American Eagle Outfitters Plummets as Teen Fashion Chain Lowers Holiday Season Sales Expectations

Investors clip the wings of American Eagle Outfitters Wednesday after the teen fashion retailer is forced to lower its holiday season sales forecast amid softer demand for men's and women's tops.
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Shares of American Eagle Outfitters (AEO) - Get Report plunged Wednesday after the teen fashion retailer significantly lowered its guidance for the all-important holiday season.

American Eagle's stock price dropped 6.58% to $14.13 a share after the retailer forecast fourth-quarter sales and earnings well below market expectations.

American Eagle now expects earnings to ring in at 34 cents to 36 cents a share during the last three months of 2019, compared with the estimate of 46 cents a share of analysts surveyed by FactSet. The teen fashion retailer also lowered its sales forecast, now expecting flat same-store sales for the fourth quarter, compared to the more than 4% increase predicted by FactSet.

That's compared to earnings of 43 cents a share during the fourth quarter of 2018.

Jay Schottenstein, the company's CEO, cited "softer demand" in certain "apparel categories" and "higher markdowns," noting the trends have extended into the fourth quarter and the holiday shopping season.

In a later call with analysts, Schottenstein said men's and women's tops were the categories battling softer demand.

"The team has been working hard to quickly course correct, and our focus is squarely on continuing to capitalize on the strength of our brands," Schottenstein said in a press statement.

Even so, American Eagle reported solid results for the third quarter.

The retailer posted earnings o 48 cents a share, right in line with the estimate of analysts  surveyed by Zacks Investment Research.

American Eagle reported revenue of $1.07 billion for the quarter, edging past Zacks' estimate by 0.23% and up from the same quarter in 2018, when the retailer reported revenue of $1 billion.