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Chief of American Eagle's Martin + Osa brand resigns

| Thursday, Oct. 19, 2006

American Eagle Outfitters Inc. has opened just three of its Martin + Osa clothing stores, but the brand already is going through a leadership change with the company's vice chairman taking over as interim president.

Ken Pilot resigned as president of the Martin + Osa brand to pursue other opportunities, the Marshall-based retailer said Wednesday, and American Eagle Vice Chairman Roger Markfield is leading the division for now.

Martin + Osa is designed for customers older than American Eagle's target bracket of 15- to 25-year-olds. Stores at the Tysons Corner Center in McLean, Va., at North Park Center in Dallas and at Fashion Island in Newport Beach, Calif., are selling the sportswear brand that launched in September for 25- to 40-year-old women and men.

Two stores are to open by year's end, in Chicago and San Francisco. No Pittsburgh area locations have been announced, and Martin + Osa clothing isn't for sale online yet.

While analysts generally were surprised at Pilot's departure, Dana Cohen of Banc of America Securities LLC said in a research note yesterday that the transition "will likely not be a huge deal for the company given Martin + Osa's relatively small size."

Other executives remain, she said, and Markfield helped to oversee the creation and positioning of the new brand. Martin + Osa is named for Martin and Osa Johnson, photographers and adventurers from Kansas who were well known in the 1920s and '30s.

"We have heard that business at Martin + Osa may be starting off a little slower than expected," Cohen wrote, although "we still think that it's early to judge, given that the concept has only just opened its third store."

Holly Guthrie of Janney Montgomery Scott LLC has said little about Martin + Osa, while she waits to see whether consumers embrace the brand.

Still, Guthrie noted yesterday she is concerned that prices are high, given the amount of fashion and style in the line's offerings so far. "I don't think it's that intriguing," she said, although she's quick to add that the stores open so far are test sites, and the company will adapt merchandise to customers' reactions.

"I believe in the American Eagle management team," she said. The company for years has done thorough research on its main brand, polling customers about fit and fashion tastes, and the same careful study likely went into creating Martin + Osa, she said.

American Eagle, asked about the new stores, said yesterday it's too early to tell how the brand is doing.

The company declined further comment on the management change. American Eagle stock closed yesterday at $45.37, down 45 cents.

A statement from CEO Jim O'Donnell thanked Pilot, a past president of concept development at Polo Ralph Lauren Corp.,for his efforts, and added, "Martin + Osa has a strong management team, and under Roger's leadership they will continue to drive the brand forward."

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