By  on November 16, 2005

NEW YORK — Propelled by a 20.4 percent sales increase, American Eagle Outfitters Inc. beat Wall Street profit estimates by a penny while Abercrombie & Fitch Inc. raced past estimates on a 35.1 percent sales gain.

American Eagle said third-quarter profits jumped 27 percent as revenues were propelled by an increase in average store transactions. The company also said it has found a partner in Japan to begin its first expansion outside of North America and that it plans to launch an intimates subbrand targeted at core American Eagle customers.

In the three months ended Oct. 29, net earnings rose to $73.3 million, or 47 cents a share, from $ 57.9 million, or 38 cents, in the year-ago period. Analysts had been expecting a profit of 46 cents in the most recent quarter. Third-quarter net sales climbed to $577.7 million from $479.6 million a year ago, while same-store sales rose 13.6 percent.

Gross profit margin, however, declined to 46.6 as a percent of sales, from 48.8 percent last year. The firm cited lower merchandise margin, which was offset by the leveraging of rent expense.

In the nine months, American Eagle earned $186.6 million, or $1.19, up 66 percent from $112.4 million, or 75 cents, last year on revenues that jumped 28 percent to $1.5 billion.

Susan McGalla, chief merchandising officer, said on a conference call with analysts that women's knit tops, graphic Ts, denim, pants and intimates performed well during the fall back-to-school quarter, while blazers and woven shirts underperformed.

Regarding international expansion, Jim O'Donnell, chief executive officer, said on the call that the company has "signed a memorandum of understanding to open stores in Japan" with an unnamed business partner.

He said American Eagle will have "majority control over the agreement" and "all of the say as it relates to how we do business and our brand presentation, product assortment and so forth."

O'Donnell also said expansion of the specialty retailer's intimates business is "another significant opportunity" and that the company is "poised to launch intimates as a subbrand" targeted at American Eagle customers. He said the company is testing a "side-by-side format" that will place intimate stores adjacent to American Eagle stores. The company plans to open a total of 40 to 50 new American Eagle-branded stores in the next three to five years.

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