American Eagle Lets an Intimates Subbrand Fly (AEOS, LTD)

Includes: AEO, LB
by: Andrea Wasserman

Women's Wear Daily reports that American Eagle Outfitters (ticker: AEOS) will launch its first subbrand, "aerie by American Eagle", in the fall with a multipronged real estate strategy and an expanded collection:

Aerie represents an aggressive effort to maximize a category that has been building at the sportswear chain for six years and challenges the dominance of Victoria's Secret (parent is Limited Brands Inc., ticker: LTD). Company executives said aerie won't have the edginess or raw sexuality of Victoria's Secret, but will still come across as romantic for a narrower segment of consumers ages 15 to 25.

The rollout will include three or four stand-alone aerie by American Eagle stores. All intimate apparel areas operating within American Eagle stores will be converted into aerie by American Eagle in-store shops, with enhanced fixtures and graphics, says WWD.

Susan McGalla, president and chief merchandising officer of American Eagle, outlined the plans:

"There is really one major market share player out there in addition to department stores," McGalla said, referring to Victoria's Secret. "We don't really look at it as us going after them. We look at it as a good market share opportunity with a business we've been in. We are very interested in extending our lifestyle. We are a lifestyle brand and a destination. Six years ago, we started to pursue the intimate business. It's a natural extension of our [female customer] and her more personal side."

Comment: This is no real competition for the market leader: aerie's sweet and playful aspirations may yield a line that takes some teenage shoppers away from Victoria's Secret, but even slightly older buyers will stay put. However, expect American Eagle's sales to increase as the teenyboppers it already draws to its stores find more to buy in an intimates brand that's finally geared toward them.

AEOS 1-Yr Price Performance: