American Eagle Outfitters (AEO): 1 Big Problem for This Popular Retailer

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The problem with that approach is that it pegs American Eagle as a basics company, and basics aren’t fashionable. Looking at Urban Outfitters, as the other end of the spectrum, the company has managed to grow its Anthropologie line into an aspirational brand. Last quarter, the company not only improved sales but actually grew gross margin by more than a full percentage point, up to 36.8%. That’s a reflection of brand strength, something that American Eagle lacks.

With more than 1,000 locations in the U.S. and strong brand recognition, American Eagle Outfitters (NYSE:AEO) has the potential to jump on the trendy end of the fashion bandwagon, but management has to go for it. Right now, the company is playing to its historic strengths, and that means that it’s going to keep repeating the past. I like American Eagle Outfitters (NYSE:AEO)’s potential, but I’m worried that management isn’t ready to unlock it.

The article 1 Big Problem for This Popular Retailer originally appeared on Fool.com.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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