American Eagle Outfitters Inc announced the retirement of its chief executive officer, paving the way for new leadership at an apparel retailer that has seen sales stumble amid heavy discounting.

The company also posted quarterly profit that edged over analyst estimates.

CEO James O'Donnell, 70, will continue to lead American Eagle until the company finds and installs a successor.

We view this as a positive development, Jefferies analyst Randal Konik said of O'Donnell stepping down. The company needs new management direction to get new shareholders interested in the story.

Shares were up 1.7 percent at $15.05 in premarket trading.

Sales at stores open at least a year, a closely watched measure of a retailer's health, fell 7 percent during the fourth quarter and the company said it expected that measure to be flat to down 3 percent in the first quarter.

Adjusted earnings from continuing operations in the company's holiday fourth quarter were $87 million or 44 cents per share, up from $59.3 million or 28 cents per share a year earlier.

Analysts had expected earnings of 43 cents per share, according to Thomson Reuters I/B/E/S.

Sales fell 4 percent to $916 million. Analysts on average had expected $919.2 million.

(Reporting by Helen Chernikoff, editing by Dave Zimmerman)