American Eagle third-quarter surprises as margins better than expected

Wed Nov 6, 2013 5:21pm EST

Pedestrians walk past an American Eagle Outfitters store in New York, June 23, 2009. REUTERS/Brendan McDermid

Pedestrians walk past an American Eagle Outfitters store in New York, June 23, 2009.

Credit: Reuters/Brendan McDermid

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(Reuters) - Teen apparel retailer American Eagle Outfitters Inc (AEO.N) said it expects third-quarter profit above analysts' estimates due to better-than-expected margins, sending its shares up 13 percent in after-hours trading.

The company estimated earnings of 19 cents per share, excluding items, for the quarter ended November 2, above its previous forecast of 14 cents to 16 cents per share.

Analysts on average were expecting earnings of 15 cents per share, according to Thomson Reuters I/B/E/S.

"In an extremely challenging environment, our bottom line results are slightly ahead of our prior expectations and we ended the period with clean inventory," said Chief Executive Robert Hanson.

The company's comments are in contrast to those of rival Abercrombie & Fitch Co (ANF.N), which said on Tuesday it expects significant gross margin erosion in the holiday quarter as it discounts heavily to clear excess inventory.

Same-store sales, including online, fell 5 percent in the quarter at American Eagle, compared with a 10 percent rise a year earlier.

Comparable sales at Abercrombie fell 14 percent in the same period.

American Eagle shares, which closed down 4 percent at $14.65 on Abercrombie's results, were trading up 12 percent in extended trading on Wednesday.

(Reporting by Siddharth Cavale in Bangalore; Editing by Sriraj Kalluvila)

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