UPDATE 2-Apparel cos struggle in Jan., Talbots cuts view

(Recasts; adds Hot Topic and Talbots details, byline)

By Alexandria Sage

LOS ANGELES, Feb 6 (Reuters) - Teen clothing retailers American Eagle Outfitters Inc (AEO.N) and Hot Topic Inc (HOTT.O) on Wednesday posted weaker sales at established stores in January, but both affirmed earnings forecasts for the fourth quarter.

Meanwhile, Talbots Inc (TLB.N), which sells traditional apparel to women aged over 40, said it would shut more stores as the economy worsens and slashed its fourth-quarter financial target.

"Worsening economic conditions in the fourth quarter exacerbated problems that we had already recognized and have been working to address and impacted our near-term performance," Talbots CEO Trudy Sullivan said in a statement.

Investors have been closely watching the U.S. retail sector to see if sales declines during the crucial year-end holiday season would persist into January and eventually crimp earnings.

Teen retailers, which cater to carefree young shoppers with no mortgage burdens, fare better than most, but same-store sales at established stores, a key gauge of retail performance, are down as store traffic has fallen even in that segment.

American Eagle posted a 7 percent decline in sales at stores open for at least a year, well below the 3.2 percent drop expected by Wall Street, on average, according to Reuters Estimates.

A 3.6 percent decline at Hot Topic, however, was better than the 6.5 percent drop expected by analysts.

American Eagle reiterated its fourth-quarter earnings outlook of 64 cents to 65 cents per share. Analysts, on average, are expecting 65 cents, according to Reuters Estimates.

Hot Topic also stood by its fourth-quarter earnings forecast, of 25 cents to 29 cents a share, versus the average Wall Street estimate of 26 cents.

TROUBLE AT TALBOTS

Talbots said it would close 100 underperforming stores in fiscal 2008, including 78 kids' and mens' stores announced previously, and reduce 2008 capital spending to $75 million from $83 million in 2007 as it scales back store opening plans.

It warned it would take a fourth-quarter hit of $1.87 per share from the write-down of assets, store closure charges, acquisition and financing costs, executive compensation charges and other items.

A fourth-quarter net loss is now expected to range from $2.10 to $2.15 per share, while an adjusted loss should range from 23 cents to 28 cents, the company said. In November, Talbots said its quarterly loss would range from 5 cents to 10 cents per share.

Total net sales at Talbots during the fourth quarter fell 8 percent to $587 million, while same-store sales fell 6 percent, the company said.