American Eagle Outfitters saw earnings tumble 86 percent in the first quarter on huge markdowns intended to generate foot traffic. The teen retailer said that it would close 150 stores over the next three years.
Its second-quarter profit outlook was short of Wall Street projections and company shares fell 4 percent at the open of trading Wednesday.
The Pittsburgh company is attempting to reorient itself after a dismal sales spell. Profits fell more than 60 percent last year and revenue fell 5 percent. The company has had three people in the top job since 2012, with Executive Chairman Jay Schottenstein named interim CEO in January.
Schottenstein said Wednesday that American Eagle was closing some stores, cutting expenses and increasing its base of international stores.
Of the 150 North American stores it plans to close over the next three years, nearly 100 of them will be American Eagle stores. The chain anticipates closing about 50 American Eagle stores and 20 aerie stores in North America in 2014. It expects annual savings of approximately $10 million to $15 million related to the store closings starting in 2015.
For the period ended May 3, American Eagle earned $3.9 million, or 2 cents per share, for the period ended May 3. That compares with $28 million, or 14 cents per share, a year earlier.
Analysts, on average, expected breakeven earnings, according to a FactSet survey.
Revenue declined 5 percent to $646.1 million from $679.5 million. Wall Street was looking for $647.9 million.
Comparable-store sales, a key gauge of a retailer’s health, fell 10 percent.
The company projected approximately breakeven second-quarter earnings. In the prior-year period it earned 10 cents per share. Analysts had projected earnings of 65 cents per share.