Fool on Call: American Eagle's Flight Planhttp://www.fool.com/investing/general/2007/08/28/fool-on-call-american-eagles-flight-plan.aspx Jeremy MacNealy
August 28, 2007
The latest call from Abercrombie & Fitch (NYSE: ANF ) described the state of the youth apparel retailer's development efforts, including its international strategy and the upcoming launch of an entirely new brand code-named "Concept 5." Now it is rival American Eagle Outfitters' (NYSE: AEO ) turn. AEO's most recent earnings conference call similarly focused on growth, but its eagle eye seems trained more on new branding opportunities than global markets.
An American abroad?
I'm guessing that a brand named "American Eagle" faces greater challenges in connecting with international consumers than a more nation-neutral brand like Abercrombie. We should soon know whether I'm right, since CEO Jim O'Donnell promised more definitive information on AEO's international opportunities sometime next year.
Feathering the nest
Management is particularly excited about aerie and the opportunity to expand its offerings in women's intimates. While Limited Brands' (NYSE: LTD ) Victoria's Secret dominates in the upscale side of this biz, the niche for younger women seems open for the taking.
The company sees significant upside for aerie, and it's aggressively pursuing this opportunity. By the end of this fiscal year, AEO plans to have 37 new aerie stores up and running, more three times the current 11 locations. The bulk of this development will come in the second half of the year, with 29 stores planned to open from now until the end of December. Look for the company to add 50 or more aerie sites next year.
Be nice to your little sister
In addition to rapid store development, aerie is also aggressively expanding its category assortment. By the holiday season, aerie customers will be introduced to a new fitness line, as well as personal-care products including cosmetics.
AEO may be onto something with aerie. According to management, the new brand has enjoyed immediate success, being both "highly productive and profitable from the start." We'll see whether Abercrombie & Fitch's new "Concept 5" turns out to be a retailer dedicated to young women. Aside from this potential threat, aerie appears to have plenty of open field to run in, capitalizing on domestic and international opportunities in this niche market.