Sales dip 2% at American Eagle Outfitters in Q2FY15
In the second quarter ending August 2, 2014, net revenue at apparel retailer American Eagle Outfitters fell 2 percent to $711 million from $727 million in the comparable second quarter of 2013.
Fortunately for American Eagle, sales from new store growth in the second quarter of 2014, nearly offset the decline in comparable sales which fell 7 percent from a year ago period.
Gross profit declined 3 percent year-on-year in the quarter under review to $238 million and declined 40 basis points to 33.4 percent as a rate to revenue.
American Eagle said, gross margin reflected the de-leverage of buying, occupancy and warehousing costs on negative comparable sales, which was largely offset by favourability in merchandise and design costs and a slight improvement in the markdown rate.
Selling, general and administrative (SG&A) expense rose to $190 million up 2 percent or $3.7 million, from corresponding quarter of 2013.
As a rate to revenue, SG&A went up by 110 basis points to 26.7 percent. Investments in advertising, international growth, factory stores and omni-channel initiatives drove the increase, which were again partially offset by reductions in overhead and variable expenses.
Operating income fell 59 percent to $12 million in the quarter under review, while operating margin declined 240 basis points to 1.7 percent.
In the second quarter of 2014, American Eagle reported earnings per share of $0.03 compared to earnings per share of $0.10, a year earlier.
Total merchandise inventories at the end of the second quarter of 2014 decreased 15 percent to $393 million compared to $461 million last year. At cost per foot, inventory dipped 18 percent.
According to American Eagle, inventories reflect a change to ownership terms completed late last year, as it began taking ownership of inventory at the receiving port rather than the port of departure.
Excluding the change in terms, inventory at cost per foot decreased in the mid single-digits and clearance units were well below last year.
It said that in the third quarter of 2014, ending inventory at cost per foot is expected to decline in the low double-digits, or mid single-digits excluding the change in ownership terms.
In the second quarter, capital expenditures totalled $74 million. For the full fiscal 2014, it continues to expect capital expenditures of approximately $230 million and in 2015; capital spending is expected to be approximately $150 million.
The company ended the second quarter of 2014 with total cash and investments of $263 million compared to $405 million in same period last year.
Based on a mid single-digit decline in comparable sales, American Eagle expects third quarter EPS to be approximately $0.17 to $0.19 compared to adjusted earnings of $0.19 per diluted share last year. The guidance excludes potential asset impairment and restructuring charges.
Fibre2fashion News Desk - India