American Eagle Profits Fell 63% This Quarter

It's hard out there for a teen retailer.
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Dhani Mau
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It's hard out there for a teen retailer.
Daisy Lowe at an American Eagle store opening in London in November. Photo: David M. Benett/Getty Images for American Eagle Outfitters

Daisy Lowe at an American Eagle store opening in London in November. Photo: David M. Benett/Getty Images for American Eagle Outfitters

Like other mall stores aimed at teens, American Eagle Outfitters has been struggling to hold onto its market share with increasing competition from rapidly expanding fast fashion brands. Weak demand and restructuring costs hit the retailer particularly hard in the third quarter of fiscal 2014: For the three months ending Nov. 1, profit fell 63.7 percent to $9 million from $24.9 million a year earlier.

Revenue was pretty flat: $854.3 million compared to $857.3 million last year. So what is AE doing to turn things around?

It's closing stores — 50 AE and 20 Aerie stores this year, specifically — though it also opened 23 new stores this quarter. It's also remodeling and updating existing stores. "We managed the business better and were able to reduce markdown rates and control expenses," said Jay Schottenstein, interim CEO, in a statement on Thursday. "Our ongoing priority to strengthen our business is reflected in the restructuring activities and efforts to drive a better customer experience through improved merchandising, customer engagement and building omni-channel capabilities.”

To be fair, American Eagle isn't the only teen retailer struggling this year. This week, both Abercrombie and Aeropostale reported declines in third-quarter sales.

We expect to see transformative changes from all three retailers in the coming quarters as they aim to figure out what works for them in the current retail landscape.