American Eagle Outfitters Profit Slips 41 Percent on Impairment Charges
Teen apparel retailer American Eagle Outfitters issued its fourth-quarter results Wednesday, posting a 41 percent decline in profits due to a batch of impairment charges exceeding $20 million. The company's revenue increased from a year ago, however, and it issued an encouraging forecast for the current quarter. Shares of the company rose 91 cents a share, or 6.26 percent, to $15.54 a share on the report.
In the three months ended January 28th, AEO said it earned $51.3 million, or 26 cents per share, down from a profit of $87 million, or 44 cents per share, in 2010's final quarter. Excluding certain one-time charges including the impairment expenses, earnings for the period came to 35 cents per share, matching the consensus estimate from economists in a recent Reuters poll. Overall revenue for the retailer rose 14 percent from the year-ago period to $1.04 billion, which also matched the average estimate from the economists in the Reuters poll.
As is the case with other retailers, the fourth quarter is the most vital for American Eagle, as the average retailer records nearly two-fifths of their annual sales during the holiday period. As such, American Eagle used aggressive discounting strategies to lure in holiday shoppers. The practice pressured the retailer's profit margins, but managed to boost sales nonetheless. At the same time, costs for raw materials used in the company's products also pressured margins, which fell from 39.4 percent in the fourth quarter of 2010 to 34.1 percent in the most recent quarter.