American Eagle Outfitters (NYSE: AEO) in the first quarter of FY 17 has posted the mixed first quarter earnings results and offered a weak second quarter outlook, as comps rose but margins fell.

AEO in the first quarter of FY 17 has reported the adjusted earnings per share of $0.16 beating the analysts’ estimates for the adjusted earnings per share of $0.17. The company had reported the adjusted revenue growth of 1.7 percent to $761.8 million in the first quarter of FY 17, beating the analysts’ estimates for revenue of $741.76 million.

AEO noted that comparable sales (comps) grew up 2% in the first quarter of FY 17, which is far better than the company’s own guidance for a flat to low single digit decline. Still, the momentum is decelerating, as comps were up 6% in the year-ago period.

AEO’s profit decline was due to weaker gross margins, which fell to 36.5% of revenue in Q1 2017, compared to the 39.2% in Q1 2017. That’s a 270 basis point decline, with margins hurt by higher promotions and rising shipping costs amid better online sales.

Additionally, during the first quarter, AEO has returned $110 million to shareholders through cash dividends and share repurchases. The company paid dividends of $22 million and repurchased six million shares for $88 million. The remaining authorization under the current repurchase program is 19 million shares.

In the second quarter of FY 17, AEO expects the earnings per share to range from $0.15 to $0.17, which is well below the $0.23 that analysts are looking for. The company also expects comps ranging from flat to a low single-digit decline. AEO continues to expect the fiscal year 2017 capital expenditures in range of $160 million to $170 million

For fiscal 2017, AEO has planned to open a total of 35 American Eagle Outfitters and Aerie stores throughout U.S., Canada and Mexico. However, AEO in 2017 has planned to close between 25 and 40 store locations. Internationally, the company has planned to open 45 licensed stores and close 2 licensed locations in 2017.

AEO stock has fallen 6.49% in a year (source: Google Finance). According to tipranks.com, 7 analysts has covered the stock while recommending a “Moderate Buy”. AEO has an average price target of $16.50, which is a further upside of 27.31%.