UPDATE: Bank of America Downgrades Aeropostale to Underperform, Lowers PT on Further Deceleration

In a report published Friday, Bank of America analyst Paul Alexander downgraded the rating on Aeropostale ARO from Buy to Underperform, and lowered the price target from $18.00 to $9.00. In the report, Bank of America noted, “We are downgrading Aeropostale to Underperform as further deceleration in Aero's sales suggest that the company's turnaround efforts are making already weak trends worse. Aero reported 2Q EPS of $(0.34), in line with the company's recent preannouncement. As previously announced, 2Q comps fell 15%, and the company reported that 3Q comps to date have decelerated further. The company instituted 3Q EPS guidance of $(0.21)-$(0.26), based on current comp trends. Management commented that certain new fashion product (20-25% of the line) is performing well, but declining traffic and weakness throughout the rest of the store is overshadowing the positives. We are reducing our F2013 EPS estimate to $(0.77) to reflect a slower and less robust turnaround, and we are cutting our Price Objective to $9 to reflect our new estimates. We expect doubts about the turn to limit stock upside, and estimate that Aero could be forced to tap its line of credit if trends do not improve, which could further damage investor confidence.” Aeropostale closed on Thursday at $10.98.