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American Eagle (AEO) Plunges 14% on Weak Holiday Forecast

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On Wednesday, shares of mall retailer American Eagle Outfitters (AEO - Free Report) are plunging, down almost 14% in midday trading after the company reported mixed third quarter results before the bell.

Earnings per share of 41 cents matched the Zacks Consensus Estimate, and revenues increased 2.3% to $941 million, also meeting analyst expectations. Net income was $75.8 million for the quarter. Overall comparable sales growth, however, was only 2%, coming in below the 2.9% growth that was expected. At its namesake brand, American Eagle saw comps rise 0.4%, while its popular lingerie brand, Aerie, saw sales soar 21%.

“I’m pleased that we continued to deliver strong results in a tough retail climate, with the third quarter reaching record sales and marking the 9th consecutive quarter of profit improvement,” said Chief Executive Officer, Jay Schottenstein.

“We are sharply focused on delivering the best innovation, consistent quality and outstanding value to our customers day-in and day-out. The holiday season is off to a solid start and our brands are well-positioned. We will continue to leverage our leading capabilities to maintain momentum and build on the progress we’ve made over the past few years,” Schottenstein continued.

Looking ahead to its holiday quarter, American Eagle forecasts weaker-than-expected earnings in the range of 37 cents to 39 cents per share, with comparable sales between flat and positive low single digits. Analysts were expecting EPS of 45 cents per share.

American Eagle’s holiday forecast is similar to its competitors, suggesting mall retailers will face another tough holiday season. Abercrombie & Fitch (ANF - Free Report) and Gap Inc. (GPS - Free Report) both said the upcoming quarter will be challenging in their latest earnings reports. Customers will likely see an increase in promotions and discounts at these brands, both in-store and online, as holiday shopping heats up.

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