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American Eagle to Exit 77Kids Brand After Unit Has Loss

May 18 (Bloomberg) -- American Eagle Outfitters Inc., the teen-apparel retailer with more than 1,000 stores in North America, said it will exit its children’s-apparel business, which had a loss in the last fiscal year.

The company is “exploring options,” including a full or partial sale of assets, for the 77kids by American Eagle brand, Pittsburgh-based American Eagle said in a statement today. The brand had a net loss of $24 million on sales of $40 million in the year ended Jan. 28, according to the statement.

Chief Executive Officer Robert Hanson, who started in January, has cut inventory and improved product assortment to boost profitability.

“Although making this decision is disappointing, it is in the best interest of the company and our shareholders to prioritize and focus our efforts on businesses with the highest return potential,” Hanson, previously at Levi Strauss & Co., said in the statement.

American Eagle rose 1.6 percent to $18.70 in after-hours trading at 4:35 p.m. in New York. The company gained 20 percent this year through today’s close of regular trading.

American Eagle said in a separate statement that Chief Financial Officer Joan Hilson plans to step down after more than six years at the company. She will work through the end of July for an “orderly transition,” and will be succeeded on an interim basis by Scott Hurd, vice president and controller, until a replacement is found, the company said.

A charge tied to the 77kids brand sale will be taken, “primarily in the second and third quarters,” the company said in the statement, without estimating the amount.

The brand 77kids targets babies, and children up to age 14, in 22 stores and online, the company said. The business was introduced in October 2008 as on online-only brand, according to American Eagle’s most recent annual filing.

The company will announce first-quarter results on May 23. For the last fiscal year, it had sales of $3.16 billion and net income of $151.7 million, or 77 cents a share.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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