American Eagle Outfitters: Thriving In The Retail Apocalypse

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Value Kicker


  • American Eagle stock is 24% below its May 2019 price despite 17 consecutive quarters of growth.
  • The company's Aerie brand continues to move from strength to strength.
  • AEO has announced it will start selling CBD-infused products.
  • The company has no debt and generates a significant amount of cash flow that is returned to shareholders via dividend and its buyback program.

One of my favorite strategies is looking at unloved sectors that the market has ignored and look for solid companies at a discount (even better if the company pays a dividend so you get paid to wait!). American Eagle Outfitters (NYSE:AEO) is one such company.

AEO is a multi-brand clothing and accessories retailer with over 1,200 retail stores. As a retailer in the age of online shopping/death of malls, the company has managed not only to survive but to thrive through a combination of significant digital presence to complement its brick and mortars stores as well as the proper brand messaging. I believe the market is undervaluing AEO due to trends in the overall retail sector.

Retail Apocalypse Or Retail Evolution?

The retail industry has vastly underperformed the market this past year. As the S&P 500 (led by the technology sector) quickly recovered from the December 2018 lows, retail stocks, as evidenced by the SPDR S&P Retail ETF (XRT), have barely budged off their lows. The issues facing the retail industry are largely structural and mainly caused by a confluence of factors namely the growth of online shopping, oversupply of malls and shifting consumer habits with analysts predicting more retail outlets and shop closures in the years to come.

Source: (registration required)

What does a “retail apocalypse” look like? If the predictions are correct, about 145 Malls of America.

That’s how many combined stores are projected to close between now and 2026 — 75,000, according to Coresight Research. The advisory firm counts 5,994 announced shutterings just in 2019 so far, beating all of 2018.

That much retail real estate, if equated to the Mall of America’s 2.5 million square feet of 520 stores, translates to more than 700 million square feet, or 25 square miles — larger than the city of

This article was written by

Value Kicker profile picture
Nine to 5 by day. Hobbyist stock trader by night. I got an MBA and a CFA ... so that should count for something. I only care about my own greedy interests and I love feeding trolls. Not your financial advisor. Information for entertainment purposes only. Diamond hands are forever.

Disclosure: I am/we are long AEO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Caveat emptor! (Buyer beware.) Please do your own proper due diligence on any stock directly or indirectly mentioned in this article. You probably should seek advice from a broker or financial adviser before making any investment decisions. I don't know you or your specific circumstances, therefore, your tolerance and suitability to take risk may differ. Although I write with conviction, due to timing issues my articles may not fully reflect my investment portfolio (I have a day job so I can't write all the time, etc.). This article should be considered general information, and not relied on as a formal investment recommendation.

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