It was once a purveyor of outdoor gear, but American Eagle Outfitters now feathers its nest with jeans and polos. The mall-based retailer sells denim and other casual apparel and accessories (sweaters, t-shirts, fleece, outerwear, and accessories) aimed at young men and women ages 15-25. The chain operates more than 1,000 stores in all 50 US states, Puerto Rico, Canada, and now in the Middle East. Virtually all of the company's products bear its private-label brand names: American Eagle Outfitters and aerie. In mid-2012 the company sold its 77kids by american eagle business to Ezrani 2 Corp. Direct sales come from the company's website and its AE magazine, a lifestyle publication that doubles as a catalog.
Terms of the 77kids sale to Ezrani 2 Corp., which is owned by Ezra Dabah, former CEO of another kids clothing chain The Children's Place, were not disclosed. As a result of the sale, American Eagle will record an after-tax loss of about $35 million, which is at the low end of a previously announced range of $35 million to $50 million. Introduced in 2008 as an online-only brand, 77kids grew to become available in more than 20 US stores. However, it had not been performing as well as American Eagle would have liked.
American Eagle itself showed continued improvement in fiscal 2012 (ends January), when for the first time in four years, it saw sales top $3 billion. However, the company's net profit margin has not returned to pre-recession levels, logging about a third of what it was in fiscal 2008. American Eagle's fiscal 2012 sales increased 6% and net income was up nearly 8% compared to the previous year. (Sales at stores open more than one year, a retail metric known as same-store sales, increased 3% after having reported negative comparisons in each of the prior three years.)
American Eagle's strategy includes internally developing new brands, expanding both domestically and internationally, and making acquisitions. As far as existing brands, the company is trying enable its flagship American Eagle Outfitters brand to gain more market share in key categories like denim, knit tops, fleece by reducing production times and improving its store layout.
With 77kids being sold, the company is also likely to redirect focus on its intimate apparel brand, aerie, which was launched in 2006. It is mainly aimed at teenage girls with a selection of intimates and personal care products. Competing with the PINK label by Victoria's Secret, aerie has more than 150 standalone stores. The brand is also available online and in select AE stores.
In addition to opening new stores and closing underperforming ones, American Eagle remodels and refurbishes lower volume stores in smaller markets to be cost effective.
At the end of fiscal 2011 American Eagle operated in all 50 states, Puerto Rico, and Canada.In its first foray outside of North America, American Eagle opened stores in Dubai and Kuwait City in 2010 via a franchise agreement with M.H. Althea Co., a leading retailer in the region. Since then, American Eagle's international presence has grown to some 40 franchised stores in about a dozen overseas markets, including China, Israel, Kuwait, Egypt, and Russia. Its newest international market is the Philippines, where the American retailer has a licensing agreement with Suyen Corp. to open American Eagle Outfitters and aerie stores beginning in 2013.