American Eagle Outfitters reported their Q3 finances December 6, 2013, with dismal results of a drop in profits of 68.3%. Like many teen retailers facing a challenging economic climate and out of tune with the youth marketplace, American Eagle is struggling to figure out what to do.
Robert Hanson, CEO stated, “Our financial performance is clearly unsatisfactory and not consistent with our objectives. As we continue to navigate through an intensely promotional North American retail landscape, we are making improvements in merchandising and marketing, while aggressively pursuing efficiency gains, expense reductions and ensuring disciplined inventory management. We are continuing to invest in important areas of growth including omni-channel, global expansion and factory stores — all high-return segments, which diversify our business and will be key drivers of our future growth and success.”
Specifically, the total net revenue of $867 million dropped 6% from $910 million last year. Gross profit decreased 21%, primarily, the brand says, as a result of higher promotional activity. This is something that many retailers are struggling with. When buyers seek out discounts rather than paying full retail price, this can ultimately hurt the brand in the long run. Because young people today are far different in terms of their shopping patterns than just 3 years ago, many brands cannot overcome the trend of promotionals and discounting in order to get buyers into their stores.
American Eagle Outfitters opened 13 new stores, including 6 factory stores, and closed 5 locations, including 3 aerie stores. Additionally, the company had 61 international franchise locations in 12 countries.
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