American Eagle Outfitters, Inc. today announced that earnings for the 13 weeks ended May 3, 2008 decreased 40% to $0.21 per diluted share, compared to the 13 week period ended May 5, 2007.

“Our first quarter results reflect a number of challenges during the quarter, both internal and external,” said Jim O’Donnell, Chief Executive Officer.

“We are taking quick action to strengthen the business, and I am pleased with the progress we were able to make during the quarter. In response to the economic environment, we are reducing inventory and expenses.”

The mall-based chain, known for colorful, casual fashions, said net profit in the first quarter was $43.9 million, or 21 cents per share, compared with $78.8 million, or 35 cents per share, a year earlier.

Teen apparel retailer had forecast a first-quarter profit ranging from 18 cents to 20 cents per share.