March 10, 2010, 12:00 AM

Despite solid annual web growth, American Eagle shutters a brand

American Eagle announced yesterday plans to shut down its Martin+Osa brand, including its 28 stores and online business. For the year, web sales for all online operations increased 12.1%.

Mark Brohan

Research Director

Lead Photo

Jim O`Donnell, CEO, American Eagle

Despite a solid year of growth online in 2009, American Eagle Outfitters Inc. is killing off one of its store and e-commerce brands.

American Eagle, No. 54 in the Internet Retailer Top 500 Guide, announced yesterday plans to close down its Martin+Osa brand, including all 28 stores and the online business. In fiscal 2009, Martin+Osa generated an after-tax loss of approximately $44 million, including a non-cash impairment charge of approximately $11 million, says American Eagle. The company will now focus its efforts and resources on its other of brands, including American Eagle, aerie and 77kids, which have a greater potential of creating long-term value, says CEO Jim O`Donnell.

“Closing Martin+Osa was a difficult decision, particularly in light of the progress that was made over the past year,” says O`Donnell. “However, it is in the best interest of our company and stakeholders to focus our efforts on the brands that capitalize on our strengths and have the highest potential. Creating new brands is never an easy endeavor.”

American Eagle plans to close all Martin+Osa stores by the end of June, but didn’t give a date for turning off the brand’s e-commerce site. In 2010, American Eagle expects to incur pre-tax charges of $32 million to $77 million for lease-related, severance and other charges. The company also estimates approximately $29 million of non-cash, pre-tax impairment charges and inventory write-downs. Those charges will be taken during the first and second quarters, the retailer says.

Despite losing an e-commerce site going forward, American Eagle still posted solid web sales in 2009. For the year ended Jan. 30:

  • E-commerce sales increased 12.1% to $344.3 million from $307.0 million in 2008.
  • Total sales grew year over year 0.3% to $2.99 billion from $2.98 billion.
  • Comparable-store sales declined 4%.
  • Net income decreased 5.6% to $169.0 million from $179.0 million.
Based on the total revenue for 2009 and 2008, Internet Retailer calculates the web accounted for 11.5% of total sales last year compared with 10.3% in 2008. American Eagle does not report quarterly web sales.

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