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NEW YORK — At least one teen retailer could be losing its luster in the eyes of Wall Street.

A.G. Edwards & Sons Inc. analyst Robert Buchanan cut his investment rating on Aeropostale Inc. to “hold” from “buy.” Same-store sales at the retailer “eroded rather badly” in the last two weeks of August, the analyst said Monday, leading him to expect “good but not great” results from the specialty retailer in September and through the remainder of the year.

Buchanan first lowered his earnings-per-share estimates on Aeropostale after the company reported lower-than-expected August comps of 6.2 percent. Those results greatly contrasted with rival American Eagle Outfitters’ 23.9 percent surge, evidence of what Buchanan called American Eagle’s “sustained performance momentum.”

Aeropostale’s weaker August comps followed a 13.8 percent advance in July, but were down significantly from its 27 percent surge in May comps and February’s 26.4 percent spike. In contrast, same-store sales for American Eagle turned positive in January and were on a tear in July and August, up 21.7 percent and 23.9 percent, respectively.

As a result, “Aeropostale in our view needs to beat, rather than just meet, consensus comp and EPS estimates in the near term for the stock to outperform the broad market,” said Buchanan, who on Sept. 2 reduced his third-quarter EPS estimate on the company to 55 cents from 61 cents.

Closing Monday trading down 4.9 percent to $28.60 following the downgrade, shares of Aeropostale have advanced 25 percent since late April and are up about 46 percent in the last year versus the S&P 500. Shares of American Eagle have risen 43 percent since late April. Both stocks are trading at about 16 times expected full-year 2005 earnings.

Even though Buchanan expects 46 percent earnings growth from Aeropostale in the second half of the year, he called the expectation “inefficient” for the stock to outperform the broader market because of the “lofty expectations that already exist for this name.”

This story first appeared in the September 22, 2004 issue of WWD.  Subscribe Today.