American Eagle's Q3 Earnings Drop On Sliding Margins

Chesapeake, VA (AHN) - American Eagle Outfitters announced Tuesday third quarter earnings fell more than 50 percent as the company saw same-store sales drop 7 percent in the quarter.

The clothing retailer posted third quarter earnings of $42.6 million or 21 cents a share, down from $99.4 million or 45 cents a share in the same period a year ago.

Excluding a special charge related to auction-rate securities, American Eagle earned 30 cents a share. The result was in-line with analyst estimates, according to Thomson Reuters.

Revenue totaled $754 million, up 1 percent from $744 million from last year.

"We continue to face challenges, which affected our third quarter financial results," said CEO Jim O'Donnell, according to Business Wire. "As we look ahead, our top priorities are to strengthen our businesses and protect our market share."

Online sale were strong, up 35 percent from last year on increased site traffic.

The company saw gross margin on sales fall to 41 percent from 47.4 percent last year. Margins on merchandise fell 4.7 percent due to aggressive markdowns.

Total inventory rose to $422 million in the third quarter, up $29 million from last year.

American Eagle had capital expenditures of $69.2 million in the quarter. The company expects capital spending for the year to total $250 to $275 million and aims to cut it by roughly 50 percent for 2009.

American Eagle plans to release fourth quarter earnings guidance next week.