American Eagle Outfitters records mixed Q3
- Q3 earnings down to US$9m
- Gross margin widens 200 bps
- Sales decline to $854m
Analysts liked American Eagle Outfitters' execution in a difficult environment
Teen apparel retailer American Eagle Outfitters has booked a decline in third-quarter earnings but saw gross margin increase, in what analyst have described as a "difficult environment".
Net income amounted to US$9.03m in the three months ended 1 November. This compared to earnings of $24.9m a year earlier.
Gross margin, however, rose 200 basis points to 36.9%, driven primarily by reduced markdowns and partially offset by 120 basis points of buying, occupancy and warehousing deleverage.
Total net revenue declined slightly to $854m from $857m in the prior year, while consolidated comparable sales dropped 5%.
Based on the group sales decline and a mid single-digit decline in comparable sales, management expects fourth quarter EPS to be around $0.30 to $0.33 compared to adjusted earnings of $0.27 per diluted share last year. This excludes potential asset impairment and restructuring charges.
FBR & Co analyst Susan Anderson, noted: "We like American Eagle Outfitters' execution in a difficult environment, confidence in 2015 gross margin expansion, and its omni-channel initiatives; but we believe that investors now look for positive 2015 comp inflection, which could prove difficult amidst continued mall traffic declines and a highly competitive environment. We remain on the sidelines and look for comp stabilisation, improvement in the competitive landscape, and/or a more attractive valuation."
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