US teen clothing retailer American Eagle Outfitters has lifted its full-year earnings guidance, despite posting a decline in second-quarter profit due to costs related to the exit of its loss-making children’s brand 77kids.
In its financial results for the second quarter ended July 28, 2012, American Eagle Outfitters announced income from continuing operations to have increased 62 percent to $61.8m, or $0.21 per diluted share, compared to $0.13 per diluted share for the comparable quarter last year.
Net income for the second quarter ended 28 July, which includes a loss from discontinued operations, declined 3.3% to US$19m, or 0.09 dollars per diluted share, compared to 0.10 dollars per diluted share last year. Net sales increased 11% to $740m, while comparable store sales, including AE Direct, climbed 9%.
The after-tax loss for the company’s 77kids business was $24m during the quarter, compared to an operating loss of $5m last year. The company expects to incur the remaining exit costs during the third quarter. Last month, American Eagle said it expects to incur an after-tax loss of $35-50m through the exit.
On May 18, 2012, the company had announced plans to exit its children’s business, 77kids, which includes 22 stores and the online business. On August 3, 2012, the company completed a sale of 77kids, which included substantially all of the assets comprising the 77kids business, including store assets, the on-line business, inventory and a temporary license to use the 77kids name through January 15, 2013.
In the second quarter, online sales increased 28 percent, compared to a 17 percent last year. The company ended the quarter with total cash and short-term investments of 702 million dollars compared to 514 dollars million last year.
For the third quarter, management expects EPSfrom continuing operations to be in the range of0.37 dollars to 0.38 dollars per diluted share, compared to 0.30 dollars last year. For the year, management is raising its EPS guidance from continuing operations to a range of 1.33 dollars to 1.36 dollars, compared to an adjusted 0.97 dollars last year.
CEO Robert Hanson said: “While pleased with our results, and therefore raising our annual outlook, we continue to drive for long-term performance improvement through fortifying our brands, further strengthening our products, marketing and customer experience, enhancing operational disciplines and pursuing growth across North America.”
Looking forward, the company has lifted its full-year earnings per share to range from $1.33 to $1.36, compared to earlier adjusted EPS guidance of $1.16 to $1.22.
American Eagle Outfitters is a global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products under its American Eagle Outfitters and Aerie brands. The company operates more than 1,000 stores in North America, and ships to 77 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 39 international franchise stores in 12 countries.