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Analyst downgrades American Eagle Outfitters

NEW YORK (AP) -- American Eagle Outfitters is facing tough competition at the mall for basics like T-shirts and shorts, a Citi Investment Research analyst said Wednesday, and he downgraded the stock to "Neutral" from "Buy."

There has been increased competition in basics in the teen sector, said analyst Oliver Chen — specifically for shorts, tees and tops, key items for American Apparel, which could lead to market share loss.

American Eagle may still meet its guidance, Chen said, but there is more return on stock investment likely for accessory makers, such as Michael Kors and Coach Inc.

"Mall traffic continues to be lackluster and our industry view is that teen and women retailers run the risk of underpacing overall trends," he said in a note to clients.

He cut his price target by $2, to $21, and lowered his rating on the stock to "Neutral" from "Buy."

American Eagle shares slipped 25 cents to $18.91 in afternoon trading. The stock's 52 week trading range is $18.02 to $23.94.