What happened Shares of retail clothier American Eagle Outfitters (NYSE: AEO) jumped out of the gate Thursday, racing ahead 7.7% by 9:45 a.m. EST after the company reported an earnings beat last night. Expected to report pro forma profits of $0.36 per share on sales of $1.28 billion, American Eagle edged out both numbers with a report of $0.39 per share pro forma profit, and $1.29 billion in sales. Image source: Getty Images. So what Despite beating estimates, sales for American Eagle's fiscal fourth quarter 2020 declined 2% year over year, with same-store sales declining 1%, hurt by a 20% decline in in-store sales. Sales of Aerie lingerie, however, jumped 25%, and the company's online sales surged 35%. Profits-wise, gross margin climbed 300 basis points and gross profits were up 8%. Higher operating costs, however, sapped those gains, with the result that on the bottom line, AE earned only $0.02 per share when profits were calculated according to generally accepted accounting principles (GAAP) -- much less than the pro forma figure, and also down from $0.03 a year ago. The large difference between AE's GAAP number and its pro forma number was attributed to "$0.36 of impairment charges and expenses related to COVID-19 protocols and $0.01 of non-cash interest expense on the company's convertible notes." Now what Nevertheless, investors were pleased with the earnings beat, and here's something else that should keep them smiling: AE CEO Jay Schottenstein says the company has "entered 2021 with momentum," and management is forecasting that both its revenue and operating profit in the first quarter of 2021 will exceed levels set in Q1 2020 -- and the pre-pandemic Q1 2019 as well. When you consider that Q1 2019 revenue, for example, was $886.3 million, and that Wall Street analysts are forecasting only $790.4 million for this quarter, it sure sounds like AE just promised to follow up its Q4 beat with another beat in Q1 2021. 10 stocks we like better than American Eagle OutfittersWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Eagle Outfitters wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of February 24, 2021 Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source