American Eagle Outfitters is not joining the race to the bottom

Discussion
Jul 30, 2015

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.

What role does inventory management play in helping retailers avoid getting caught in the race to the price bottom? What else will American Eagle Outfitters need to do if it wants to be around and successful five years from now?

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Braintrust
"It’s not just about the right merchandise content, but also about speed to market — and speed to exit a downtrending idea. Cutting down on lead times, and sourcing closer to one’s stores, is critical to making it happen."
"There is really nothing more to be said. Just imagine how much more profitable retailers would be if they didn’t have to discount the last 30 percent of their sales by 60 percent, 70 percent or more."
"It is not just inventory management, but what types of products that American Eagle Outfitters focuses on, that will define how to avoid getting caught in the race to the price bottom."

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3 Comments on "American Eagle Outfitters is not joining the race to the bottom"


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Dick Seesel
Guest
6 years 9 months ago

If any of the “Three As” of specialty retail had figured out how to improve their supply chain and product development, they probably would not have lost as much market share to the “fast fashion” masters of the art like Forever 21, Zara and H&M. It’s not just about the right merchandise content, but also about speed to market — and speed to exit a downtrending idea. Cutting down on lead times, and sourcing closer to one’s stores, is critical to making it happen.

So American Eagle is right: There is no reason why inventory levels need to grow at a faster pace than sales growth. In fact just the opposite, if “just in time” sourcing and smart inventory allocation are working as they should.

Gene Detroyer
Guest
6 years 9 months ago

WOW! Here is an enlightened retailer!

” … the company’s goal is to have its inventory grow at a slower rate than sales … 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.”

There is really nothing more to be said. Just imagine how much more profitable retailers would be if they didn’t have to discount the last 30 percent of their sales by 60 percent, 70 percent or more. And not only does that discounting hurt the bottom line on those particular sales, it has taught the shopper to wait for those sales, exacerbating the situation.

Fast fashion is not only built on getting fashion to market quickly, it is also built on scarcity. If you come back next week expecting a discount on that item you like, you will be disappointed. It will be gone and not replaced. They are teaching the shopper to buy now.

Kai Clarke
Guest
6 years 9 months ago

It is not just inventory management, but what types of products that American Eagle Outfitters focuses on, that will define how to avoid getting caught in the race to the price bottom. It also needs to continue to invent new ways to get attention besides just cutting price. New ways to style clothes, invigorate their markets with different materials, etc.

wpDiscuz
Braintrust
"It’s not just about the right merchandise content, but also about speed to market — and speed to exit a downtrending idea. Cutting down on lead times, and sourcing closer to one’s stores, is critical to making it happen."
"There is really nothing more to be said. Just imagine how much more profitable retailers would be if they didn’t have to discount the last 30 percent of their sales by 60 percent, 70 percent or more."
"It is not just inventory management, but what types of products that American Eagle Outfitters focuses on, that will define how to avoid getting caught in the race to the price bottom."

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