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 1,220 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 940 stores and online, while Aerie sells underwear and intimates for young women through more than 100 stand-alone and 80-plus side-by-side stores, as well as online. American Eagle also operates four Tailgate Clothing Co. retail stores.
About 55% of American Eagle's revenue comes from AEO women's apparel and accessories and some 35% comes from men's. The company's Aerie products bring in the remainder of total sales at around 10%.
The majority of American Eagle's stores are company owned, but 175 are licensed store locations.
Products are sold online to 81 countries worldwide. American Eagle rings up more than 85% of its sales in the US. Canada, where the chain has 100 stores in nine provinces, is the company's second largest market. The chain also has around 150 international stores in more than 20 countries, including 25 stores in Mexico, six in Hong Kong, 10 in China, and three in the UK.
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, the Netherlands, and Hong Kong.
Advertising expenditure mostly goes towards direct mail, in-store photographs, and other promotional costs that come with marketing campaigns.
In fiscal 2016, revenue grew 2% to $3.6 billion with sluggish 1% growth in the American Eagle Outfitters (AEO) brand complemented by 23% growth in the smaller Aerie brand. AEO men's segment decreased in the mid-single digits, while women's increased by a similar amount. Higher average transaction size was partially offset by lower total transaction numbers.
Net income fell 3% to $212.4 million due to an impairment and restructuring charges of $21.2 million. Cash provided by operating activities climbed 7% to $365.6 million due mostly to higher sales.
American Eagle's growth strategy includes expanding its store fronts both domestically and internationally. In 2016, the chain's store opening program eased off (it opened a net 3 stores in the year), but it plans to open 15-20 American Eagle Outfitters stores and 15 Aerie stores in 2017, as well as convert 30-35 Aerie side-by-side format stores. Meanwhile, it plans on closing 15-20 American Eagle Outfitters stores in the same period.
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.