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American Eagle warns profit is dropping

American Eagle isn’t alone: Walmart, Kohl’s, Macy’s, and Saks have cut their forecasts.
Associated Press/File 2006
American Eagle isn’t alone: Walmart, Kohl’s, Macy’s, and Saks have cut their forecasts.

Fewer customers are shopping at American Eagle Outfitters, and the teen retailer expects a big drop in profit in the current quarter as it deals with tough competition.

The Pittsburgh company’s outlook for its fiscal third quarter, which runs through October, was also well below Wall Street’s view. Shares fell nearly 10 percent Wednesday to $14.76.

‘‘Our second-quarter results reflected disappointing product execution in women’s. Additionally, we faced a highly promotional and competitive retail landscape and a decline in traffic, which have continued into the third quarter,’’ said American Eagle CEO Robert Hanson in a statement.


American Eagle Outfitters Inc. is the latest retailer to post disappointing results. Chains including Walmart, Kohl’s, Macy’s, and Saks have recently cut their outlook for the year, raising worries about consumer spending. And Target Corp. on Wednesday sounded the latest warning on cautious consumers. It said its earnings per share this year would come in at the low end of its guidance.

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For the quarter that ended Aug. 3, American Eagle’s net income rose 3 percent to $19.6 million, or 10 cents per share. Revenue fell 2 percent to $727.3 million. The company had preannounced its second-quarter results two weeks ago.

Revenue at established stores open at least a year and from the company’s websites dropped 7 percent. This figure is a key indicator of a retailer’s health because it excludes results from stores recently opened or closed.

For the third quarter, the chain expects profit of 14 to 16 cents per share. Analysts’ prediction was more than double that: 35 cents per share. It’s also a steep fall from its earnings per share from continuing operations of 41 cents in last year’s quarter.