aeo anf aro promotionalcompetition

8/13/2019 AEO ANF ARO PromotionalCompetition

1/8

The Three As: Promotional Battle in Teen Retailers12/6/2013

Companies mentioned:

American Eagle Outfitters (AEO) - $15.96Abercrombie & Fitch (ANF) - $35.70Aeropostale (ARO) - $9.17

Why Read?

Investors are increasingly concerned that Teen Retailers, in particular American Eagle Outfitter

(AEO), Abercrombie & Fitch (ANF), and Aeropostale (ARO), are eroding long-term profitabilitythrough increased promotions in an attempt to restore growth to anemic comparable store sales andcontrol market share.

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

! Comparable store sales trending down: All of the Three As have reported negativecomparable store sales in each quarter during FY2013. ANF and ARO have reported

significantly worse comparable store sales results than AEO. Since 1Q08, AEO has reported

positive comparable store sales in just 9 out of the last 23 quarters (ANF: 7/23, ARO: 12/23).

! Promotions trending negative: Retailers have encouraged sales through increasedpromotional activity. Weekly channel checks show that retailers have increased the cadence of

promotions YoY beginning significantly in 2Q13. We expect this trend to continue as retailersdial down expectations after a lackluster beginning to the holiday shopping period.

! Margin sacrifice:With consumer confidence still weak, lagging employment gains, and thebifurcation of the middle-class consumer between low-price discount and high-end luxury

retailers; traditional brick and mortar retailers are now operating in a world where investorsprize market share over profitability.

#$%&'() *'+,-(.(/ 01.%2+&' 3&4,.5 0.%2.5 06.%+%7162.5 06.%+%7162. 82()5 97,,2):.%5 0.%7;7):&,.

?=>

@==>

AB C=@C A@ C=@D AC C=@D AD C=@D AEF AB C=@D

!"#$#%'() +,-,)./ 0123 0453 6 072

G.)) H,&: I7%.


2/8 C

8#$9("(:), ;%#", ;(),.


3/8 D

P' & :K%..MN.&% ):&+8.( 6&)2)5 7'+. &4&2'5 03P 2) & +,.&% L2''.% 2' +%.&:2'4 +71;&%&6,. ):7%. 4&2')LK2,. 0ZH K&) +7':2'-.( :7 ):%-44,.5 .);.+2&,,N 2' 2:) 97,,2):.% +7'+.;:< I.&'LK2,.5 0SP K&)

+7':2'-.( :7 )K7L :K&: :K. 67::71 K&) N.: :7 &%%2Q. L2:K :K. 7Q.%&,, :%.'( ):2,, +,.&%,N '.4&:2Q.

C=>

B=>

[=>

X=>

@==>

ACC=@C

ADC=@C

ABC=@C

A@C=@D

ACC=@D

ADC=@D

AEFAB

C=@D

072 !"#$#%'() 8(=,'C,

G.)) H,&: I7%.

=>C=>B=>[=>X=>

@==>

ACC=@C

ADC=@C

ABC=@C

A@C=@D

ACC=@D

ADC=@D

AEFAB

C=@D

F#))&.%," !"#$#%'()

8(=,'C,

G.)) H,&: I7%.


6/8 [

Additionally, we expect that ARO sales have been hurt as they target incremental customers with more

fashion forward BTS and holiday lines.

Margin Sacrifice:

E7 (.17'):%&:. :K. 21;&+: 7T 2'+%.&).( ;%717:27'&, &+:2Q2:N 2' :K. );&+. L. K&Q. 7Q.%,&2( :K.

1.%+K&'(2). 1&%42' $;) 21;&+: :7 4%7)) 1&%42' T7% :K. +71;&'2.) LK7 (2)+,7). :K. 1.:%2+

B=>

[=>

X=>

@==>

AC C=@C AD C=@C AB C=@C A@ C=@D AC C=@D AD C=@D AEF ABC=@D

012 G,"CE('=&., G(">&' H$9(C%

G.)) H,&: I7%. I.%+K&'(2). I&%42' $;) ]K&'4.


7/8 a

0SPV) 1.%+K&'(2). 1&%42' K&) )..' :K. 17): (%&):2+ (.+,2'. :K%7-4K :K. N.&%< I.%+K&'(2).

1&%42' $;) 21;&+: K&) 6..' '.4&:2Q. )2'+. BA@C5 &'( )24'2T2+&':,N L7%). :K&' 2:) ;..%)< *' DA@D5:K. +71;&'N %.;7%:.( &: bYX=c $;) (.+,2'. 2' 4%7)) 1&%42'5 (%2Q.' 6N b[Y=c $;) (.+,2'. 2'1.%+K&'(2). 1&%42')5 ,7L.%2'4 :K. +71;&'NV) &(_-):.( 4%7)) 1&%42' :7 _-): @X< H @&)) @"&%,%E(% #', $#", %&$,3 IJKIL >"#.. $(">&' M#" ( .9,C&()%N ",%(&),"O EK2) 2) _-): -'K.&%( 7Td T.L+71;&'2.) K&Q. .Q.% %.;7%:.( )-6 C=> 4%7)) 1&%42')5 .Q.' 2' BA=X< J2:K +71;&%&6,. ):7%. )&,.).W;.+:.( :7 +7':2'-. :7 (.+,2'. &: :K. )&1. ;&+. &) \EF %.)-,:) bM@?>c5 L. .W;.+: 1.%+K&'(2).1&%42') L2,, +7':2'-. :7 .%7(. 2':7 BA@D

C=>

B=>

[=>

X=>

@==>

AC C=@C AD C=@C AB C=@C A@ C=@D AC C=@D AD C=@D AEF ABC=@D

072 G,"CE('=&., G(">&' H$9(C%

G.)) H,&: I7%. I.%+K&'(2). I&%42' $;) ]K&'4.


8/8 X

We expect ARO to continue to fall apart as they continue to post some of the worst comparable storesales results and margin losses in specialty retail history. They have completely lost touch with theircore customer while placing no meaningful accountability on their management. CEO Tom Johnsonneeds to be fired, ASAP, unless the plan is to replace him with Aeropostale EVP Emelia Fabricant (see the wonders she did at BEBE (sarcasm)) in which case the entire board of directors should be

replaced as well. Recently shares have been bolstered by activist investor activity and the possibility of abuy-out in play. Without these crutches, we would expect shares to be trading materially lower.

Disclaimer:The information contained herein reflects the views of Consumer Fox as of the date of publication. These views

are subject to change without notice at any time subsequent to the date of issue. All information provided in this presentationis for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sell

the securities mentioned or to invest in any specific security or investment product. While the information presented herein is

believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. In addition,

there can be no guarantee that any projection, forecast or opinion in this presentation will be realized. All trade names, trade-

marks, service marks, and logos herein are the property of their respective owners who retain all proprietary rights over their

use. This presentation is confidential and may not be reproduced without prior written permission from Consumer Fox. It

should be noted that Consumer Fox has no position in any security of the company mentioned in the report/presentation.

aeo anf aro promotionalcompetition

Documents