Shares of Abercrombie & Fitch (ANF) and Francesca's (FRAN) are sliding after FBR Capital analyst Susan Anderson downgraded both stocks to Underperform, a sell-equivalent rating, given their recent promotional trends and an increased risk for downside seen in the stocks. Additionally, the analyst cut her rating for American Eagle (AEO), moving to the sidelines on similar concerns.

SELL A&F, FRANCESCA'S: In a research note to investors this morning, FBR Capital's Anderson downgraded Abercrombie & Fitch to Underperform from Market Perform, citing heightened promotional trends and an unattractive risk/reward profile. The analyst noted that her U.S. checks have shown increasing promotions year over year at Hollister and higher clearance for most of the quarter, which indicates Hollister comparable sales have likely slowed from the second quarter. Further, Anderson pointed out that Abercrombie & Fitch is up against difficult international same-store sales compares in the second half of 2016 as it cycles the lowering of prices that began in the third quarter of 2015. The analyst also lowered her price target on the shares to $14 from $19. Abercrombie & Fitch was not the only stock that saw its rating cut to Underperform at FBR Capital. Anderson also downgraded Francesca's to a sell-equivalent rating this morning, citing similar reasons. The analyst argued that she has recently seen higher promotions and clearance at Francesca's, particularly in apparel, which could indicate a slowdown in sales from mid-September. Moreover, she noted that the company is up against the toughest fourth quarter same-store sales compare in her coverage and therefore does not have the easy compare tailwind other retailers have in the quarter. The analyst kept her $14 price target on Francesca's shares.

AMERICAN EAGLE 'FAIRLY VALUED': Aside from Abercrombie & Fitch and Francesca's, Anderson also lowered her rating for another name in the specialty retail and apparel sector. The analyst downgraded American Eagle to Market Perform from Outperform, saying that she believes the stock is "fairly valued" at current levels given the recent increase in its price coupled with recent higher promotions for several weeks of the third quarter. Furthermore, Anderson told investors that she believes the risk/reward is "fairly balanced" with risks from tougher third quarter compares, somewhat higher promos in the quarter and a continued competitive environment offset by an easier fourth quarter compares, consolidation benefits, and growth from its aerie and international segments. The analyst also lowered her price target on the shares to $19 from $22.

PRICE ACTION: In morning trading, shares of Abercrombie & Fitch fell 4.6% to $15.92, Francesca's dropped 4.5% to $16.65, and American Eagle's stock declined about 2.3% to $17.95 per share.