1:30PM New York – American Eagle traded higher after it reported quarterly sales rise of 5% and earnings decline of 56%.

American Eagle Outfitters, Inc., teen age apparel retailer today reported first quarter sales increased 5% to $640.3 million compared to $612.4 million in the quarter year ago. Net income decreased $43.9 million or $0.21 cent per diluted share compared to $78.8 million or $0.35 cent per diluted share for the same quarter of 2007.

First quarter comparable store sales decreased 6% compared to a 6% increase last year.

Gross profit declined to $263.7 million or 41.2% as a rate to sales compared to $298.5 million or 48.7% as a rate to sales in the same quarter of 2007. Selling, general and administrative expenses were $169.6 million increased to 26.5% as a rate to sales from $157.0 million, or 25.6% as a rate last year.

Operating income for the quarter was $64.5 million, compared to $116.0 million last year. The operating margin was 10.1%, compared to 18.9% for the same quarter of last year.

New Store openings

In the first quarter, the company opened 15 AE stores, 16 aerie stores and 3 MARTIN + OSA stores. In fiscal 2008, the company plans to open approximately 40 AE stores, 80 aerie stores and 11 MARTIN + OSA stores and remodel 40 to 50 AE stores.

Capital expenditure more than $250 million

For the first quarter, capital expenditures were approximately $74 million. For fiscal 2008, management expects capital expenditures to be in the range of $250 to $275 million.

Second quarter earnings outlook

Management expects second quarter earnings between $0.28 and $0.30 per share compared to $0.37 per share last year.

American Eagle Outfitters, Inc., (AEO: chart), in the last one year of traded as high as $22.04 in August 2007 and as low as $15.80 in April of 2008.