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 in all 50 US states, Puerto Rico, Canada, Hong Kong, China, and now Mexico and the UK. It also has stores in about a dozen 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.

Operations

In 2014, American Eagle Outfitters operated 944 American Eagle stores and 122 aerie standalone stores. The company is expanding its portfolio of store locations in North America and abroad; it also has renovation plans for certain stores. Third party operators had 66 stores in a dozen countries; products are sold online to more than 80 countries worldwide.

Geographic Reach

American Eagle ring's up 90% of its sales in the US. Canada, where the chain has more than 90 stores in nine provinces accounts for the rest. The chain has 45 stores, operated under license in about a dozen countries, including China, Hong Kong, Israel, Japan, Poland, Russia, and several cities in the Middle East. Its newest markets are Mexico, the UK, and the Philippines.   In 2014 the company had nearly 100 company-operated stores in Canada, six in Mexico, three in Hong Kong, four in China, 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 2014 the company spent approximately $9 million on advertising, up from $8.4 million the previous year.

Financial Performance

After experiencing sizable growth over the past few years, the company's revenues fell 5% to $3.3 billion in fiscal 2014 (ended January). The decline was primarily due to a reduction in comparable sales by 6% versus fiscal 2013. Sales of the American Eagle Outfitters brand fell 7% while the aerie brand's sales fell 2%.

Although American Eagle's profits topped $232 million in fiscal 2013, they declined 69% to $83 million the following year as a result of reduced revenues and income from continuing operations. Additionally, cash flow from operations decreased by more than 50% to $229.9 million as net income fell and as more cash was used for compensation costs, taxes, and accounts receivable.

Strategy

American Eagle's strategy includes expanding both domestically and internationally. After entering Mexico in early 2013, the company expects to open more stores thereas part of its plan to open about 50 new American Eagle Outfitters stores in North America, Mexico, and China. It also plans to remodel 45 to 55 existing shops. In late 2014 it entered the UK with three new company-owned stores. Through a licensing agreement with Grupo David, the company is also expanding its brand in Latin America and the Caribbean.

The retailer is also working to further develop its existing brands to 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 about 150 standalone stores. The brand is also available online and in select AE stores. 

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, was sold in mid-2013.

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.

Divestitures

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. 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.

In 2013 the company exited a licensing agreement with Dickson Concepts (International), which operated six stores in China and Hong Kong. Not wanting to lose such vital markets, American Eagle took over the operations.

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AMERICAN EAGLE OUTFITTERS, INC.


77 Hot Metal St
Pittsburgh, PA 15203-2381
Phone: 1 (412) 432-3300
www.ae.com

STATS


  • Employer Type: Public
  • Stock Symbol: AEO
  • Stock Exchange: NYSE
  • Chairman and Interim CEO: Jay L. Schottenstein
  • EVP and COO: Michael R. Rempell
  • Chairman and Interim CEO: Jay L. Schottenstein

Major Office Locations

  • Pittsburgh, PA

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