UPDATE 1-American Eagle issues weak forecast as traffic drop continues
Aug 21 (Reuters) - American Eagle Outfitters Inc on Wednesday issued a weak sales and profit forecast for the back-to-school quarter, and the teen retailer said the promotional environment that forced it to slash prices this summer was continuing.
"What is most disconcerting is that the discounting is really aggressive," said Morningstar analyst Jaime Katz. "As back to school goes, so goes the holiday. This means we'll probably see the same price competition out there in the fourth quarter."
American Eagle said gross profit margin fell 3.6 percentage points to 33.8 percent of sales in the fiscal second quarter, ended Aug. 3, because of the discounting.
The company, which competes most directly with Abercrombie & Fitch Co and Aeropostale Inc, said comparable sales, which include online sales and sales at stores open at least a year, will fall by a mid-to-high single digit percentage in the current quarter, continuing a sharp decline.
American Eagle projects a profit for the third quarter that is less than half what analysts expect. It forecast 14 to 16 cents a share, while analysts expected 35 cents, according to Thomson Reuters I/B/E/S.
American Eagle Chief Executive Robert Hanson said he was "extremely disappointed" with the numbers.
The company, which previously reported that same-store sales fell 7 percent in the second quarter, posted net income of $19.6 million, or 10 cents per share, for the period, up from $19.0 million, or 9 cents a share, a year earlier.
The earnings were in line with a warning issued by the company two weeks ago. At that time, analysts' average forecast was 21 cents a share.
American Eagle shares were down 6.3 percent to $15.35 in premarket trading.