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American Eagle to Close Stores in Glum Day for Retailers

Inside an American Eagle Outfitters Store
Customers shop inside an American Eagle Outfitters Inc. store in San Francisco. Photographer: David Paul Morris/Bloomberg

American Eagle Outfitters Inc. announced plans to close an additional 150 stores after posting sluggish sales today, joining a cluster of North American retailers with lower-than-predicted results.

The teen-apparel chain, which is seeking a new chief executive officer, will close the locations over the next three years. Last quarter, sales at stores open at least a year declined 10 percent, worse than the 7.8 percent drop analysts had estimated. Shares of the Pittsburgh-based company fell 6.4 percent to $10.60 at the close in New York.

Retailers including PetSmart Inc., Target Corp. and Sears Canada Inc. also reported same-store sales declines today, underscoring the impact of a particularly cold winter and still-shaky consumer confidence. Not all companies are suffering: Tiffany & Co., the luxury-jewelry chain, beat profit estimates today and raised its annual forecast. At the lower end of the scale, though, it remains a tough environment for retailers, said Ken Perkins, president of research firm Retail Metrics Inc.

“They’re facing significant consumer headwinds,” said Perkins, whose firm is based in Swampscott, Massachusetts. “Most middle-income and lower-income consumers don’t have much discretionary money.”

PetSmart, the largest pet-store chain, cut its annual earnings forecast to $4.29 to $4.39 a share, down from a range of as much as $4.54. Comparable-store sales dropped 0.6 percent last quarter, missing the 1.5 percent gain that analysts had estimated. Its stock dropped 8.3 percent to $57.02, marking the biggest one-day decline in more than a year.

‘Volatile’ Environment

“We did not achieve our sales goals, which were impacted by a challenging and volatile consumer environment and a competitive market,” David Lenhardt, CEO of Phoenix-based PetSmart, said in a statement.

At Sears Canada, a department-store chain that’s majority-owned by Sears Holdings Corp., its quarterly net loss widened to C$75.2 million ($69 million), or 74 cents a share, from C$31.2 million, or 31 cents, a year earlier. Sales fell 11 percent to C$771.7 million.

The business’s struggles have prompted its U.S. parent to consider a sale or spinoff of its remaining 51 percent stake. Sears Holdings, run by hedge-fund manager Eddie Lampert, said last week that it will hire an investment bank to study options for the Canadian operation, which has a total market value of about $1.4 billion.

Frostbitten Sales

In the most recent quarter, a late spring took a toll on sales, Sears Canada CEO Douglas Campbell said today.

“Sales of spring merchandise were below last year, as winter-like weather was prevalent in most parts of the country well into the new season,” he said in a statement.

Even as shopping-mall traffic slows, consumers are spending money elsewhere, Perkins said. That includes big-ticket items such as cars, as well as mobile-phone and cable bills, he said. That diversion of funds is contributing to a slower recovery for the retail industry.

“Unfortunately, it doesn’t look like any sort of significant snapback or rebound that everybody was hoping for,” Perkins said.

Download: Earnings

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