American Eagle Outfitters is an amazing success story, propelled by next gens who love it for its honesty and relevant, trending style. It’s the perfect example of a brand from the early aughts that managed to evolve into a Gen Z go-to –– it’s exactly what Abercrombie wishes it could be.
CEO Jay Schottenstein has led the brand to new heights as the pioneer in supporting body positivity, inclusive environments and connection with its customers and local communities. AEO came off the pandemic as a nonessential retailer with over $5 billion in revenue and the strongest profit in over a decade.
Sustained Success
Schottenstein says his secret sauce to sustaining such impressive success is, “We are a customer-centric company. Everything we do is with the customer in mind–and we believe in meeting them wherever, whenever, and however they choose to engage with our industry-leading brands. This mindset allows us to seamlessly serve the customer while delivering exceptional products, services, and experiences.”
“Even with the rise in digital, we have always believed in the value of physical retail stores. Success in today’s marketplace means having a significant digital business and capability, while combining this with a strong physical footprint. And it’s becoming increasingly important to develop an engaging virtual experience through the Metaverse. Yet, to be successful–all of these touchpoints have to work seamlessly and connect with customers.” Jay Schottenstein
AEO’s disciplined focus on achieving returns on its investments while focusing on people (both employees and customers) has resulted in the company’s strong financial results. This is a key reason AEO is a 2022 Retail Radical.
Next Gen Fanbase
How did they do it? The darling of young consumers, the company added over 1.8 million new customers with an increase in customer spend. Schottenstein says they stay steps ahead of next-gens in keeping their products and services relevant and valuable by continuing to leverage strong engagement across social channels, while remaining intensely focused on exploring innovative ways to interact with customers. He adds, “Our marketing and commerce initiatives across TikTok and the Metaverse continue to be very successful. We have confidence in our brands and overall consumer affinity for great casual wear and lifestyle apparel is stronger than ever. We also deeply believe in building a better world for future generations–which resonates personally with our customers. Through three key areas of focus [Planet (Environment), People (Social) and Practices (Governance)], we are committed to creating positive change by advancing sustainability efforts, caring for our communities, and operating with the highest level of integrity. In 2022, we published our first ESG report to increase transparency and awareness for our efforts.”
Operational Innovations
Schottenstein describes the top initiatives AEO is most proud of: “In 2022, we have leveraged the strength of our operations and brands in an uncertain macro environment. We quickly responded early in the year to ensure we were best positioned for the second half of the year — and those efforts have paid off. Our portfolio of brands is strong and customer engagement continues at a healthy pace. Aerie remains a standout in the industry, and I’m very proud of the multi-year growth we’ve achieved, including the success of our activewear sub-brand OFFL/NE. American Eagle profit and margins improved compared to pre-pandemic, reflecting strong product assortments as well as the team’s dedication to customer-first experiences. Overall, I’m most proud of our ability to remain focused on our long-term strategies for growth, which sets us apart from our competition as we prepare to emerge from the current environment even stronger. “
AEO focused on inventory and real estate optimization strategies. Highly edited assortments and new product offerings increase full price selling. The company’s emerging brands Todd Snyder (menswear line) and Unsubscribed (slow fashion) performed well. And the company closed unproductive stores and invested in high quality stores and digital channels.
Two supply chain acquisitions, AirTerra and Quiet Logistics, improved in-market fulfillment and more cost-effective shipping. AEO has continued to invest in company-owned distribution centers and provides direct to store shipments which reduces transit times and lowers operating costs. AEO also increased its BIPOC representation across stores, corporate and distribution center locations.
Schottenstein states, “Even with the rise in digital, we have always believed in the value of physical retail stores. Success in today’s marketplace means having a significant digital business and capability, while combining this with a strong physical footprint. And it’s becoming increasingly important to develop an engaging virtual experience through the Metaverse. Yet, to be successful–all of these touchpoints have to work seamlessly and connect with customers.”
Workplace Culture
American Eagle leadership understand that young consumers are worker-first. Schottenstein says their workforce is engaged and resilient because “Caring for people is at the very core of how we show up. We have created a rewarding company culture that embraces optimism, inclusivity, and well-being. We know that by empowering our associates and amplifying their unique voices, we spark positive impact at AEO and within our communities.”
The enthusiastic workforce is supported by AEO’s Power of People initiative. The company introduced new communication tools and technology for workers to better operate in a hybrid working environment. The company provided additional benefits including mental health and student loan debt support. Three new AEO Real Care Health Centers opened in 2021 which brings the total up to four health centers located in corporate offices and distribution centers. And all AEO associates working at the locations that have the health centers have access to non-acute medical services. That is true commitment to a workforce, which makes AEO not only a great place to work, but a master of PR in the era of callout culture.
The AEO Community
The company’s charitable contributions hit a record high. AEO’s Human Rights Policy donated over $15 million to the community and the company established an Environmental, Social, and Governance (ESG) program and will provide its first report in fiscal 2022. Schottenstein is driving future growth with consistent focus on its brand ethos of Real People, Real Power, Real Growth.
Outstanding Results
Financial results for 2021 include a three-year CAGR of almost 7.5 percent, the profit margin last year was 8.4 percent, and the return of assets was 11.6 percent. American Eagle Outfitters outperformed the industry standards across these three financial indicators, proving that giving back is the best way for modern retailers to move forward… provided they make sure consumers know about it.
Staying innovative and radical in today’s disruptive retail marketplace is central to AEO’s success, Schottenstein says, “Innovation is one of AEO’s core values. Our associates are curious and change-oriented, constantly looking for ways to improve the business and our practices. We make decisions in the face of ambiguity, and we take calculated risks in order to better serve our customers, our communities, and protect our planet.”
