By  on August 16, 2006

American Eagle Outfitters Inc. posted a 27 percent increase in second-quarter earnings, bolstered by strong sales of "wear-now" merchandise during July's unusually hot weather.

For the three months ended July 30, net income surged to $72.1 million, or 47 cents a diluted share, from $58 million, or 37 cents, in the same period last year on sales that gained 17 percent to $602.3 million from $515.9 million. Earnings-per-share results include a 1 cent-per-share stock option expense, which was not included last year. Same-store sales for the quarter showed a 10 percent gain, which is on top of a 21 percent increase in the prior year.

For the six-month period, net income jumped 20.3 percent to $136.3 million, or 89 cents a diluted share, from $113.3 million, or 72 cents, in the prior year on sales that rose 16.7 percent to $602.3 million from $515.9 million.

"I am very pleased with this performance, especially in light of the investments we are making in our future growth initiatives, such as our real estate strategy, aerie intimates sub-brand and our new Martin + Osa concept," said Jim O'Donnell, chief executive officer for the specialty retailer, in a release. "These results are clearly the by-product of a strong and successful team across our organization."

During the period, the company opened its first Martin + Osa stores, a retail concept that targets 25- to 40-year-old consumers. The retailer plans on opening about 20 stores by the end of next year.

During the quarter, store traffic improved via a promotion offering free movie tickets to shoppers who try on jeans in the mall-based store.

On a conference call with analysts, Susan P. McGalla, president and chief merchandising officer, said results "reflect compelling on-trend assortments driven by our strong customer connection and unique brand positioning."

McGalla said the retailer "achieved continued success in men's and women's jeans and experienced strong results in targeted retail categories."

"We entered the second quarter committed to maintaining strength from spring," McGalla said. "Summer was fresh, with significant [sales] units, and we were pleased with how our team translated the merging fashion trend for our AE customer."McGalla went on to say the women's business reached same-store sales in the high-single digits, with strong performances in "shorts, tank tops, graphic Ts, jeans."

The chief merchant said the retailer's Web site "also achieved outstanding results, with sales increasing 53 percent in the second quarter. This was driven by a 40 percent increase in unique user sessions and a higher conversion rate."

Regarding back-to-school, the season "kicked off to a good start," McGalla said, adding that, within the retailer's jeans business, "we have established trust and confidence with our customers, enabling us to offer innovation and newness in our denim collection."

The company said it expects third-quarter earnings in the range of 52 cents to 54 cents a share, compared with 47 cents last year.

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