UPDATE 2-American Greetings profit down; shares tumble

(Recasts with share move)

NEW YORK, June 25 (Reuters) - American Greetings Corp (AM.N) posted sharply lower quarterly earnings on Wednesday, hurt by higher costs as it introduced a new card line in Canada, and its shares fell 17 percent.

The greeting card company, which holds licenses for Care Bears, Strawberry Shortcake and Holly Hobby, said net earnings were $13.3 million, or 27 cents a share, in the fiscal first quarter ended May 30, down nearly 56 percent from $30.1 million, or 54 cents a share, a year earlier.

Two analysts, on average, had expected it to earn 61 cents a share, according to Reuters Estimates.

Revenue rose to $428.3 million from $420 million.

American Greetings, the second-largest U.S. greeting card company behind Hallmark Cards Inc, stood by its forecast for fiscal 2009 earnings of $1.60 to $1.85 a share from continuing operations. Analysts' average forecast is $1.65 a share excluding one-time items.

The company said the costs tied to the new Canadian card line were not permanent and it would focus on revamping its supply chain to become more efficient.

American Greetings shares were down $3.12 to $15.18 in morning trading on the New York Stock Exchange. The shares have traded as high as $29.10 and as low as $16.95 in the past year. (Reporting by Aarthi Sivaraman; Editing by Derek Caney and John Wallace)