American Eagle Q1 results show a rough first quarter after restructuring

By

Cassidy Mantor

Published
May 17, 2017

American Eagle Outfitters, Inc. has announced its Q1 results, reporting comp sales up 2% this year compared to last year's 6% and gross profit decreasing $15 million over last year, just missing Wall Street predictions. 

Net income slumped to $25.24 million from $40.48 million a year earlier. Gross profit decreased to $278 million from $293 million last year, a $15 million dollar decline. Furthermore, the gross margin rate was 36.5% to revenue compared to 39.2% last year, a 270 basis point decline.

The Pittsburgh, PA retailer had had to pay $5.4 million in severance pay and other charges related to restructuring in Asia and the UK. American Eagle plans to operate through licensed partnerships in Hong Kong and UK and paid large sums to divest itself of its retail locations and offices in those locations.

Ads

Like other retailers, American Eagle was hit hard with low mall traffic around the new year. The company also cited increased shipping charges from a growing digital business as a source of loss, as well as increased advertising costs. The quarter also showed a decrease in operating income of $22 million over last year. Factoring in the adjustments for the restructuring, operating income still was down $17 million.

Jay Schottenstein, Chief Executive Officer, underscored the quarter's positive aspects in his comments, focusing on "improved trends over Easter and a strong digital business throughout." Of the future, he added, "We are taking the right steps to improve our results and adjust our business for today’s rapidly evolving retail environment. We are creating efficiencies across our organization, as we aim to continue capitalizing on the strength of our brands, product leadership and other competitive advantages."

The brand nevertheless reported an unexpected rise of 2% in quarterly comparable-store sales, driven by strong sales of its lingerie line, Aerie.