American Eagle May Close 50 to 100 Stores in Next Two Years

Announcing second-quarter financial results that saw its gross profits decline 6% and comp store sales decrease by 1%, American Eagle Outfitters revealed that it may close as many as 100 stores in the next two to five years as part of enterprise-wide efforts to improve profitability. The retailer also plans to reduce inventories and implement new merchandise allocation technology, as well as implementing workforce reductions.

For the quarter that ended July 31, 2010, the retailer's gross profit was $240 million, compared to $254 million for the same period last year. Sales for the period were $652 million, up from the $647 million recorded during the same period in 2009. Sales for the retailer's online businesses, which include ae.com, aerie.com and 77kids.com, decreased 9% during the quarter, compared to a 17% sales increase the previous year that had been promotionally driven.

American Eagle Outfitters is engaged in a comprehensive profitability initiative. Key elements include:

>> Sales and merchandise margin optimization: includes strengthening merchandising strategies, a reduction in inventories, implementation of new merchandise allocation technology and refinement of store presentation models.
>> Organizational streamlining: involves workforce reductions and process improvements to increase efficiencies.
>> Evaluation of stores and facilities: targets 50 to 100 closures of underperforming stores over the next two to five years.