Sales for American Eagle increase, but profits rise at a slower pace than anticipated.

• American Eagle experienced a significant increase in profits, with its net income nearly quadrupling compared to the previous year.
• Finance chief Mike Mathias informed CNBC that the company has a cautious outlook for the second half of the year due to the anticipation of tougher comparisons and the "noise" surrounding the upcoming election.
• Jennifer Foyle, the President of American Eagle, announced that the company is updating its product selection and decreasing the number of items it offers for sale.

Although its fiscal first-quarter sales were weaker than expected, the company said on Wednesday that it is making gains in boosting profitability by improving its product assortment and tweaking operations.

Although revenue fell short of expectations, it was 6% higher than the previous year and set a new record for the company, according to a news release.

Shares fell about 5% in extended trading on Wednesday.

Based on a survey of analysts by LSEG, how the apparel company performed compared to Wall Street's expectations.

• Earnings per share: 34 cents vs. 28 cents expected
• Revenue: $1.14 billion vs. $1.15 billion expected

American Eagle's net income for the three-month period ending May 4 increased by almost four times compared to the previous year. The company reported net income of $67.8 million, or 34 cents per share, compared to $18.5 million, or 9 cents per share, in the prior year.

Sales increased by approximately 6% to $1.14 billion from $1.08 billion the previous year.

American Eagle expects full-year operating income between $445 million and $465 million, with revenue growth of 2% to 4% compared to the previous year. This is slightly below analysts' estimates of 3.4% growth, according to StreetAccount.

American Eagle's finance chief, Mike Mathias, informed CNBC that the company is taking a "cautious" stance for the second half of the year due to the anticipation of more challenging comparisons, the upcoming interest rate decisions from the Federal Reserve, and the potential for "noise" around the presidential election.

He waited for the back-to-school shopping season to determine the rest of the year's performance.

American Eagle anticipates operating income between $95 million and $100 million for the current quarter, driven by high single-digit revenue growth, which aligns with the 7.4% increase predicted by analysts, as reported by LSEG.

The apparel company, known for its banner and intimates brand Aerie, is implementing a new strategy to increase growth. The company aims to increase sales by 3% to 5% annually over the next three years and achieve an operating margin of approximately 10%.

American Eagle's gross margin increased by 2.4 percentage points during the fiscal first quarter, thanks to improved inventory management, lower product and transportation costs, and the use of expenses such as rent, delivery, distribution, and warehousing to leverage gains.

American Eagle has focused on revamping its product assortment by removing unsuccessful items and emphasizing categories that resonate with customers.

Jennifer Foyle, American Eagle's president and executive creative director, stated to CNBC that the company was "over-skued," meaning it had an excessive number of individual products, commonly known as SKUs, which made it difficult for consumers to make a choice.

"We knew we could achieve more with fewer resources," said Foyle. "Therefore, we decided to invest more deeply in our core products while reducing the number of SKUs to better meet our customers' demands."

American Eagle's new store design is outpacing the rest of the chain, said Foyle, as the company continues to revamp its stores and introduce new formats.

"Foyle stated, "We're thrilled about revamping our stores with a fresh brand identity that I believe accurately reflects our recent endeavors. The customer response to the new store design has been overwhelmingly positive, as evidenced by the results.""