American Eagle Outfitters (AEO) announced its earnings for the third quarter of 2012 Wednesday morning. Net sales increased by 11% to a record $910 million, up from $819 million in the same quarter last year.

Gross profit increased 21% to $379 million. Operating income increased 39% to $129 million, and the company's operating margin expanded to 14.1% -- their best margin rate in four years.

American Eagle's earnings per share on continuing operations rose by 37%. It now stands at 41 cents per share compared to 30 cents in the same period last year. Online sales, via AEO Direct, increased 27% compared to 21% last year. Comparable store sales, including online sales, increased 10% compared with 7% last year.

Total merchandise inventory at the end of the third quarter was worth $481 million, an 11% decrease compared to $555 million in merchandise last year. Depreciation and amortization costs were $31 million, a decrease of 80 basis points to 3.4% rate to sales. Capital expenditures for the quarter were $23 million, and $71 million year-to-date. The company projects that capital expenditures will total $100 million for all of fiscal 2012. The company ended the quarter with cash and short-term investments totaling $545 million, after dividend payments totaling $317 million.

On Aug. 3, American Eagle sold its children's business 77kids, including its online business, store assets, inventory, and a license to use the name. Year-to-date after-tax losses from this sale totaled approximately $32 million. Some $4 million of this loss, or 2 cents per share, was incurred in the third quarter and reflected on the balance sheet.

For the fourth quarter of 2012, American Eagle expects an EPS in the range of 54 cents to 56 cents per diluted share, which compares favorably to an adjusted EPS of 39 cents from last year. For all of fiscal year 2012, the company expects EPS from continuing operations to fall between $1.38 and $1.40 per share, compared to an adjusted EPS of 97 cents last year.

American Eagle traded up 7.2% Wednesday.