Pacific Growth Downgrades Aeropostale

Analyst Andy Graves says the teen-focused specialty clothing retailer has strong competition from newly-invigorated peers

Pacific Growth downgrades teen-focused specialty clothing retailer Aeropostale (ARO ) to equal-weight.

Analyst Andy Graves says Aeropostale stock has risen about 30% since he upgraded it to overweight Jan. 11.

He thinks strong competition from American Eagle Outfitters and Abercrombie and Fitch, which he feels have successfully reinvigorated their brand identity over past year, combined with difficult July 2004 comparable sales (+13.8%), could result in continued gross margin erosion from higher-than-expected promotional activity during back-to-school season in order to move merchandise.

In light of reduced second-quarter guidance, Graves cuts his 21 cents earnings per share estimate to 18 cents and $1.86 fiscal 2006 (ending January) to $1.81, and $2.29 fiscal 2007 to $2.23 earnings per share.

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