American Eagle Outfitters Q4 profit rises, plans to close Martin+Osa brand
Pittsburgh American Eagle Outfitters on Wednesday said its fiscal fourth-quarter profit rose 81% as demand for its teen clothing and accessories improved.
Profit for the three months ended Jan. 30 rose to $59.3 million, from $32.7 million in the same period last year.
American Eagle said late Tuesday it would close the underperforming Martin+Osa adult-focused brand. The line was comprised of 28 stores and a Web site. Analysts said the line had become a distraction.
BMO Capital Markets analyst John Morris said the move to close Martin+Osa was a “major positive” since the line was “a sizable drag” on the company’s results, generating an after-tax loss of $44 million in 2009.
Meanwhile, American Eagle Outfitters reported that its quarterly revenue rose 7% to $972 million from $905.7 million. Same-store sales rose 5% during the quarter.
For the full year, profit fell 6% to $169 million from $179.1 million in 2008. Revenue was nearly flat at $2.99 billion.
American Eagle benefited during the recession, taking market share from higher-priced rivals such as Abercrombie & Fitch as consumers traded down to its lower-price offerings.
CFO Joan Hilson said the company plans to improve its margins each quarter by having higher sales and focusing on new concepts like its 77kids stores aimed at young children and its aerie intimates and sleepwear lines.
A perfect storm for shoplifters
Retailers are fortunate the majority of customers are honest and choose to pay for the items they need and want. However, even the most well intentioned shoppers can succumb to the allure of theft when their moral compass is exposed to the polarizing forces of a recessionary economy and a retail environment where the perceived risk of apprehension is low due to thinly staffed stores. As a result, retail theft characterized as amateur or opportunistic is on the rise, according to 78% of retailers responding to a survey conducted by the Retail Industry Leaders Association (RILA). While amateur and opportunistic thieves are more active, all types of theft have increased, with 74% of retailers reporting seeing an increase of stolen items found in online marketplaces, and 65% reporting increased theft by organized groups.
A rebound awaits in key categories
Target is the beneficiary of a perceived quality gap relative to Walmart, and that typically helps it in head-to-head comparisons where such categories as apparel and home are concerned. Unfortunately, consumer decision-making is seldom so linear, and Target has a slew of other retailers against whom it must compete, and recent sales results suggest it has work to do. Target has reported weak (flat or declining) results for its apparel and home categories and did so again in February. However, such companies as TJX, Ross and Kohl’s, which appeal to the same value-oriented shoppers as Target, produced solid gains. TJX said its February same-store sales increased 10%, Ross produced an 11% increase and Kohl’s was up 3.7%. Also producing gains were such competitors as Nordstrom, Macy’s and JCPenney, which serve customers squarely in the crosshairs of Target’s “expect more, pay less” value proposition. Macy’s reported a better-than-expected increase of 3.7%, and Nordstrom topped analysts’ views with a 10.3% increase. JCPenney’s same-store sales rose 1.2%, which was also better than expected.