American Eagle’s Profit Drops 41% (AEO)

Despite a 14% surge in revenue, American Eagle’s (NYSE: AEO) profit fell by 41% in the fourth fiscal quarter. The drop in profits is attributed to the reduction in value of some of its stores, higher costs for products and expenses related to an executive transition.

The teen retailer also reported that it had to take more markdowns during the quarter to boost sales during the holiday season.

Nonetheless, Company’s adjusted earnings met the Wall-Street’s expectations.

On Wednesday, American Eagle reported that its net income dropped to $51.3 million, or 26 cents per share, for the period ended Jan. 28 from $87 million, or 44 cent per share, a year ago.

However, when both impairment charges and executive transitions were removed, company’s earnings went up to 35 cents a share. Earlier, analysts surveyed by FactSet had also anticipated the same amount earnings per share.

In January, American Eagle’s CEO, James O’Donnell had stepped down. He was replaced by Levi’s executive Robert Hanson.

Quarterly revenue rose by about 14 percent to $1.04 billion from $916.1 million, with online sales climbing up 18 percent. Wall Street anticipated slightly higher revenue of $1.05 billion.

Meanwhile, revenue at stores open at least a year ago, climbed up 10 percent. This figure tends to be an accurate indicator of a retailer’s health because it excludes results from stores recently opened or closed.

While American Eagle’s full-year net income soared 8 percent to $151.7 million, or 77 cents per share, from $140.6 million, or 70 cents per share, in the preceding year, Company’s annual revenue climbed up 6 percent to $3.16 billion from $2.97 billion.

Revenue at stores open at least a year ago rose 3 percent, in the same period.

The Company is now expecting modest sales increase and margin improvement for the current year. It expects to provide its full-year earnings outlook in May, when it reports its fiscal first-quarter results.

At last check, shares of American Eagle gained 80 cents, or 5.5 percent, to $15.43 ahead of the market opening.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.