American Eagle Outfitters profit plunges in Q1

Pittsburgh American Eagle Outfitters’ fiscal first-quarter earnings plunged by half on losses from its failed Martin+OSA chain, masking higher sales.

For the quarter ended May 1, American Eagle's profit dropped to $10.9 million, from $22 million a year earlier. Gross margin widened to 37.7% from 36.1%.

"The first quarter demonstrated progress toward our goals. We achieved higher sales and stronger profitability," said Jim O'Donnell, CEO. "We remain focused on our priority to deliver margin improvement and earnings growth, with the ultimate goal of reaching our mid-teen operating margin target."

During the recession, American Eagle posted weak sales and relied heavily on discounting but has seen results improve lately. It said in March it was closing its Martin+OSA business, shutting 28 stores and an online operation.

Earlier this month, the company said revenue increased 8% to $659 million as same-store sales climbed 5%.

Inventory climbed 15% on the per-square-foot basis, which excludes the direct-to-consumer business.