(RTTNews) -  Teen clothing retailer American Eagle Outfitters, Inc. (AEO: News ) reported Tuesday a 39% year-over-year surge in profit for the third quarter, helped by a tax benefit as well as absence of an impairment charge this year. However, non-GAAP earnings per share for the quarter dropped 30%, but came in line with analysts' expectations. Quarterly net sales declined 1%, but topped consensus estimate by a whisker.

The company also noted that it is poised for a continued recovery in 2010 as it drives forward with creativity, vision and discipline, and said it would provide earnings guidance for the fourth quarter along with its November monthly sales results.

In a statement, chief executive officer, Jim O'Donnell said, "Although earnings results remain below our standards, American Eagle Outfitters continued to gain ground during the third quarter. The AE brand showed improvement across key merchandise categories. Additionally, aerie and Martin+Osa achieved strong top line growth."

Third Quarter Results

The Pittsburgh, Pennsylvania-based retailer reported net income of $59.16 million or $0.28 per share for the third quarter, up from $42.60 million or $0.21 per share in the prior-year quarter.

The results for the latest quarter include a tax benefit of $0.07 per share associated with the repatriation of earnings from Canada, while the year-ago quarter results included $0.09 per share of other-than-temporary impairment charge related to auction rate securities.
Excluding the special items, non-GAAP earnings for the quarter dropped 30% to $0.21 per share from the year-ago quarter's $0.30 per share. On average, 32 analysts polled by Thomson Reuters expected the company to report earnings of $0.21 per share for the third quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter declined 1% to $748.96 million from $754.04 million in the same quarter last year, but topped twenty nine Wall Street analysts' consensus estimate of $748.32 million by a whisker.

Comparable store sales decreased 4% for the quarter, compared to a 7% decline last year. Meanwhile, during the first three weeks of November, consolidated comparable store sales declined 5%.

The recession has had a negative impact on many retailers due to reduced customer spending. In October, American Eagle's total sales was down 5% to $195.1 million, while in September sales rose 7% to $246.0 million from last year. In August, sales decreased 4% to $307.7 million. Meanwhile, comparable-store sales for the month of October dropped 5%, September comparable store sales were flat, and August comparable store sales decreased 7%.

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