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American Eagle Outfitters is not joining the race to the bottom

July 30, 2015Written by George Anderson

Back in December, a Forbes article questioned whether teen retailers Abercrombie & Fitch, Aeropostale and American Eagle Outfitters would "be around in five years" as the result of competition from fast fashion chains and a host of other factors. The answer, according to a new piece on Fortune's website, may be "yes," at least for American Eagle, which has found ways to compete without engaging in an endless cycle of discounting.

During its first quarter, comparable store sales growth at American Eagle improved seven percent. Much of the credit went to changes made to the chain's fashions, including the decision to add stretch fabric to its Denim X women's jeans. The change helped American Eagle offset some issues that other denim sellers have faced as more and more female shoppers choose to wear so-called athleisure wear instead of jeans.

With a clear point of difference from the merchandise being sold by its competitors, American Eagle has been freed, at least for the moment, from getting caught in a continuous cycle of discounting. The success of Denim X for women led American Eagle to develop its Flex line of similarly constructed jeans for men.

AEO Denim X=
Source: ae.com

Gaining less attention — but of critical importance in reducing price as a factor in performance — has been American Eagle's emphasis on inventory management.

Chad Kessler, global brand president for the retailer, told Fortune, the company's goal is to have its inventory grow at a slower rate than sales. While this might suggest a future filled with out-of-stocks, Mr. Kessler said the strategy will actually help American Eagle respond more quickly to fashion trends since less time will be focused on figuring out how to rid itself of slow turning inventory.

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