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American Eagle Stock Crashes to Ground

NEW YORK ( TheStreet) -- American Eagle Outfitters (AEO - Get Report) is one of the few retailers that still can't manage to top last year's earnings.

While American Eagle was hurt by charges related to the shuttering of its money-losing Martin + Osa chain, the teen retailer also forecast disappointing second-quarter earnings, citing margin pressure from weaker business trends early in the quarter.
American Eagle

As a result, shares of American Eagle are tumbling 9.3% to $13.95 in early morning trading Wednesday.

The lower-than-expected outlook is overshadowing American Eagle's strong gross margins of 39.7%. American Eagle was one of the few teen retailers that managed to beat margin estimates.

During the first quarter, the teen retailer earned $10.9 million, or 5 cents a share, compared with $22 million, or 11 cents in the year-ago period. Excluding charges, American Eagle actually earned 17 cents a share, in-line with analysts' estimates.

American Eagle sales rose 8% to $659.5 million from $612 million.

Looking ahead, American Eagle foresees second-quarter earnings in the range of 12 to 16 cents a share, significantly less than Wall Street's outlook of 22 cents a share.

This weak outlook could also be a result of higher inventory levels and not enough product improvement, UBS analyst Roxanne Meyer wrote in a note.

-- Reported by Jeanine Poggi in New York.

Follow Jeanine Poggi on Twitter and become a fan of TheStreet on Facebook.

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