American Eagle Outfitters looks to unload children's brand 77kids

By Shan Li

May 24, 2012 12 AM PT

Teen retailer American Eagle Outfitters Inc., seeking to exit the children’s apparel business, is looking for ways to unload its chain of 77kids stores despite a first-quarter profit that beat Wall Street expectations.

In the three months ended April 28, American Eagle reported a profit of $39.7 million, or 20 cents per share, up from $28.3 million, or 14 cents, a year earlier. Sales jumped 18% to $719 million.

77kids is American Eagle’s foray into the under-15 set. Begun as an online-only business in 2008, the brand now has 22 stores nationwide.

But the brand never seems to have taken off. In American Eagle’s last fiscal year, that division reported a $24-million loss on sales of $40 million.

In a statement, American Eagle said it was “exploring options” for the business that could include finding a buyer.

Robert Hanson, who took the helm in January as American Eagle’s chief executive, said the decision to exit the kid’s category was “disappointing.”

“It is in the best interest of the company and our shareholders to prioritize and focus our efforts on businesses with the highest return potential,” Hanson said in a statement.

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