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Aeropostale shares tumble on market share worries

NEW YORK (AP) -- Shares of Aeropostale Inc. fell Monday after a Janney Capital Markets analyst cut her rating for the company, saying that teen spending might be shifting toward other clothing retailers.

THE SPARK: Adrienne Tennant lowered her rating for Aeropostale to "Neutral" from "Buy," noting that its competitors Abercrombie & Fitch Co. and American Eagle Outfitters Inc. appear to be on the rise and could take away some of its market share. The analyst also reduced her price target on the stock by $1 to $14.

THE BIG PICTURE: Like other teen retailers, Aeropostale has struggled to boost profitability in the face of continued weak consumer spending. In addition, the company has faced tough competition from other retailers vying for teen dollars, prompting it to mark down its merchandise more than it would like to.

In August, the New York-based company reported lackluster second-quarter results stemming from soft demand during the back-to-school season and issued disappointing guidance for fiscal third quarter. Aeropostale is set to report its results for that period on Wednesday.

The company's stock has taken a beating in recent months too, falling about 26 percent since the company pre-announced its second-quarter results on Aug. 2.

THE ANALYSIS: Tennant noted that it's a very rare occurrence when Aeropostale, Abercrombie and American Eagle all perform well at the same time, saying that success at one company usually stems from a shift in market share away from another.

Tennant noted that Abercrombie posted some of the biggest sales improvements on Black Friday, while American Eagle showed continued momentum. She added that product and value improvements at Abercrombie could draw in the sector's most price-conscious spenders, further taking away market share from Aeropostale.

THE SHARES: Down 98 cents, or 6.8 percent, to $13.47 in heavy afternoon trading, after dropping as low as $13.27 earlier in the day. Over the past 52 weeks, the company's shares have traded between $11.76 and $23.05.