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 (top categories include jeans, t-shirts, bras, and panties) aimed at young men and women ages 15-25. The chain operates more than 1,000 stores across the US, Puerto Rico, Canada, Hong Kong, China, Mexico, and the UK. It also has stores in 17 other countries operated under license. Direct sales come from the company's websites. Virtually all of the company's products bear its private-label brand names American Eagle Outfitters and aerie.
American Eagle Outfitters operates more than 950 American Eagle stores and more than 100 aerie standalone stores. Third party operators had nearly 100 stores in more than 15 countries; products are sold online to more than 80 countries worldwide.
Its aerie brand is mainly aimed at teenage girls with a selection of intimates and personal care products. Competing with the PINK label by Victoria's Secret, the brand is also available online and in select AE stores.
More than 50% of the company's revenue comes from women's apparel and accessories, while another nearly 40% comes from Men's. The company's aerie products bring in the remainder of total sales.
American Eagle rings up nearly 90% of its sales in the US. Canada, where the chain has more than 100 stores in nine provinces accounts, is the company's second largest market. The chain also has international stores in more than 15 countries, including 18 stores in Mexico, five in Hong Kong, nine in China, three in the UK, and six in Puerto Rico.
Sales and Marketing
The company's merchandise is typically shipped from vendors to US distribution centers in Pennsylvania and Kansas or its Canadian distribution center in Ontario. In 2013 American Eagle opened third-party distribution centers in Mexico City, Shanghai, and Hong Kong.
In fiscal 2015 (ended January), the company spent approximately $6.6 million on advertising, down from $9 million in 2014, and $8.4 million in 2013. Its advertising costs are mostly related to direct mail, in-store photographs, and other promotional costs that come with marketing campaigns.
Revenue ended lower for a second straight year, dipping by less than 1% to $3.28 billion in fiscal 2015 (ended January). The decline was mostly driven by a 5% drop in comparable sales, particularly with high single-digit decreases in men's clothing sales. Women's clothing from comparable sales also fell in the low single digits. Sales of both the American Eagle Outfitters and aerie brand fell equally by 6%.
Profits also shrunk for a second year in fiscal 2015, falling by 3% to $80.32 million, mostly from revenue declines but also because of higher restructuring charges as the company made corporate overhead reductions, which included severance and related items, and office space consolidation.
Cash from operations, however, jumped by 47% to $338 million in fiscal 2015, primarily because of higher earnings from continuing operations and because of higher non-cash expenses related to higher accrued compensation and payroll tax balances.
American Eagle's growth strategy includes expanding its store fronts both domestically and internationally. In fiscal 2015, it planned to open 20 to 25 Factory-style AEO stores and continue is global expansion plans, after opening some 60 new stores in fiscal 2014. Some of its 2015 expansion plans include franchise, license, or brand-dedicated store openings in Eastern Europe, the Middle East, Central and South America, Northern Africa, and parts of Asia.
In late 2014 it entered the UK with three new company-owned stores, and entered Mexico in 2013 -- opening some 18 stores in the region since. Through a licensing agreement with Grupo David, the company is also expanding its brand in Latin America and the Caribbean.
The retailer is also improving its store layout to enable its flagship American Eagle Outfitters brand to gain more market share in key categories like denim, knit tops, and fleece. To this end, the company in fiscal 2015 planned to remodel and refurbish 25 existing AEO stores while closing some 50 AEO stores and 20 Aerie stores. In fiscal 2014, the company renovated, refreshed, or refurbished some 44 AEO stores.
In the near term, the company's top priorities are to drive a competitive top line, generate margin flow-through through improved inventory management, rebalance its fleet of stores, accelerate online sales, and gain leverage on its infrastructure.
With the exception of aerie, American Eagle Outfitters hasn't had much luck launching new brands. Its MARTIN + OSA sportswear concept for older men and women (launched in 2006) was shutdown four years later.
77kids, introduced in 2008 as an online-only brand and later expanded to 20 retail locations, was sold in mid-2013 after disappointing results. 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 recorded 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.