Q1 Soar, Q2 Stall for American Eagle?

NEW YORK – American Eagle Outfitters matched analysts’ consensus estimates with a double-digit profit gain during the first quarter, but its conservative estimate for the current period let down investors.

Net income for the three months ended May 5 was $78.8 million, or $0.35 a diluted share, on par with analysts’ estimates and 22.8% ahead of the year-ago mark of $64.2 million, which translated to diluted EPS of $0.28.

Net sales ratcheted up 17.2% to $612.4 million from $522.4 million a year ago. Comparable-store sales were up 6% while gross margin held steady at 48.7% of sales in both periods.

Investors were disappointed with the company’s second quarter guidance for earnings per diluted share of $0.34 to $0.36. Although ahead of the $0.31 registered during the second quarter of 2006, it trailed the consensus estimate of $0.37. That contributed to a selloff on the New York Stock Exchange in American Eagle shares, which ended the day at $28.06, down $1.27 or 4.3%. In the past year, they’ve been as high as $34.80 (January 18) and as low as $20.07 (May 24, 2006).

“We continue to capitalize on our systems and the investments we’ve made in critical functions such as sourcing and production,” said Jim O’Donnell, CEO. “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.”

Based in Warrendale, Pennsylvania, American Eagle currently operates 913 American Eagle stores in North America as well as eight Martin + Osa units. This year it intends to open 34 AE stores, 14 M+O units and about 40 Aerie shops. It also plans to remodel 56 AE stores and increase square footage overall by about 10%.