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May 17 American Eagle Outfitters Inc
forecast second-quarter profit below estimates as intense
competition in the industry pushes the apparel chain to offer
deep discounts and bear excess shipping costs on online orders.
Shares of the teen apparel maker fell as much as 9.2 percent
to touch a two-year session low of $11.77 in morning trading on
The company forecast second-quarter adjusted profit in the
range of 15 to 17 cents per share, far below analysts' average
estimate of 23 cents per share, according to Thomson Reuters
The retailer's dull forecast comes at a time when the
industry is struggling to cope against the increasing reach of
online shopping and a general decline in spending on clothes.
Several retailers, including American Eagle's rival
Abercrombie & Fitch Co, have been struggling to turn
around sales while some have filed for bankruptcy.
Apparel retailers such as Aeropostale Inc, Wet Seal and BCBG
Max Azria Group LLC have filed for bankruptcy over the last two
years and industry experts say many more may follow suit.
American Eagle's gross margins in the first quarter ended
April 29 declined by 2.7 percent to 36.5 percent, while its
inventory at cost increased 9 percent to $364 million.
"We anticipate gross margin pressure in the second quarter
pretty consistent with what we experienced in Q1," Chief
Financial Officer Robert Madore said.
The company also warned its current-quarter comparable sales
could decline, after it reported a surprise 2 percent rise in
the first quarter on Wednesday.
Analysts had forecast a 0.7 percent decline in same-store
sales, according to research firm Consensus Metrix.
Net income fell to $25.24 million, or 14 cents per share, in
the quarter, from $40.48 million, or 22 cents per share, a year
The company said it incurred $5.4 million pre-tax
restructuring charges for severance and related charges in the
Excluding certain items, the company earned 16 cents per
share in the quarter, missing analysts' average estimate by a
cent, according to Thomson Reuters I/B/E/S.
Net revenue rose 1.66 percent to $761.83 million, beating
analysts' average estimate of $741.7 million.
(Reporting by Gayathree Ganesan in Bengaluru; Editing by Arun