closing its 28 Martin+Osa stores, American Eagle would have earned 13 cents per share.
Revenue inched up to $651.5 million from $646.8 million last year, while sales at locations open at least a year fell 1 percent. Revenue from locations open at least a year is a key indicator of a retailer's health because it excludes stores that open or close during the year.
Analysts surveyed by Thomson Reuters had expected the company to earn 13 cents per share on slightly higher revenue of $655 million.
For the third quarter, American Eagle said it expects to post earnings from continued operations of 23 cents per share to 26 cents per share. Last year, it earned 32 cents per share on the same basis.
Analysts expect the company to earn 26 cents per share for the quarter that includes back-to-school shopping.
The retailer said that so far, August sales at established stores are up about 1 percent, consistent with the company's back-to-school plan. American Eagle expects same-store sales to be flat to down in the low single-digits for the third quarter.
American Eagle, based in Pittsburgh, has 935 stores in the U.S. and Canada. Its shares fell 14 cents, or 1.1 percent, to $12.49 in premarket trading Wednesday.
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