American Eagle Outfitters has announced net income of US$22m for the first quarter, compared to $43.9m in the first quarter of last year, as sales and margins both declined.

The company said total sales for the quarter ended 2 May decreased 4% to $612.0m. Same-store sales decreased 10% for the quarter, compared to a 6% decrease last year. AEO Direct sales increased 26%, driven by increased traffic and conversion.

Gross profit for the first quarter was $220.9m, or 36.1% as a rate to sales, compared to $263.7m, or 41.2% as a rate to sales last year. Merchandise margin declined by 260 basis points, due to a lower initial markup and higher markdowns compared to the first quarter last year.

Selling, general and administrative expense of $158.7m decreased 6% from $169.6m last year.

"While we are never satisfied with an earnings decline, there are early indications that the business is stabilising. For example, we are seeing improvements in the AE brand, particularly in denim and other key fashion categories such as dresses and accessories," said Jim O'Donnell, chief executive officer, American Eagle Outfitters.

"There are also critical areas of our business that still need considerable work in order to drive top line sales and profitability. They include further progress in assortments across AE categories and strengthening our merchandise margin. We are aggressively focused on these issues and expect to be better positioned as we move ahead."

The company expects second quarter earnings to be in a range of $0.12 to $0.15 per share, compared to earnings of $0.29 per share last year.