This is a summary of the earnings call for the fourth quarter fiscal 2005 conducted by American Eagle Outfitters (AEOS: chart) on March 1, 2006

Management:

- President, CMO: Susan McGalla
- CEO: Jim O’Donnel
- SVP Finance, CAO: Dale Clifton
- SVP Finance: Joan Hoxen
- DIR: Judy Mehan

Key Investor Issues:

- Sales increased 13.4% to $764.4 million from $674.0 million in the prior year.
- Net income increased 6.5% from $101 million or 66 cents a share in 2004 to $108 million or 71 cents a share.
- The company repurchased 7 million shares for a total of $161 million, leaving 3.5 million shares in authorization.

Full Year highlights

- Total sales increased 22.8% to $2.309 billion from $1.881billion in the prior year.
- The firm opened a total of 36 stores and closing 11 underperforming locations, and remodeled 43 stores, giving sales per square foot of $454 during the first year.
- Net income increased to $294.2 million or $1.89 a share from $213.3 million or $1.42 a share in the prior year.

Fourth Quarter Highlights:

Total sales increased 13.4% to $764.4 million from $674.0 million in the prior year as square footage increased 5% and units per transaction increased.

- Average store sales increased 46% and sales per square footage increased 14% on a square footage increase of 29%.
- Comparable store sales increased 7.8% compared to a 28.6% increase in the corresponding period last year.
- Sales reflected positive store traffic trends, resulting in low double digit increase in both units sold and transactions per store.
- Higher merchandise markdowns resulted in a low single digit decline and are averaged in retail price and average transaction value.

Gross margin was 46.3%, declined 300 basis points from 49.3% in the prior year due to a lower merchandise margin as well as the deleveraging of buying, occupancy and warehousing costs.

- There was an increase in markdowns partially offset by higher lead to a 210 basis point decline in the merchandise margin.
- Buying, occupancy and warehousing costs increased 90 basis points.
- Operating income increased to $174.2 million from $171.7 million last year though as a percent of sales was 22.8% down from 25.5% last year.
- Net income increased 6.5% to $107.5 million or 71 cents a share from $100.9 million or 66 cents a share in the prior year on revenue growth.

Selling, general and administrative expenses leveraged by 10 basis points to 21% while absorbing costs related to Martin and Osun as well as continued expense discipline and store payroll and a reduction in professional service costs.

- Also included in SG&A was an asset write down for Canadian distribution business and an increase in expense due to the timing of accrual.
- Effective tax rate was 40% comparing to 39% last year as a result of a 2 point per share charge for tax on a planned repatriation to take place prior to the tax year ending July 2006.
- Other income increased 31% to $4.4 million reflecting a higher average cash and investment balance on a higher investment yield compared to last year

Strong cash flow resulted in a $223 million increase in cash, short term and long term investments compared to the end of last year after capital expenditures and share repurchases.

- The firm repurchased 7 million shares for a total of $161 million, leaving 3.5 million shares in authorization.
- The firm will continue to pursue share repurchases as a part of the overall corporate financial plan.
- Capital expenditures were $23 million and for the year totaled $83 million.

Guidance For the First Quarter of 2006

- Ending inventory to increase in the low double digits in cost per foot, compared to last year.
- Earnings per share to be in the range of 36 cents a share to 38 cents a share.
- Stock option expense of 2 cents per share expected.

Guidance For the Fiscal 2006

- Stock option expense to total $.4 cents to 5 cents per share.
- The firm to open approximately 50 new stores and remodel about 50 locations, leading to a 7% per square foot growth.
- Capital expenditures to be approximately $175 million.