By  on March 8, 2007

While some of its competitors continue to struggle, American Eagle Outfitters has been gaining market share at record high gross margins.

Reporting fourth-quarter financial results, American Eagle said Wednesday net profits rose 15.4 percent to $150.2 million from $107.5 million in the year-ago quarter. Net gross margins increased 160 basis points due to higher merchandise margins and leveraging of markdowns and rent.

Earnings per share increased 40 percent to 66 cents, despite rather modest square-footage growth, indicating consumers are willing to pay higher prices for American Eagle merchandise.

American Eagle, which has logged 12 consecutive quarters of record earnings, said total sales for the fourth quarter rose 27 percent to $973.4 million, compared with $769.1 million last year. Comp-store sales increased 14 percent versus an 8 percent increase in last year's same period. The company gave guidance for the first quarter of 31 cents to 33 cents a share, compared with 28 cents a share for the first quarter of last year.

Sales for the four weeks ending March 3 rose 16 percent to $166.3 million, from $143.1 million for the four-week period ended Feb. 25, 2006. Due to the 53rd week in fiscal 2006, last month's comps were compared with the four-week period ended March 4, 2006. On this basis, the company delivered a same-store sales increase of 6 percent, versus 8 percent for the same period last year.

For the year, net income rose 13.9 percent to $387.4 million, from $294.2 million, on sales of $2.79 billion, versus $2.32 billion in the previous 12 months.

Today, American Eagle is moving from the Nasdaq to the New York Stock Exchange, where its common stock is trading under symbol AEO. "We're proud to join the NYSE and view it as a reflection of both our brand and our consistent financial performance," said chief executive officer Jim O'Donnell.

In the company's recent performance, O'Donnell also found validation for American Eagle's strategy of launching the aerie subbrand and Martin + Osa and the continued investment to aggressively expand both businesses.

In a conference call, O'Donnell said underdeveloped categories in the core American Eagle business, such as knitwear and accessories, are being targeted for growth. "We're exploring other new concepts that complement our lifestyle brand to drive incremental growth and sales productivity."

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