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American Eagle Shares Fall on Lower Profit

American Eagle Outfitterssaid Tuesday that its quarterly profit declined after it cut prices to offset slumping store traffic amid unseasonably warm weather, and its shares fell after it forecast holiday earnings that could miss Wall Street targets.

The teen clothing retailer said that so far in November its sales at stores open at least a year are "slightly positive" and it was "pleased with the Thanksgiving weekend driven by positive traffic trends."

But it forecast earnings of 67 to 70 cents per share for the fourth quarter, while analysts, on average, was expecting earnings of 70 cents, according to Reuters Estimates.

CIBC World Markets analyst Roxanne Meyer said the earnings forecast is "likely to be viewed as a shortfall" and with American Eagle ending the third quarter with higher inventory, markdowns could pressure results in the current quarter.

The company's shares fell 5 percent at $20.32 in early New York Stock Exchange trading.

Net income for the third quarter ended Nov. 3 was $99.43 million, or 45 cents per share, compared with $100.95 million, or 44 cents per share, a year earlier. In the most recent period, the company had fewer shares outstanding.

Analysts, on average, had been expecting earnings of 45 cents per share, according to Reuters Estimates.

Earlier this month, the mall-based retailer reiterated its third-quarter earnings per share outlook of 44 to 45 cents and said total third-quarter sales rose 7 percent to $744.4 million. Same-store sales, which measure sales at established stores, rose 2 percent overall in the quarter.

But the company has cited lower mall traffic during the fall, amid warmer weather, and same-store sales fell 2 percent and 3 percent in September and October, respectively, after a rise of 9 percent in August.

It said that in the quarter, merchandise margins declined after higher markdowns partially offset lower product and transportation costs.

The retailer's brands include the preppy American Eagle concept; aerie, a line of dormwear and intimates; and MARTIN + OSA, a sportswear chain targeting 25-to-40-year-old women and men.

The company said that initial customer response to its new aerie line of fitness and workout merchandise that it launched in the quarter had been "quite positive," and it said that last week it launched aerie personal care items, which include products for lips, body care and home fragrance.

The company said it was making "steady progress" with its MARTIN + OSA stores, and it expects its loss from the brand to be less in its next fiscal year than the current fiscal year.

The company also said it is evaluating plans to enter the "global marketplace," looking at a possible joint venture with one or more partners.

"International has a ring to it. We think we can participate in that arena, but I'm also being somewhat cautious," said Chief Executive Officer Jim O'Donnell on a conference call with analysts.

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