When American Eagle Outfitters launched its 77kids business for younger children, in 2008 it was determined to take it slow and test the brand's appeal online before incurring the expenses associated with operating physical stores.
By 2010, the company had decided it saw enough to lay down some bricks and the first of 22 stores were opened.
"There are natural synergies," Betsy Schumacher, senior VP merchandising at American Eagle Outfitters, told The Wall Street Journal back in 2010. "We like to be able to have a customer start with us at birth and stay right through college."
Many others agreed. A 2010 RetailWire poll found that 68 percent of respondents believed there was a "large" or "medium" growth potential for teen retailers such as American Eagle launching kids concepts such as 77kids.
By the end of last year, however, 77kids had lost $24 million on sales of $40 million. Now, the decision has been made to get out of the business, possibly selling some or all of 77kids' assets to a third party.
"Although making this decision is disappointing, it is in the best interest of the company and our shareholders to prioritize and focus our efforts on businesses with the highest return potential," said Robert Hanson, chief executive officer of American Eagle, in a press release. Mr. Hanson joined the company earlier this year with the mandate to turn the business around.