UPDATE 1-RESEARCH ALERT-Jefferies starts American Eagle with buy

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Sept 19 (Reuters) - Jefferies & Co started coverage of American Eagle Outfitters Inc (AEO.N) with a "buy" rating, saying the apparel retailer's recent initiatives, including a bolder product assortment and tighter inventory control are gaining traction.

Though macro headwinds are likely to persist and American Eagle is not out of the woods yet, management is taking decisive action resulting in sales trends becoming less negative and margin contraction moderating, analyst Randal Konik said in a note to clients.

He has a price target of $21 on American Eagle shares.

Jefferies also initiated coverage of teen clothing retailers Abercrombie & Fitch Co (ANF.N) and Aeropostale Inc (ARO.N) with an "underperform" and a "hold" rating, respectively.

Analyst Konik said having held up fairly well until now, Abercrombie's sales trends are taking a leg down and margins are starting to crack. He has a price target of $38 on the stock.

"While many competitors are adapting to the weak retail environment with lower pricing strategies, Abercrombie is sticking by its high product pricing. This preserves long-term brand equity but will likely hurt near-term sales, profits and market share," Konik wrote in a note to clients.

On Aeropostale, Konik said the company is taking share from its peers and navigating well in a difficult retail environment by offering a compelling assortment at value price points.

The analyst, who has a price target of $32 on the stock, said he expects this favorable trend to continue for Aeropostale as macro pressures persist.

But, the company's shares are near an all-time high and already trade at a premium to the group, so valuation is not compelling, Konik said. (Reporting by Dilipp S. Nag in Bangalore; Editing by Amitha Rajan)