By late morning, shares had taken off 5% to $13.50.
The teen apparel retailer posted net income of 27 cents a share in the three months to Feb. 1, compared to net income of 55 cents a share in the year-ago quarter.
Total quarterly revenue dropped 7% year over year to $1.04 billion. Consolidated comparable sales decreased 7% compared to a 4% gain in the year-ago period.
Analysts surveyed by Thomson Reuters had anticipated net income of 26 cents a share on $1.03 billion.
"The company's results in 2013 were highly disappointing. While tough macro conditions have persisted in our retail sector, our merchandise and overall customer experience fell short of expectations," said interim CEO Jay Schottenstein in a statement.
Gross profit margins decreased 930 basis points to 31.9% as the company engaged in heavy discounting as a result of an aggressively promotional holiday season.
Pittsburgh, Penn.-based American Eagle expects a high single-digit decline in comparable sales over the April-ending first quarter with earnings breakeven compared to 18 cents a share a year earlier. Analysts had expected per-share earnings of 13 cents.
"Business conditions remain challenging, with severe winter weather contributing to weak demand," the company said in its earnings release.
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TheStreet Ratings team rates AMERN EAGLE OUTFITTERS INC as a Hold with a ratings score of C+. The team has this to say about their recommendation:
"We rate AMERN EAGLE OUTFITTERS INC (AEO) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow."
- You can view the full analysis from the report here: AEO Ratings Report