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WARRENDALE, PA-American Eagle Outfitters continues to set records with double-digit increases in total sales, comp store sales overall and within each region and a stunning 58% increase in internet sales for the first quarter ended April 30. “We’re differentiated now more than ever,” said James O’Donnell, CEO, during a conference call in which he spelled out plans for even more gains.

One route to growth is line extensions of the AE brand in intimates, accessories and knits, he said. Susan McGalla, chief merchandising officer, noted that accessories in particular, “is a higher-margin business.” The other route is the as-yet-unidentified “new concept,” on track for a debut early next year. But, no details were disclosed. In addition, the company plans to add 42 more stores this year and renovate between 50 and 55 existing ones.

Total sales rose to $454 million for the quarter, a 36.7% increase over first-quarter 2004. Comp store sales increased 27.1%. Net income for the opening quarter of this year spiked to $55.3 million, more than doubling net income of $25.3 million in first quarter a year ago.

Furthermore, gross profit as a percent of sales increased to 48.9% from 44.7% a year ago due to the leveraging of rent expense and improved merchandise margins. The company issued fewer coupons and sold more product at regular prices. “Our real estate is significantly more productive,” said Laura Weil, CFO. “Our sales per sf are not yet at the $450-per-sf peak, but we’re confident we’re headed in that direction,” she said.

“We are the denim destination,” said Roger Markfield, vice chairman and president. While he would not say what proportion of overall sales is represented by denim, he said, “our market share of specialty store denim nearly doubled last year.” Three-quarters of the denim styles being readied for the back-to-school season will be new designs, “on trend and differentiated,” he added.

While other denim merchants have raised prices significantly on embellished denim, McGalla said, “we feel very strong about our value position. We will add styles with some embellishments, and we’ll get paid for that work, but they will still represent value and be very accessible.”

The partnership with MTV that AE used this spring will continue through back-to-school and for the rest of the year. O’Donnell said customers are making more visits to stores. He attributed that to the designs, marketing and to “the number of floor sets and the frequency of new floor sets in stores. People come in just to see what’s new.”

Asked how the company’s credit card business was doing, McDonnell said AE credit card use “rose 57% in first-quarter versus fourth-quarter 2004.” He would not say what proportion of sales credit cards accounted for, but said company credit card sales “are a meaningful number.”

Legg Mason analyst Richard Jaffee concluded the conference by telling the AE management team, “you’ve really raised the bar for apparel retailers.”

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