* Closing all 28 Martin + Osa stores and online business
* Closures expected to be completed by end of Q2 of FY10
* Shares up 6 percent in extended trade
(Recasts, adds analyst comments, background, bylines; changes
dateline, previous LOS ANGELES, updates share price)
By Lisa Baertlein and Alexandria Sage
LOS ANGELES/SAN FRANCISCO, March 9 American
Eagle Outfitters Inc (AEO.N) said on Tuesday it will close all
28 stores in its Martin + Osa clothing chain and the chain's
The 3-year-old chain, which started out aiming for
customers in their mid-30s, racked up an after-tax loss of $33
million in 2009, excluding impairment charges, American Eagle
said in a statement.
"That's a huge loss. That really says it all," said Eric
Beder, an analyst with Brean Murray Carret & Co.
He noted that the brand would join Abercrombie & Fitch Co's
(ANF.N) Ruehl chain and Aeropostale Inc's ARO.N Jimmy'Z among
failed concepts by companies whose main brands cater to teens.
"Our view is 'Finally ...'," Jefferies & Co analyst Randal
Konik wrote in a client note. [ID:nN09108273] "This
announcement removes a key overhang on the stock."
The chain, launched in 2006 before the recession, had
stores in 17 states, but its largest market was California,
where it had six locations. California was especially hard hit
by the recession.
Named after 20th century American adventurers Martin and
Osa Johnson, the chain failed to stake a claim on its target
market of mid-30s men and women. The mall-based chain also had
competition from department and specialty stores.
The company said it hopes to have all of the stores closed
by the end of July, which is the end of its fiscal 2010 second
In fiscal 2009, Martin + Osa generated an after-tax loss of
$44 million, including a non-cash impairment charge of $11
million, net of tax.
The company said it expects the related fiscal 2010 cash
outflow, net of associated tax benefits, to be between $10
million to $40 million after taking account of pre-tax charges
of $32 million to $77 million for lease-related, severance and
In addition, the company expects around $29 million of
non-cash, pre-tax impairment charges and inventory write-downs.
American Eagle said it planned to book the charges over the
first and second quarters of fiscal 2010.
The company said it would focus on the American Eagle
family of brands including AE, its teen lingerie chain aerie
and 77kids, which it said have a greater potential of creating
long-term shareholder value.
American Eagle said in March that February same-store sales
had risen 6 percent and it affirmed its fourth-quarter earnings
outlook of 32 cents to 33 cents per share, excluding items.
Analysts, on average, have been expecting 33 cents per share.
American Eagle is due to report its fourth-quarter
financial results on Wednesday.
"While this is clearly a positive for the stock, we believe
investor focus is turning more toward the core American Eagle
business where recent signals have pointed to margin weakness,"
"It reflects a management team seeking to start the year on
a clean slate, or in other words deciding not to throw good
money after bad," Wall Street Strategies analyst Brian Sozzi
wrote in a note.
Shares of American Eagle rose to $18.18 in extended trading
after closing at $17.15 in the regular session.
(Additional reporting by Martinne Geller in New York; Editing
by Tim Dobbyn)