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American Eagle's Sales Are Still Dropping, But Slightly Less Than Before

The mall mainstay's second quarter results were better than expected, but still not great.

As it tries to get its struggling business back on track, American Eagle's sales are still slipping, but at a lower rate than they have in the past. Over the course of the second quarter, which ended August 2, the teen retailer's total revenue dropped 2 percent from $727 million in 2013 to $711 million. Still, that's better than the 5 percent dip it saw during the first quarter.

The results were "slightly ahead of expectations," although they don't reflect American Eagle's potential, interim CEO Jay Schottenstein said in a release Wednesday morning. Fair enough. Gross profit was down 3 percent to $238 million, while comparable store sales sank 7 percent in the quarter, consistent with decrease the year prior. 

Some heartening news is that American Eagle is handling its inventory better than it has in the past, selling through its spring and summer merchandise and striking a better aesthetic chord with consumers. According to Schottenstein, it's now entering the second half of the year "in a good inventory position." The quarter also saw a "slight improvement" in discounting. 

Back in January, Jeffries analyst Randal Konik made a case for Urban Outfitters and American Eagle as his top teen retailer picks for 2014. Based on Urban Outfitters's subpar results just a few days ago, his bet on that horse hasn't panned out just yet. Maybe American Eagle will turn things around for a win in the next two quarters.

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