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Sector Snap: Teen retailers drop on 2Q concerns

NEW YORK (AP) -- Shares of teen retailers dropped on Tuesday after American Eagle cut its second-quarter earnings forecast due to weak sales and margins during the period.

Late Monday American Eagle Outfitters Inc. said it anticipates second-quarter earnings of 10 cents per share. Its prior forecast called for earnings of 19 cents to 21 cents per share. Analysts, on average, had been expecting 21 cents per share, according to FactSet.

The Pittsburgh company also said revenue fell 2 percent in the quarter. Based on revenue of $739.7 million in 2012 second quarter, that suggests it will report revenue this year of $724.9 million. That was below Wall Street's forecast of $750.2 million

American Eagle's stock plunged $3.02, or 15.1 percent, to $16.95. The shares declined to $16.60 earlier in the session, their lowest point since March 2012.

B. Riley & Co.'s Jeff Van Sinderen lowered his rating on American Eagle to "Buy" from "Neutral" and reduced its price target to $17.50 from $26. Van Sinderen said in a client note that even though he has had increasing concerns about the promotional environment in the sector and difficult comparisons American Eagle is up against, he didn't expect the chain's second-quarter performance to be punished so badly.

The analyst said that things may not start to get better until the first quarter, when comparisons begin getting easier.

John Kernan of Cowen and Co. said that American Eagle's increased level of promotions and soft traffic hurt its performance. The analyst said that this commentary makes him more cautious on other teen retailers, such as Aeropostale, Abercrombie & Fitch and Buckle.

Kernan maintained a "Market Perform" rating and $16.50 price target.

Here's how some other teen retailers are faring in afternoon trading:

Abercrombie & Fitch dropped $2.71, or 5.3 percent, to $48.95.

Urban Outfitters Inc. declined $1.40, or 3.2 percent, to $42.27.

Aeropostale Inc. fell 80 cents, or 5.4 percent, to $14.15.

Buckle Inc. dropped $2, or 3.5 percent, to $54.65.

Zumiez Inc. shed $1.14, or 4 percent, to $27.63.

Wet Seal Inc. fell 21 cents, or 4.8 percent, to $4.21.