Why Did Robert Hanson Bail on American Eagle?

Days after American Eagle generated positive news from its new ad campaign, CEO Robert Hanson steps down to pursue... other things?

Jan 23, 2014 at 4:40PM

It's hard to be the guy who always has to deliver the bad news. No one wants to be that guy, and few people even want to see him. Maybe that's what drove American Eagle (NYSE:AEO) CEO Robert Hanson to jump ship. Of course, it seems like his million-dollar base salary would have helped ease the burden -- in his first year Hanson actually took home $12 million  -- but money doesn't buy happiness.

The real reasons behind Hanson's departure aren't known, yet. In its statement, American Eagle simply noted that he was leaving, and that Executive Chairman of the Board Jay Schottenstein was going to fill in until a suitable replacement was found.

Robert Hanson's legacy at American Eagle
Hanson joined American Eagle at the start of 2012, coming to the company from Levi's, where he last held the global brand president role. He had been with the jeans maker for 23 years -- he made it through just two at American Eagle.

In the 2011 fiscal year, American Eagle suffered. While total sales were up, the company was immersed heavily in promotion to make those sales, and margins were declining. Earnings per share had fallen, and the business was out of favor with its teen demographic.

Things haven't "gotten better" since Hanson joined. Fiscal 2013 is wrapping up, and it looks like margins will remain compressed, and income per share will fall compared to 2012. In the company's third-quarter earnings release, Hanson said, "Our financial performance is clearly unsatisfactory and not consistent with our objectives." 

Bad news in a sea of bad news
While many teen retailers have taken a hit over the past year, American Eagle was particularly damaged. Companies like Gap (NYSE:GPS) and Urban Outfitters (NASDAQ:URBN) found a way to squeeze out the occasional win. Through the first nine months of the year, Gap managed to increase comparable sales over the first nine months of 2012. While it also managed a 1% increase during the holiday season, things started to slow down at the end of the year. Still, better off than American Eagle.

Urban Outfitters had a bumpier ride, flying high for much of the year before hitting a wall in September, when it announced lower-than-expected comparable-store sales growth. Even so, the business has grown its margins and increased its earnings per share, year to date. That's something that Hanson failed to make happen at American Eagle.

Why would Hanson leave?
There was good reason for Hanson to stick it out. In his employment agreement with American Eagle, he was offered a few options. If he left on his own, he took nothing with him. As long as he didn't leave for some horrible reason -- drug abuse, criminal behavior, taking the last cup of coffee without making a new pot -- he was set to take a nice payout with him. By leaving of his own accord, Hanson indicated that he's likely got something better waiting for him.

For American Eagle, the news couldn't come at a worse time. The weak year didn't give the business much momentum coming into 2014, and a shift at the top isn't going to propel anything forward. Hanson was seen as an industry specialist with a strong background, just the kind of person that American Eagle now needs to find -- again.

A business with plenty of gas in the tank
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers