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American Eagle: Smartphones and Desperate Times

By Alyce Lomax - Updated Apr 6, 2017 at 12:43PM

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Just how shameless will retailers get for back-to-school season?

Last week's retail same-store sales data revealed the desperate promotions retailers rolled out in June to lure in shoppers. If American Eagle Outfitters' (Nasdaq: AEO) new bid to fill its fitting rooms is any indication, that trend could continue into back-to-school season.

American Eagle will give shoppers free smartphones simply for trying on its jeans (which cost about $30 to $40 a pop) between July 21 and Aug. 3. About 40 phones will be available through the promotion through carriers AT&T (NYSE: T), Sprint Nextel (NYSE: S), Verizon (NYSE: VZ), and T-Mobile. (Sorry, kids -- Apple's iPhones aren't included in this promotion.) Shoppers get a $25 American Eagle gift card thrown in, too.

Those who try on the jeans and decide to take American Eagle up on its offer (for the free phone, not the jeans), will find the goodies aren't all free. Shoppers are required to sign up for a two-year phone contract. (Smart move, carriers. That alone probably makes the deal a win for you.)

Maybe this move is American Eagle's attempt to get ahead of rivals like Aeropostale (NYSE: ARO) and Abercrombie & Fitch (NYSE: ANF), getting the first crack at peddling back-to-school jeans to denim-starved students. But I don't quite buy it.

I'm just amazed that the purchase of a pair of jeans isn't even necessary to get the free phone deal. I wonder whether this means that other retailers are planning even more crazy, attention-grabbing, and horrifically margin-busting promotional maneuvers over the next few months. Fools, now may be the time to pick through your portfolio and weed out weaker retail stocks.

Crazy promotional activity isn't just your opportunity to score great deals at the mall. It'll also give you an idea of which stocks may have a harder time generating sales and profits in the coming months. What's good for your wallet isn't always good for companies' profits.

Have you noticed any wild promotions? Share your mall-based stock research in the comment box below.

Sprint Nextel is a Motley Fool Inside Value selection. Apple is a Stock Advisor recommendation. Try any of our Foolish newsletters free for 30 days

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.

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Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$44.84 (0.36%) $0.16
Sprint Corporation Stock Quote
Sprint Corporation
AT&T Inc. Stock Quote
AT&T Inc.
$18.01 (-0.50%) $0.09
Abercrombie & Fitch Co. Stock Quote
Abercrombie & Fitch Co.
$18.82 (4.73%) $0.85
Aeropostale, Inc. Stock Quote
Aeropostale, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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