Why Did Robert Hanson Bail on American Eagle?

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.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2806758, ~/Articles/ArticleHandler.aspx, 9/30/2014 8:22:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement