Byline: Jennifer Weitzman

NEW YORK — American Eagle Outfitters, one of America’s hottest retailers, took a rare hit Monday. The stock fell 18.3 percent, after an analyst cut his rating on the youth-oriented apparel chain.
Shares closed down $5.88 to $26.25 on the Nasdaq, adding to declines over the past week. The stock is down 34.4 percent from its 52-week high of $40.04 reached Feb. 15. Analyst Thomas Filandro of J.P. Morgan cut his rating on the Warrendale, Pa.-based company to “long-term buy” from “buy” and cut his forecast for February same-store sales to a decrease of 1 to 3 percent from an increase of 1 to 3 percent.
The preppy and casual retailer has for several seasons outperformed the industry and has been able to rise above the fray since the first signs of an economic downturn surfaced last summer. The last time the retailer posted negative same-store sales was June, when it fell 5.3 percent.
In a research note, Filandro explained slow mall traffic due to a sluggish economy and unseasonable weather, as well as a late catalog mailing, led to the downgrade for American Eagle, which is up against an 8.8 percent increase in February of last year.
Filandro also noted the competitive landscape, primarily from Abercrombie & Fitch, which entered the spring selling season with opening price points 17 percent lower than the prior year, as well as the Gap, which was discounting spring assortments during the middle of last week. In addition, American Eagle launched its spring catalog four weeks later than last year.
“Despite what we observed as a strong initial start to its spring one collection, February results will likely miss expectations,” he said.
Dennis Van Zelfden with Robinson-Humphrey said American Eagle shares took such a large hit mostly due to the downgrade and because the company is trading at one of the higher multiples, and, with any signs of a disappointment, they will get slammed, he said. He added investors sometimes “sell first, ask later.”
Still, he said he is not expecting “any disasters” in February. “I am estimating its comps to rise 1 percent, so even if they were to come down 2 to 3 percent, it is not that far off.”
Several specialty retailers are expected to report a tough February on Thursday due to industry-wide problems like slower traffic and difficult comparisons from last February when spring started much earlier and was seasonably warmer as well as external factors like the cold weather, the economy and consumer confidence, not conducive to strong sales.
Richard Jaffe, with UBS Warburg, said while there appears to be nothing wrong with American Eagle’s fundamentals, investors are jittery and want to trim the most expensive stocks, especially after Gap reported last week during its fourth quarter review that its sales were trending down in the low double digits.
Steven Richter, with Tucker Anthony, said he expects American Eagle’s same-store sales to fall 2 to 3 percent, while Jaffe said he expects 3 percent.