American Eagle CEO outlines plan for expansion nationwide
By Kim Leonard
Published: Tuesday, Oct. 23, 2012, 11:26 a.m.
American Eagle Outfitters CEO Robert Hanson said store expansion nationwide and improved mobile online shopping are his top goals for the youth-oriented clothing retailer.
Hanson, who took over in January as South Side-based American Eagle Outfitters Inc.'s top executive, outlined long-term goals on Tuesday, including opening new stores in the Midwest and West and closing lower performing locations. He wants to place the retailer's Aerie intimates and AE brand stores side-by-side when possible. Another priority is adding technology to make mobile online shopping a “flagship” store experience, he said.
The retailer, which expects to report sales this year of $3.44 billion, has more than 1,000 stores in North America and plans to open five stores in Mexico in 2013. Online shopping is about 14 percent of the total.
“We are a company that skews to the East Coast,” Hanson said in an investor presentation, but “we have an opportunity to address a number of underpenetrated markets from the middle of the country to the West Coast.”
Hanson, a former Levi's executive, discussed sharpening the company's AE clothing and accessories brand, which is known especially for denim, knits, shorts and color, for a “bull's-eye, target 20-year-old” customer.
He wants to turn over merchandise at a faster rate — expanding advertising on social networks and stressing value while marking down fewer items.
The company's stock closed at $21.22, down 83 cents.
BMO Capital Markets analyst John Morris said the drop likely was because the company repeated, rather than raised, expectations for third-quarter results to be reported after Thanksgiving, and the “backdrop of a weak market.”
Hanson said the company is “pleased” with results in the latest three-month period, which is tracking close to the company's guidance previously stated at 37 to 38 cents a share.
“The update meeting was positive with no bad news,” Morris wrote in a note to investors, adding the per-share price drop is a buying opportunity.
Hanson said about 80 more outlet stores with lower-priced items could be added to the 73 AEO Factory Stores open now. Locations in the Pittsburgh area include Tanger Outlet Center in South Strabane and the Galleria at Pittsburgh Mills in Tarentum.
The AE fleet of stores has a strong presence in regional malls, with all but 21 stores profitable, but the brand is under-represented in higher-end malls and urban locations, he said.
In New York City, for example, “We're not in the Upper East Side or Upper West Side or down on Wall Street.”
American Eagle, with 13 Western Pennsylvania AE stores and four Aerie locations, is “not under pressure to close stores,” he said. But 20 to 30 lower performing stores a year could be culled from the total count, replaced by new, more promising locations, he said. In recent years, the company's annual sales have hung around the $3 billion range, said Mary Boland, who joined the company in July as chief financial officer. While 2012 sales are projected at $3.44 billion, “clearly we have opportunities” for improvement, with about a 7 to 9 percent growth rate.
E-commerce is about 14 percent of total revenue but, “We see a path to get that closer to 20 percent,” Boland said.
Hanson said shopping experience at the AE flagship stores “will be mobile and tablet driven,” adding to online shopping available on more traditional computing devices.
Onetime co-CEO Roger Markfield, now the company's vice chairman and executive creative director, will retire in early 2014, Hanson said. That will allow a transition time in which AEO will make sure it has the merchandising and market team it needs for growth.
The company soon will announce a new chief talent and culture officer.
“Outside of our brand, our talent is our most important asset,” he said.
Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or firstname.lastname@example.org.
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