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American Eagle's 1Q profit tops expectations

PITTSBURGH (AP) -- American Eagle Outfitters Inc. reported a drop in its fiscal first-quarter profit because of falling sales and some special charges during the period, but the teen retailer's adjusted earnings beat market expectations.

Shares rose in trading Wednesday on the news.

The company earned $28 million, or 14 cents per share, for the quarter that ended May 4, down from $39.7 million, or 20 cents per share, in the same quarter last year. After adjusting for asset write-offs and other special items, it earned 18 cents per share, compared with 22 cents per share.

The retailer's total revenue fell 4 percent to $679.5 million from $708.7 million.

Analysts polled by FactSet had expected earnings of 17 cents per share on revenue of $677.9 million.

American Eagle CEO Robert Hanson said a tough economic environment and cooler weather hurt demand, plus the company faced a difficult comparison to last year's quarter, when unusually warm weather helped boost sales.

The company said its revenue from stores open at least a year fell 5 percent for the most recent quarter, compared with a gain of 17 percent last year. This is considered a key indicator of financial performance as it strips away the impact of recently opened or closed stores.

Hanson said the company was disappointed in the quarter's decline but remains confident about its long-term growth prospects.

Jefferies analyst Randal Konik gave a mixed review to the retailer's report, saying that while American Eagle continues to execute well, its momentum may be muted by comparison to a strong year last year. The analyst said he is encouraged by management's long-term vision but sees its current stock price as fair and maintained a "Hold" rating on the stock.

American Eagle forecast second-quarter earnings between 19 and 21 cents per share; analysts were anticipating 24 cents per share. The retailer also said that expects to earn between $1.42 and $1.45 for the year, below analyst expectations of $1.49 per share.

American Eagle, based in Pittsburgh, owns the American Eagle Outfitters and Aerie brands. It operates more than 1,000 stores in North America and has more than 57 franchise stores globally.

Shares of the company increased 48 cents, more than 2 percent, to $20.79 by early afternoon.