American Eagle Outfitters Inc. suffered its biggest stock decline in almost nine months, dragged down by concern that the teen retailer’s sales and profit-margin growth is slowing.
The Pittsburgh-based company posted a smaller improvement in gross margin last quarter than in the previous period. It also is predicting that same-store sales will grow in the mid-single digits in the current period. That would be down from the 11 percent increase in the second quarter.
The shares fell 7.5 percent to $16.90 in New York, the largest drop since December 2014.
“The problem is people were expecting more,” said Simeon Siegel, an analyst at Nomura Securities. “It’s the combination of people expecting even stronger comparable sales and the fact that the guidance calls for a deceleration.”
The tumble follows a 32 percent run-up for the stock this year through Tuesday’s close. American Eagle has been praised for successfully updating its product assortment, drawing teen shoppers looking for festival-chic outfits.
Investors see the company as the rare retailer able to shine in a generally moribund market for teen clothing. That’s made it tougher to live up to expectations, Siegel said.
“The company is growing very strongly, and the stock has already priced that in,” he said.