UPDATE 2-Aeropostale holiday sales slide, losing out to rivals

Thu Jan 10, 2013 10:15am EST

* Aeropostale holiday sales down 6 percent

* Aeropostale cuts back Q4 EPS view

* American Eagle holiday sales up 5 pct

* Urban Outfitters holiday sales up 15 pct

Jan 10 (Reuters) - Aeropostale Inc confirmed fears of weak sales during the holiday selling period as the budget-friendly teen clothes retailer saw sales slide, sending shares down nearly 10 percent on Thursday.

Aeropostale has been losing out to rivals like American Eagle Outfitters Inc, and said the environment in the teen apparel space was still heavily promotional.

"Following a strong Black Friday weekend, sales and traffic trends deteriorated significantly in December," Aeropostale Chief Executive Officer Thomas Johnson said in a statement.

The New York-based company has had trouble engaging its young clientele with its merchandise. Wardrobe staples like graphic T-shirts and fleece during cold weather often make for the lion's share of teen clothing inventories and Aeropostale has had a tough time selling those.

Aeropostale shares were down 9.8 percent at $12.05 in early morning trading on the New York Stock Exchange.

Richard Jaffe, an analyst with Stifel Nicolaus research firm, said fashion merchandise was performing better than basic clothing and fashion items represent only a small portion of Aeropostale's total merchandise.

"The underperforming core basics category represents the majority of the store and requires deep discounts to sell," Jaffe said.

He said that in the crowded "classic, preppy" merchandise business, companies such as Abercrombie and Aeropostale "lack differentiation" so they compete mostly on price.

Aeropostale, which gave numbers for the nine weeks ended Dec. 29, said sales fell 6 percent.

In contrast, American Eagle, which posted numbers for the period ended Jan. 8, said sales had risen 5 percent and post-Christmas selling was strong.

Separately, Urban Outfitters Inc, which owns the Anthropologie chain, said sales for two months ending Dec. 31 rose 15 percent over the same period last year.

The weak sales prompted Aeropostale to cut back on its expectations for its fourth quarter.

The company now expects net earnings of 20 cents to 24 cents per share, compared with its earlier outlook of 36 cents to 41 cents.

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