American Eagle Outfitters (AEO), a specialty retailer of clothing and accessories, has recorded a 70.33 percent plunge in profit for the quarter ended Aug. 02, 2014, due to substantial increase in costs and expenses despite drop in sales.
The company earned $5.81 million or $0.03 a share in the second-quarter compared with $19.59 million or $0.10 a share a year ago.
Revenue during the second-quarter went down 2.29 percent to $710.59 million from $727.31 million in the last year period.
Gross margin contracted by 32 basis points over the last year period to 33.4 percent. Total expenses as a percentage of revenues increased to 98.3 percent from 95.95 percent in the same period last year. That has resulted in contraction of 235 basis points in operating margins to 1.70 percent.
The company disclosed operating income of $12.05 million, compared with $29.42 million in the last year period.
Jay Schottenstein, Interim CEO, commented, ''Although the second quarter results were slightly ahead of our expectations, they do not reflect our potential. We did, however make significant progress on our priorities to build a sustainable path to higher profitability. We successfully cleared through spring and summer merchandise and entered the second half of the year in a good inventory position. We made progress on merchandise improvements, which will ramp up through the holiday season.''
The company management expects third quarter EPS to be approximately $0.17 to $0.19 compared to adjusted earnings of $0.19 a share last year.
Cash Position
As on Aug. 02, 2014, the company's cash balance stood at $262.63 million, down 23.92 percent or $82.56 million from Aug. 03, 2013.
Working Capital
American Eagle Outfitters has witnessed a decline in the working capital over the last one year. The company's working capital stood at $390.88 million as at Aug. 02, 2014, down $218.30 million or 35.83 percent from $609.18 million on Aug. 03, 2013. It registered a decrease in current ratio to 1.89 as at Aug. 02, 2014 from 2.31 on Aug. 03, 2013.
Shares of the company gained $0.45 or 4.04 percent to settle at $11.59 on Tuesday.
