American Eagle Outlook Disappoints

American Eagle Outfitters Inc reported a higher profit for the holiday quarter, helped by fewer markdowns, but the teen clothing retailer gave a weak sales forecast, citing a tough economy and bad weather that kept shoppers at home.

The company, which outperformed rivals Aeropostale Inc and Abercrombie & Fitch Co during the Christmas season, said on Wednesday that it expected same-store sales this quarter to fall by a mid-single-digit percentage rate.

Shares of American Eagle were down 10.1 percent at $20.27 in premarket trading.

Abercrombie last month also forecast a decline in quarterly same-store sales.

Retailers that cater to young shoppers on limited budgets typically are among the first to feel any pullback from customers hit by the economy. Many Americans are dealing with smaller take home pay because of higher payroll taxes as well as tax refunds that have come later this year than last.

American Eagle forecast earnings of 16 cents to 19 cents per share, excluding special items, for the quarter that started last month, well below the 25 cents Wall Street analysts were projecting, according to Thomson Reuters I/B/E/S.

Net income for the fourth quarter ended Feb. 2 rose to $94.8 million, or 47 cents per share, from $51.3 million, or 26 cents per share, a year earlier. Same-store sales rose 4 percent.

Overall revenue for the 14-week period rose 8.6 percent to $1.12 billion.

Gross profit rose 6 percentage points to 41.2 percent of sales, helped by lower cotton costs and fewer markdowns.

American Eagle said it was raising its quarterly dividend 14 percent to 12.5 cents per share.