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.
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.