American Eagle is Not Going Bankrupt But Q1 of 2017 Was Challenging
American eagle outfitters (AEO) is a major lifestyle brand dealing in designing, marketing and selling clothing and accessories. In 1977 the company was founded by two American brothers Jerry and Mark Silverman. This apparel retailer mainly targets clothing for youngsters between 16 and 34 years. The company provides its merchandise at prices that are affordable to majority of customers. It has in its collection variety of jeans, cargos, polo and graphic t-shirts etc. In its inception stage during 1977, the brothers started selling leisure apparel, footwear and accessories for men and women. They also sold outfits designed for hiking, camping etc. These were heydays for the company as its business picked up sales rapidly. Within 10 years the company set up several outlets in malls across United States and several other countries. There were 137 outlets of American eagle outfitters in 36 states.
First Instance of Stress in Business
In the end of 80’s and beginning of 90’s the company planned to reorganize their management and product line. This misadventure cost them adversely in the start of 1990’s. AEO started to lose money as its sales started to ebb. The situation got even worse with low profit margin, high inventory cost, and to add salt to its injury those days the country was in midst of recession. At this juncture a businessman named Jay Schottenstein bought the company from the Silverman family. Under his stewardship AEO regained its credibility in 1992. With the new product line, opening new outlet stores, and several other fundamental changes shoot up the sales as well as profitability of AEO. As the reorganization became successful the company went out with an IPO in April 1994. It got listed in NASDAQ stock exchange. The $37 million which came through the IPO were utilized for the expansion and reinvention. His plan to design, manufacture and sell niche clothing and accessories clicked well and AEO profit zoomed to new height. The new sales strategy, online selling, expansion in west coast all brought back AEO out of drubbing. It started three new brands called Aerie which sold lingerie and sleepwear for young women, The second brand Martin+Osa catered men and women between 30 and 40 years and 77kids which is mainly an online chain sells kids clothing. Because of huge loss Martin+Osa got closed in 2010.
1st Quarter of 2017
The first quarter of 2017 was a challenging year for AEO. It has plans to close 25 to 40 stores by the fiscal year 2018. The company has become more aggressive in closing stores. AEO has missed the expectation of analysts for the first quarter. Its profit has dipped to $25 million as compared to same quarter of last year which was $40 million dollar. Although there are several headwinds in the apparel retailing of AEO, it has a silver lining on the dark cloud. The online sales and Aerie brand has shown a double digit growth. Because the online business has become more profitable the company is now trying to migrate from stores to online sales. However, there is still some amount of sale in stores but it is not as high as it was 3 to 4 years ago in many of AEO stores. As every company has its ups and downs, so does AEO. But at the same time it is not going out of business, but changing the mode of operation from brick and mortar stores to technological oriented digital online sales.