In this Thursday, Dec. 13, 2012 photo, amazon shipments are packaged in Koblenz, Germany. Amazon’s fourth-quarter net income fell 45 percent, as sharply higher revenue failed to keep pace with increased spending on order fulfillment and digital content, a trend that’s become the norm for the world’s largest online retailer. (AP Photo/dapd, Harald Tittel)
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In this Thursday, Dec. 13, 2012 photo, amazon shipments are packaged in Koblenz, Germany. Amazon’s fourth-quarter net income fell 45 percent, as sharply higher revenue failed to keep pace with increased spending on order fulfillment and digital content, a trend that’s become the norm for the world’s largest online retailer. (AP Photo/dapd, Harald Tittel)
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FILE - In this July 27, 2007, file photo, signs for American Express, Master Card and Visa credit cards are shown on a New York store's door. American Express says its net income fell 47 percent in the fourth quarter of 2013, as the credit card issuer racked up hefty charges related to restructuring costs and other one-time expenses. (AP Photo/Mark Lennihan, File)
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FILE - In this Monday, Dec. 10, 2012, file photo, workers sort packages at a FedEx sorting facility in Kansas City, Mo. FedEx is more pessimistic about the U.S. economy than it was three months ago, but more assured of its own ability to grow earnings. The world's second-largest package delivery company lowered its economic forecast for the U.S., saying that there remains a lot of uncertainty for the company and the country. Its forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations. (AP Photo/Charlie Riedel, File)
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FILE - In this Monday, Dec. 10, 2012, file photo, workers sort packages at a FedEx sorting facility in Kansas City, Mo. FedEx is more pessimistic about the U.S. economy than it was three months ago, but more assured of its own ability to grow earnings. The world's second-largest package delivery company lowered its economic forecast for the U.S., saying that there remains a lot of uncertainty for the company and the country. Its forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations. (AP Photo/Charlie Riedel)
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FILE - In this Tuesday, Dec. 11, 2012 file photo, FedEx workers unload packages from a cargo plane at the Oakland Regional Sort Facility in Oakland, Calif. FedEx is more pessimistic about the U.S. economy than it was three months ago, but more assured of its own ability to grow earnings. The world's second-largest package delivery company lowered its economic forecast for the U.S., saying that there remains a lot of uncertainty for the company and the country. Its forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations. (AP Photo/Ben Margot, File)
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FILE - In a Nov. 14, 2011 file photo customers enter and exit a Lowe's store in Saugus, Mass. Home improvement retailer Lowe’s Cos. said Monday, Feb. 25, 2013, cleanup efforts after Superstorm Sandy and its new pricing strategy helped its fourth-quarter net income surpass expectations. (AP Photo/Michael Dwyer, file)
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In this May 14, 2012 photo, shoppers walk by the GAP store at a shopping mall in Peabody, Mass. Gap Inc. announced Thursday, Nov. 15, 2012, it is raising its outlook for the year after its third-quarter net income rose 60 percent from a year ago. (AP Photo/Elise Amendola, File)
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FILE - In this Thursday, Dec. 4, 2008, file photo, a shopper hurries past the Abercrombie & Fitch store at Beachwood Place Mall in Beachwood, Ohio. Abercrombie & Fitch Co. delivered a pleasant pre-Christmas surprise to investors: the teen retailer raised its full-year earnings earnings guidance on a strong third-quarter performance, sending shares surging. The company, based in New Albany, Ohio, reported a 41 percent increase in its net income for the third quarter as international, domestic and direct-to-consumer sales strengthened. Its results beat Wall Street expectations.(AP Photo/Amy Sancetta)
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FILE - In this file photo made Jan. 26, 2010, the 3M Co. logo is seen on some of their products in Philadelphia. 3M Co. annouced Tuesday, Oct. 23, 2012, that it is reducing its profit expectations for this year because of what it calls "current economic realities." 3M makes everything from Post-it notes and Scotch tape to roofing granules, coatings for LCD screens, and traffic sign coatings. The variety of its businesses and its worldwide footprint make it an economic bellwether. And CEO Inge Thulin said what it's seeing right now is a "slow-growth economy." (AP Photo/Matt Rourke, file)
American Eagle's stock plunges
American Eagle Outfitters Inc.'s shares sank Wednesday after the teen retailer reported disappointing fiscal fourth-quarter earnings and offered a first-quarter earnings forecast well below analysts' estimates.
THE SPARK: The company reported that its net income jumped 85 percent to $94.8 million, as it reduced inventory and sales improved. Adjusting for special items, it earned 55 cents per share, while analysts polled by FactSet expected 56 cents per share. Revenue was up 9 percent at $1.12 billion.
American Eagle forecast earnings of 16 to 19 cents per share in the first quarter, saying that bad weather and unfavorable economic conditions impacted consumer spending in February. Analysts were looking for earnings of 25 cents per share for the quarter.
THE BIG PICTURE: American Eagle's shares were one of the biggest decliners on the New York Stock Exchange on Wednesday. The teen retail space has proven very difficult for retailers as consumers remain fickle about where they spend their money.
THE ANALYSIS: Jefferies analyst Randal Konik kept his "Hold" rating on American Eagle. The analyst said the company had a solid end to the fiscal year, noting that its inventory levels are in great shape and it has plans to buy back shares.
But Konik said the forecast is disappointing given the strong momentum the company saw in 2012. He believes the company may have provided a conservative outlook, as he expects March will bring better weather and a sales boost from spring break.
He has a $22 price target on American Eagle shares.
SHARE ACTION: Shares fell $2.28, or 10.1 percent, to close at $20.27. The stock fell as low as $19.65 earlier in the day. It has traded between $15.20 and $23.94 in the past 52 weeks.
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