Dive Brief:

• Shares of American Eagle Outfitters slid 5.4% early Wednesday after the teen apparel retailer reported fourth quarter same-store sales rose 0.4% on top of a 4% rose in the quarter a year ago. Q4 revenue decreased 1% to $1.1 billion from the year-ago period.

• But what bothered Wall Street most was likely its forecast for flat fiscal 2017 same-store sales, with guidance between $1.057 billion and $1.059 billion, after 2016 same-store sales of $1.05 billion; FactSet analysts were forecasting 0.8% growth, according to MarketWatch. 

• The retailer’s Aerie lingerie brand continues to be a solid contributor, with a 17% rise in same-store sales, compared to a 1% same-store decline in the rest of the retailer’s brands. E-commerce sales are factored into the company’s same-store sales measure, according to a press release.

Dive Insight:

Although American Eagle Outfitters continues to fend off the challenges plaguing many teen apparel retailers, it is certainly on firmer ground than rivals like Abercrombie & Fitch, which is undergoing a major rebranding effort; Aeropostale, which exited bankruptcy last year after an 11th-hour save from a group of its landlords; and American Apparel, which is operating as a brand within Canadian basics company Gildan with no stores to its name.

American Eagle's efforts to boost quality and cut costs have allowed the teen apparel retailer to command higher prices, but those efforts didn’t show up in this report, according to GlobalData Retail analyst Carter Harrison. Though disappointing, he said, that fortunately means the company’s “pace of descent is fairly shallow and was mostly driven by store closures which a very small uplift in overall same-store sales could not offset.”

A bigger problem for American Eagle is the marked contrast between its Aerie lingerie lines and its flagship merchandise, Harrison said in a note emailed to Retail Dive. “Aerie is a much younger brand and is still benefiting from its expansion into the market,” he said. “However, we believe that its fresh take on lingerie — especially in the sense of using ordinary women as models and its body-positive advertising — is still striking a chord with consumers and is allowing it to take custom from other players.”

Aerie is also benefitting from store redesigns, smaller stand-alone stores of its own and a series of pop-ups in major cities, as well as from a nimble reaction to boosting inventory of its most popular styles. Harrison noted that even American Eagle’s merchandise is a cut above that of its rivals, but said there’s more work to do, especially in men’s, which he called “boring.”

“If Aerie is the new and fresh brand, then American Eagle is its much older sibling which is suffering from the problems of maturity,” Harrison said. “To be fair, American Eagle has done a good job in reinventing its proposition and is in a much better place than many of its teen apparel peers." While clever, Harrison also said the recent "We All Can" marketing campaign fell flat, failing to effectively connect with shoppers. "This is something American Eagle needs to remedy if it is to cut through in a crowded market."