American Eagle On Wednesday, the corporate said it was improving its profitability because it worked to enhance its product line and streamline its operations. However, first-quarter sales were weaker than Wall Street had expected.

Nevertheless, sales increased by 6 percent in comparison with the previous yr and represent a record for the primary quarter, the corporate said in a press release.

Shares fell about 5% in prolonged trading Wednesday.

Here's how the clothing company performed in comparison with Wall Street expectations, based on an analyst survey conducted by LSEG:

• Earnings per share: 34 cents in comparison with 28 cents expected
• Revenue: $1.14 billion in comparison with expected $1.15 billion

The company's net income for the three-month period ended May 4 nearly quadrupled from the identical period a yr ago. American Eagle reported net income of $67.8 million, or 34 cents per share, compared with $18.5 million, or 9 cents per share, a yr earlier.

Sales rose from $1.08 billion within the previous yr to $1.14 billion.

American Eagle still expects operating profit to be within the range of $445 million to $465 million, which corresponds to revenue growth of two to 4 percent over the previous yr. According to LSEG, that is barely below estimates of three.4 percent.

Chief Financial Officer Mike Mathias told CNBC that American Eagle is maintaining a “cautious” stance for the second half of the yr because it prepares for some harder comparisons, awaits rate of interest decisions from the Federal Reserve and prepares for “noise” related to the upcoming presidential election.

He added that the corporate desires to wait and see how the back-to-school shopping season plays out to get a greater idea of ​​how the remaining of the yr will unfold.

For the present quarter, American Eagle expects operating profit within the range of $95 million to $100 million, which corresponds to high-single-digit revenue growth and is according to the 7.4 percent increase expected by analysts, in response to LSEG.

The clothing company, which also sells lingerie under the Aerie brand of the identical name, is within the midst of a brand new growth strategy. Over the subsequent three years, the corporate goals to extend its sales by 3 to five percent annually and increase its operating margin to around 10 percent.

Some of those efforts are already bearing fruit. In the fiscal first quarter, American Eagle increased its gross margin by 2.4 percentage points. Mathias said in the corporate's earnings call that this was the corporate's second-highest rate since 2008. The gains were resulting from higher inventory management, lower product and transportation costs, and a discount in rent, delivery and distribution, and warehousing costs.

“Key growth drivers have been in women's clothing, particularly tops, which I've found to be a high priority for us. I'd also like to highlight strength in dresses, skirts and jeans. We're seeing positive customer response in these areas as we seek to address the social occasion of casual wear and a broader age group. Both are important growth opportunities in our long-term plan,” added Jennifer Foyle, president and executive creative director of American Eagle, within the earnings call.

American Eagle's strategy also focused on refreshing its product assortment, removing items that didn't resonate with customers, and specializing in categories that did.

Foyle told CNBC that the corporate was simply “over-scaled” – meaning it had too many various individual products (often referred to within the industry as SKUs) for consumers to pick from.

“We knew we could do more with less,” Foyle said. “So we invested deeper in our bottoms but fewer stocking units so we could give our customers the fits they demand from us.”

“We've really reclaimed that category, we're on a winning streak,” Foyle said of the corporate's denim business. “Certainly in women's, some early gains in men's, as I mentioned, you'll see more of those gains in the third quarter. We remain very flexible in that category, but we're definitely more balanced than we've been in the past.”

The company can be working to transform its stores and introduce latest formats, recently introducing a brand new store design for American Eagle that “outshines the rest of the chain,” Foyle said.

“We're excited to redesign our stores with a new brand feel that I think expresses exactly what we set out to do,” she said. “Customers are obviously excited about what they see in this store design when you look at the results.”