Apparel marketer American Eagle generated just under $3 billion in sales across all its brands during its most recent fiscal year, up slightly from its 2008 sales. But its net income slipped to $169 million, or 5.7% of its sales, from 179.1 million, or 6% of sales, in 2008.
The downtick in income was due to increased selling costs and administrative expenses, as well as a slightly higher depreciation and amortization expense in 2009.
Direct sales were strong in 2009, jumping 12% to $344.3 million from $307 million in 2008. During an earnings conference call, CEO Jim O’Donnell said the direct channel made “a strong bottom-line contribution.
“This channel continues to be a strong area of growth,” O’Donnell added. “In 2010, we are very focused on driving key categories on this by increasing extended sizes and unique Web-only businesses. We’ll improve the site functionality and the overall shopping experience. And lastly, we are focused on driving site traffic and conversion with high ROI market initiatives, such as paid search and affiliated marketing programs.”
Despite its overall income dip, the company ended its fiscal year strongly: Fourth-quarter sales were $972 million, up from $905.7 million in fourth-quarter 2008. And the company kept a lid on its buying, occupancy and warehousing expenses. As a result, it recorded net income of $59.3 million, or 6.1% of sales, compared with $32.7 million, or 3.6% of sales for fourth-quarter 2008.
The company did not break out direct sales for its fourth quarter. The quarter and the year ended Jan. 30.
The company will be closing its Martin+Osa brand, which specializes in active wear for men and women. American Eagle operates 28 stores, as well as an online business in support of the brand. The stores are expected to be closed by the end of the second quarter. The brand took a $44 million loss in 2009, according to a company statement. American Eagle did not indicate how much of this was attributable to its direct operations.
American Eagle plans to focus on its other brands, which include AE, aerie and 77 kids. The company also announced plans to open its first stores outside of North America, with locations for the flagship American Eagle Outfitters brand debuting in Dubai and Kuwait City.
During the earnings call, O’Donnell discussed lessons learned from how the Martin+Osa brand had been launched – and how direct marketing might have moved the brand toward a more positive fate. “I would have put it online first and monitored accordingly, and then launched the retail operations, if, in fact, they met the hurdles. [Sister brand] 77kids has not only met their hurdles but exceeded the hurdles that we’ve laid out for them when we had the business online.”
