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AEO Net Climbs 25%, Forecast Below Estimates

American Eagle Outfitters delivered a 25 percent earnings per share gain for the first quarter, but the specialty retailer said second-quarter earnings were expected to come in lower than analysts' estimates.

American Eagle Outfitters delivered a 25 percent earnings per share gain for the first quarter, but the specialty retailer said second-quarter earnings were expected to come in lower than analysts’ estimates.

For the quarter ended May 5, net income rose 23 percent to $78.8 million from $64.2 million on sales that gained 17 percent to $612.4 million from $522.4 million. Earnings per diluted share climbed to 35 cents from 28 cents in the prior year. Same-store sales for the quarter increased 6 percent.

The retailer said it projected EPS for the second quarter of 34 to 36 cents, below the analysts’ consensus estimate of 37 cents, according to Thomson Financial.

“I’m proud of our team for delivering strong first-quarter results, which truly demonstrate the sustainability of our performance, the strength of the AE brand and good expense management,” Jim O’Donnell, chief executive officer of the Warrendale, Pa.-based company, said in a statement. “We continue to capitalize on our systems and the investments we’ve made in critical functions such as sourcing and production. While keeping a sharp focus on strengthening our operations, we are also advancing future growth initiatives within the American Eagle brand, our aerie intimates concept and Martin + Osa.”

The retailer said gross profit margin in the quarter was about the same as last year’s quarter, 48.7 percent. “A higher merchandise margin was offset by the de-leveraging of distribution services and delivery charges,” the company said. “Rent expense was flat as a percent of sales.”

Selling, general and administrative costs as a percentage of sales shed 20 basis points to 25.6 percent in the most recent quarter. “Within SG&A, supplies and direct compensation [were] leveraged, while professional services, services purchased and incentive compensation increased as a percent to sales,” the firm said.

As a percent of sales, the operating margin gained 10 basis points to 18.9 percent in the quarter from 18.8 percent in the previous year.

The retailer said during the quarter it wrapped up a repurchase of 2.8 million shares worth $85.2 million.

In a separate development, American Eagle said the company’s board authorized an additional 23 million shares for its stock repurchase program, which can be made through the end of fiscal 2009.