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AE to close MARTIN+OSA Concept
10
Mar '10
American Eagle Outfitters Inc. announced that after an extensive evaluation and review of strategic alternatives, it plans to close its MARTIN+OSA concept, including all 28 stores and the online business. Although performance improved from fiscal 2008, management determined that the brand was not achieving performance levels that warrant further investment.

In fiscal 2009, MARTIN+OSA generated an after-tax loss of approximately $44 million, including a non-cash impairment charge of approximately $11 million, net of tax. The company will focus its efforts and resources on the American Eagle (AE) family of brands including, AE, aerie and 77kids, which have a greater potential of creating long-term shareholder value.

“Closing MARTIN+OSA was a difficult decision, particularly in light of the progress that was made over the past year,” said Jim O'Donnell, chief executive officer. “However, it is in the best interest of our company and stakeholders to focus our efforts on the brands that capitalize on our strengths and have the highest potential. I am extremely proud of the innovation, hard work and dedication displayed by the MARTIN+OSA team, and I am grateful for their achievements. I want to personally thank our associates and external partners for their contributions. Creating new brands is never an easy endeavor. The valuable lessons and experiences we gained will serve us well, as we continue to develop and launch new lifestyle brands.”

Store closures are expected to be substantially complete by the end of the second quarter of fiscal 2010. In conjunction with the closing of MARTIN+OSA, the company expects the fiscal 2010 cash outflow, net of associated tax benefits, to be approximately $10 to $40 million. This is comprised of pre-tax charges of $32 to $77 million for lease-related, severance and other charges.

In addition, the company estimates approximately $29 million of non-cash, pre-tax impairment charges and inventory write-downs. These charges are expected to be recognized primarily over the first and second quarters of fiscal 2010. These estimates are preliminary and based on a number of significant assumptions and could change materially.

American Eagle Outfitters Inc

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