Once a purveyor of outdoor gear, 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) under its American Eagle Outfitters and Aerie brands, aimed at young men and women ages 15-25. The chain operates more than 1,000 stores across the US, Canada, Hong Kong, China, Mexico, and the UK. It also has stores in 23 other countries operated under license. Direct sales come from the company's websites.
The American Eagle Outfitters (AEO) and Aerie brands are mostly sold in separate store locations given their contrasting branding. AEO sells clothing for young men and women through around 950 stores and online, while Aerie sells underwear and intimates for young women through nearly 100 stand-alone and 67 side-by-side stores, as well as online. It also operates two Tailgate Clothing Co. retail stores.
About 54% of American Eagle Outfitters revenue comes from women's apparel and accessories, while some 37% comes from men's. The company's Aerie products bring in the remainder of total sales at around 9%.
Products are sold online to 81 countries worldwide. American Eagle rings up nearly 90% of its sales in the US. Canada, where the chain has more than 100 stores in nine provinces, is the company's second largest market. The chain also has 156 international stores in more than 20 countries, including 23 stores in Mexico, six 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. It has third-party distribution centers in Mexico City, Shanghai, and Hong Kong.
In fiscal 2016 (ended January), the company spent approximately $104.1 million on advertising. Its advertising costs are mostly related to direct mail, in-store photographs, and other promotional costs that come with marketing campaigns.
Revenue grew 7% in fiscal 2015 (year ending 30 January 2016) to $3.5 billion, reversing two years of falling sales. The company was able to achieve higher average selling prices and fewer markdowns, and benefited from the company's investment in omnichannel. The American Eagle Outfitters brand increased 7%, while Aerie increased 20%.
Net income increased a healthy 172% to $218.2 million, largely as a result of the increase in revenue. It also benefited from a post-tax gain of $4.8 million following the exit of its 77kids business.
Cash from operating activities was virtually flat in 2016, nudging up 1% to $341.9 million.
American Eagle's growth strategy includes expanding its store fronts both domestically and internationally. In fiscal 2016, it planned to open approximately 15 to 20 new American Eagle Outfitters stores and approximately 10 new Aerie stores in North America, and continue its international expansion following the opening of some 23 new international stores in fiscal 2015.
In 2015, the company continued its global expansion with new license agreements in South Korea with SK Networks, in Singapore with Trendz 360, and in Greece with Notos Com Holdings, strengthening the company’s position in the EMEA and APAC regions.
The company plans to further expand its global retail presence with a series of licensed stores throughout Chile and Peru, building on existing growth markets throughout the region, including Colombia, Panama and the Caribbean, as well as company owned stores in Mexico. The company has signed a multi-year license agreement with Eurofashion Limitada, a Chilean company and division of the Cencosud S.A. Group that specializes in developing national and international fashion brands.
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.
Mergers and Acquisitions
In 2015, the American Eagle acquired Iowa based Tailgate Clothing Company, which owns and operates Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and Todd Snyder New York, a premium menswear brand for $13.5 million. The Tailgate store concept is an ideal outlet to integrate AE jeans and apparel.
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.