American Eagle's sales slump as young people reject choices

The retailer struggles to stay popular after fashion missteps.
PITTSBURGH (AP) -- High school student Mike Davis recently walked out of an American Eagle Outfitters store empty-handed after finding nothing new to add to his wardrobe of boot-cut jeans, cargo shorts, screen T's and polo shirts.
"I pretty much had everything. That's the problem," said Davis, 17.
After disappointing back-to-school sales this year and several seasons of fashion missteps, Warrendale-based American Eagle Outfitters is struggling to stay in favor among 16- to 24-year-olds, who have gravitated to lower-priced stores for casual basics and skate-theme shops that teens hope will help them stand out from the crowd.
Sales decrease
With most of its 727 stores in America based in malls, the retailer -- which also operates 111 Bluenotes/Thriftys stores in Canada -- reported a 10.4 percent decrease in sales for the month of August. September sales will be released Tuesday.
"I think it would be fair to say we've been disappointed with our results thus far," said American Eagle's chief financial officer, Laura Weil. "We were very disappointed with our back-to-school performance, but with competition being so strong and the economy being relatively soft, you have to hit all cylinders."
Despite its reputation as a classic American clothier with broad appeal, American Eagle failed to stock up this season on enough staples, such as hooded sweat shirts and graphic T-shirts, one analyst said. The company found fashion denim in different washes didn't sell as well as standard five-pocket boot-cut jeans. And company officials say the vintage-wear message simply wasn't strong enough and failed to connect with the high school and college crowd.
"Everybody, including Wall Street, thought our merchandise was on track and fashion right, and we were just very disappointed that the customer didn't respond," Weil said.
Sarah Masterson, 18, bought a cream angora sweater for $34.99 but says she and her friends all bypassed American Eagle T-shirts because they were too loose and frumpy.
"It wasn't as edgy," she said.
In hindsight
American Eagle said it should have leveraged its name brand by using more logos on T-shirts and hoodies though both Masterson and Davis said they valued style and comfort over brand. And though the retailer promotes affordable fashion -- T-shirts start at $12.50 and jeans start at $29.50 -- similar items can be found at Old Navy, Aeropostale and Hollister for slightly less. Abercrombie & amp; Fitch owns Hollister.
For the past nine weeks, American Eagle has been trying to correct its problems by presenting a more streamlined image in stores to compete in the crowded teen retail segment.
Coming up
American Eagle plans to introduce a line of colorful sweaters and knits alongside corduroy blazers, cargos and pants that the company hopes will fit in with the current trend of combining preppy fashions with a more utilitarian look.
Trucker caps may be a hot-selling item among men but denim remains a store staple and makes up 16 percent of sales, the most in the company's 26-year history, said Judy Meehan, director of American Eagle's investor relations.
Dawn Stoner, a specialty retailing analyst with Pacific Growth Equities, said that when sales began to slide this year, the company made last-minute changes with untested styles that didn't resonate with the collegiate crowd. She recommends concentrating on 20-year-olds.
"They have to settle down and focus on their customer profile and be unwavering and dedicated to that, not wavering between junior apparel and follow it up with more mature offering," Stoner said.