• Q2 earnings down to US$5.8m
  • Gross margin narrows to 33.4%
  • Sales decline 2%
American Eagle said the results "do not reflect our potential"

American Eagle said the results "do not reflect our potential"

American Eagle Outfitters has revealed what analysts believe is a "good report in a difficult environment".

In the three months ended 2 August, earnings amounted to US$5.8m. This compared to earnings of $19.6m in the year ago period. The company had projected break-even results.

Gross margin narrowed to 33.4% from 33.8%. This reflected the de-leverage of buying, occupancy and warehousing costs on negative comparable sales, which was largely offset by favourability in merchandise and design costs.

Total net revenue declined 2% to $711m from $727m last year, while revenue from new store growth nearly offset the decline in comparable sales, which were down 7%.

Jay Schottenstein, interim CEO, said: "Although the second quarter results were slightly ahead of our expectations, they do not reflect our potential. We did, however make significant progress on our priorities to build a sustainable path to higher profitability."

Based on a mid single-digit decline in comparable sales, the company expects third quarter EPS to be around $0.17 to $0.19 compared to adjusted earnings of $0.19 per diluted share last year. The guidance excludes potential asset impairment and restructuring charges.

FBR & Co analyst Susan Anderson, noted: "Overall we view this as a good report in a difficult environment, which we believe will be received by investors. In addition to Aeropostale's positive pre-announcement, we think this could be further evidence that teen retailing could be beginning to stabilise."