American Eagle Foresees Strong Holiday Earnings
American Eagle Outfitters Inc on Wednesday joined other U.S. apparel makers in forecasting strong earnings for the key holiday selling season but said it expected lower profit margins compared with a year earlier. Madore’s remarks signaled the company might be as aggressive on promotions as it was last December in the aftermath of Aeropostale’s bankruptcy, when it sought to keep shoppers from flocking toward heavily discounted Aeropostale apparel.
American Eagle’s gross margin - gross profit as a share of revenue - fell 1.2 percentage points to 39 percent in the third quarter ended Oct. 28, hurt by higher warehousing and shipping costs on online orders as well as more promotions. Still, American Eagle delivered third-quarter earnings and comparable sales ahead of Wall Street targets, driven by robust demand for its Aerie line of lingerie as well as surprisingly strong sales for its namesake brand. Recent sales at American Eagle have also been driven by newer trends in women’s jeans, helping the company maintain an enviable 33 percent share of the U.S. denim market for young shoppers. Last month, Gap Inc and Abercrombie & Fitch also forecast strong holiday-quarter earnings, driven by demand for their Old Navy and Hollister apparel, respectively. American Eagle’s net income fell 16 percent to $63.7 million, bruised by promotions and a
$14 million charge.