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Promotions take toll on American Eagle Outfitters' Q3 income but sales increase

American Eagle Outfitters on Wednesday posted its 11th straight quarter of same-store sales growth, fueled by a strong performance from its Aerie brand, and forecast strong earnings for the holiday season.

Total net revenue increased 2% to $960.4 million for the quarter ended October 28, just missing estimates of $960.8 million. Total same-store sales rose 3%, better than analysts expected. By brand, same-store sales at Aerie brand surged 19%, and inched up 1% at American Eagle.

Net income fell 16% to $63.73 million or 36 cents per share amid increased promotions and a $14 million charge. Excluding charges, the company reported adjusted earnings of 37 cents a share, missing analysts estimates of 38 cents per share.

“The third quarter produced record sales, sequential margin improvement and marked eleven straight quarters of comp sales growth," said Jay Schottenstein, CEO. "Digital sales continued to grow at a rapid pace, while we also saw store sales strengthen. These results validate our investments in product leadership, innovation, quality and brand equity."

The retailer expects earnings of between 42 and 44 cents per share for the holiday quarter. Analysts on average were expecting 39 cents.

American Eagle Outfitters operates more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and ships to 81 countries worldwide through its websites.

Click here for more analysis by Neil Saunders, managing director of GlobalData.
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