The mall retailer earned 14 cents per share in the quarter ending April 29, down from 22 cents in the same quarter last year. Even excluding restructuring charges, which bumped EPS to 16 cents per share, the earnings were short of analysts' expectation of 17 cents per share. Sales rose 2% year-over-year to $762 million, beating the consensus estimate of $741.8 million.
"We're working hard to strengthen results," CEO Jay Schottenstein said on the analyst call, noting that he's never happy to report lower earnings from last year, a sentiment echoed by CFO Bob Madore.
"There's lots of turbulence out there," global brand president Chad Kessler added.
American Eagle shares crashed 14.7% to $11.05 in trading Wednesday.
Like many mall-focused retailers around the country grappling with a new normal in retail, American Eagle plans to close stores in 2017.
"We are looking to get more aggressive with store closings," Madore said. "We've been experimenting with closures of stores where we're really able to track sales migration."
Stores, he cautioned, are still "the best place to drive new customer acquisitions" and are still profitable across all mall grades. He noted, for example, that 80% of online returns are done through stores. 22% of sales are online, Kessler said.
"I was walking in the mall yesterday, and you still see a lot of signs with 40% off," Schottenstein added. "It's not a secret. There's been a lot of stores closing. I think 3800 sites closed in the last twelve months. So we have to fight that...This is the year of the disruption. It's challenging, but our people are up to it."
The 25-40 anticipated closures in the U.S., Mexico and Canada will partially offset the 35 new American Eagle and Aerie stores to be opened this year. The Pittsburgh-based company also plans to open 45 licensed locations, and close two, internationally. Over 500 store leases expected to expire in the next three years, Madore said on the call, so the company plans to "build flexibility" into new leases.
Second-quarter earnings guidance of 15 to 17 cents a share was in line with consensus forecasts. In the second quarter of 2016, American Eagle earned 23 cents a share. The company expects same-store sales in the quarter to be flat or decline in the low single digits.
With Abercrombie & Fitch confirming last week that it's in talks to sell itself, American Eagle is rumored to be one of the most eager bidders, according to The Wall Street Journal, along with Express (EXPR - Get Report) . As TheStreet reported, Abercrombie could fetch about $1.5 billion. Schottenstein declined on the call to address the rumors.
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