American Eagle OutfittersAEO

Morningstar Rating

Stock Research and Analysis

by Brady Lemos

For teen apparel retailers like American Eagle, success is largely a product of how well merchandise stays relevant to young adults. This is difficult, considering that this notoriously fickle demographic has a history of showing little loyalty to apparel Read more

Bulls Say

American Eagle occupies an attractive market niche and offers teens a fashionable yet affordable alternative to retailers like Abercrombie & Fitch.

Martin + Osa, aerie, and 77kids offer plenty of expansion opportunities into previously unserved markets.

The company has several initiatives to improve its operating margins, such as limiting promotional activities, implementing a price-optimization system, and fine-tuning its supply chain. Read more

Bears Say

Teen apparel retailing is highly competitive and has relatively low barriers to entry. American Eagle's rivals could easily mimic the company's style and steal share.

The retailer's dependence on fashion trends will probably lead to sales and profit volatility.

American Eagle's vertical approach to merchandising (selling only its own brands) limits flexibility in dealing with changing fashion trends. The company is vulnerable to competitors that offer more than one brand. Read more

Strategy

American Eagle's merchandising strategy hinges on keeping on top of young adults' broader interests so it can offer a lifestyle-based brand of apparel. In the past, the retailer has sponsored MTV programming Read more

Management

James O'Donnell has been CEO since 2003, after serving as co-CEO since 2002 and COO since 2000. In fiscal 2008, O'Donnell earned about $3.8 million worth of salary, stock, and option awards, and other incentive compensation. This is about one third Read more

Profile

American Eagle Outfitters is a specialty retailer of casual apparel, accessories, and footwear targeted at teens and young adults. The retailer maintains control over its Read more

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