American Eagle Outfitters Inc. (AEO) announced it would shutter its 28-store Martin + Osa concept, as the apparel retailer's management determined the brand wasn't achieving performance levels that warrant further investment.
Instead, the company said it would focus its efforts and resources on its namesake brands--which includes its aerie and 77kids.
Shares, which rose as much as 11% in after-hours trading, were up 6.4% to $18.24.
Brian Sozzi, an analyst at Wall Street Strategies Inc., said the company's resources would be better served cultivating the core American Eagle brand and to develop 77kids both online and in malls.
"The fact is the brand lacked the scale and mind share to generate a profit and capitalize on the opportunity that existed with this core customer [25 years old and over] since Ruehl's" exited after the holidays, according to Sozzi. Ruehl was a concept competitor Abercrombie & Fitch Co. (ANF) decided to close in June after month after month of dour sales results.
American Eagle, which sells clothes and accessories targeted at teenagers and young adults, said the brand generated an after-tax loss of about $44 million in the recently concluded fiscal year.
The store closures are expected to be "substantially complete" by the end of July. An American Eagles spokesman declined to comment on job losses, citing the company's quiet period ahead of earnings. American Eagle will report its fiscal fourth-quarter results Wednesday.
"Creating new brands is never an easy endeavor," said Chief Executive Jim O'Donnell in a statement. "The valuable lessons and experiences we gained will serve us well, as we continue to develop and launch new lifestyle brands.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com 
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