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Aerie by American Eagle Outfitters (NYSE:AEO), p.s. from Aeropostale (NYSE:ARO), and PINK by L Brands (LTD) are serving as bright spots in an otherwise depressed retail environment. The success of subbrands like these continues to reinforce the importance of this special type of brand architecture. Specifically, endorsed brands aerie and p.s. are relatively early entrants into the tween and teen retail sphere and may present investors a value opportunity to establish long positions into AEO and ARO.

American Eagle Outfitters is trading just 2% above its 52 week low and at a 12.63 Forward P/E. Likewise, Aeropostale established a new 52 week low today and trades at a 31.22 Forward P/E. Both companies disappointed traders last week with weak third quarter earnings outlooks as well as significant reductions in same store sales, traffic, and conversion rates. As of August 3, 2013, American Eagle had 921 AE Stores and 135 aerie stores worldwide. The second quarter store count for Aeropostale was 977 Aeropostale stores and 142 p.s. from Aeropostale stores. Importantly, both companies are having success with their endorsed brands. While comparable sales change for the 13 weeks ended August 3, 2013 were -8% for AE Total Brand, they were much more favorable for aerie at -2%. Year to Date second quarter comparable store sales for aerie is 1% while AE Total Brand is -7%. During the 2Q Earnings Call Chief Executive Officer and Director Robert L. Hanson is quoted saying:

Aerie's performance was solid, delivering an improvement to the bottom line and remaining on track to deliver double-digit EPS this year. We have appropriately narrowed and focused the assortments, rooted in intimates, and with improved inventory principles and smarter distribution strategies have yielded an improvement to gross margin return on investment.

Aeropostale does not breakdown same store comparables but it did report a net of 18 store openings for the p.s. brand which starkly contrasts a net of 5 store closings for Aeropostale. Previously, Aeropostale has stated they intend to open approximately 60 p.s. stores within 2013. CEO Thomas P. Johnson summarized his brand intentions when he said:

P.S. continues to build brand momentum and resonate with the customer. Last year, we achieved productivity levels that exceeded many of our customers in a very short period of time. We're excited to grow the square footage this year, and we continue to believe that over time. P.S. can become a 500-plus store chain.

Aeropostale CEO Thomas Johnson recently said, "We are committed to turning our business around and remain focused on shifting brand perception and recapturing market share." The sub branding effort of PINK has worked well for Victoria's Secret. The preteen lingerie retailer serves to introduce teens into the L Brand family. As their customers age and naturally shift buying behavior to adult lingerie the retailer easily bridges the gap from one brand to the other. Aeropostale designed the p.s. brand to achieve a similar effect. The store aims to sell trendy attire to 4 to 12 year olds while Aeropostale is aimed at 13 to 17 year olds. Given time, a successful execution should persuade teens to return to Aeropostale.

Comparably, American Eagle's strategic initiatives include brand strengthening in order to stem the slide of sales of women's apparel. Fortunately, aerie is a stand-alone retail segment in the AEO store portfolio and it does not cannibalize sales. Store fleets are being repositioned into side-by-side and shop-in-shop formats. CEO, Robert L. Hansen anticipates to open 24 shop-in-shop formats this year. More importantly, 30 more of these stores are planned for 2014. Aerie not only works to contribute partial trend immunity to American Eagle but it is on target to achieve continued EPS in the double-digits. Trend wise, because lingerie preferences hold a long life cycle compared to other apparel segments, it keeps American Eagle more relevant through the rise and fall of fast shifting trends. This will tone down long term trend shift risks and bring more stable foot traffic to American Eagles stores if successful.

At current valuations Aeropostale and American Eagle are potential opportunities for contrarian investors. Both, p.s. and aerie are components of ARO and AEO that can aid the companies' efforts to reposition themselves and recapture lost market share. Both management teams are continuing to build these powerful subbrands to deliver long term improvement to customer retention rates.

Source: Hidden Value In Retail Subbrands: Aerie By American Eagle Outfitters, P.S. From Aeropostale