By  on January 6, 2005

NEW YORK — It looks like American Eagle Inc. wants to break a rule and fill in a gap with its latest concept, which likely will go head-to-head with several recently revealed specialty retail ideas aimed at older, more affluent shoppers.

The company is tapping two former Abercrombie & Fitch executives to run the new, unnamed brand — expected to hit malls in spring 2006. On Wednesday, American Eagle named Michele Donnan Martin and Charles Martin to lead product design and development of its new concept, which joins A&F’s Ruehl and Gap’s yet-to-be-named brand in targeting an upscale, post-collegiate consumer.

Donnan Martin will serve as chief designer and general merchandise manager of women’s, while Martin was named chief designer of men’s. Both will report to Roger Markfield, president and vice chairman of American Eagle.

American Eagle executives were not immediately available for comment on Wednesday.

Despite a lack of details about the new brand, several retail analysts speculated the concept will target an older demographic than the company’s current teen-to-young adult customer base.

“I would say it could be a concept that catered to an older customer, like 25 to 35 years old, and maybe even older,” said Howard Tubin, an analyst at Cathay Financial.

“These days, a retailer wouldn’t want to rely totally on 18-year-olds for its business,” said Richard Hastings, retail economist at Variant Research Corp. “A smart retailer also would want something that is not as cyclical, which means targeting a group that is a bit more mature. My guess is that the only real option is a retail concept that is slightly more upscale, higher in price points and of a slightly older demographic.”

Tubin thinks the concept will be trendy, but not preppy, and he expects it will still cater toward value-conscious consumers, though at prices slightly higher than American Eagle’s.

Already, prices at the 849-unit chain sit at about a 30 percent discount to close competitor Abercrombie & Fitch, noted John Pinto, managing partner at Brightleaf Partners, an investment partnership. Pinto expects to see a “slightly more intimate concept than the [current] American Eagle concept. Something that is very bright and very product-focused, not as much aspirational than what A&F tries to create in their environment.”Liz Pierce, an analyst at Sanders Morris Harris, said she would be “surprised if they’re going to pursue a similar concept” to Abercrombie. She sees lower price points than J. Crew or Abercrombie’s new concept, Ruehl.

Donnan Martin and Martin each were executives in merchandising and design at Abercrombie & Fitch from 1992 to 1999 and were cited with helping to evolve the brand. Donnan Martin was vice president, gmm of women’s and girls’, and Charles held the position of vice president of men’s, boys’ and new businesses. Donnan Martin held prior posts at J. Crew and Macy’s, while Martin previously worked on the Allen Solly brand for Federated and Calvin Klein men’s at Biderman Industries.

“They are a powerful team, with a proven track record of creating and evolving a strong lifestyle brand,” Markfield said in a written statement.

Jim O’Donnell, chief executive officer of American Eagle, said in the statement, “Pursuing our next concept is key to our long-term growth strategy, and our vision of being a dominant, multibrand lifestyle retailer. We have created a unique concept that fits a real void in the current marketplace and is complementary to the American Eagle brand.”

He added the new concept “will probably be the number-one driver in use of cash for next year and hopefully in the ensuing years.” American Eagle ended the most recent third quarter with $384.6 million in cash, cash equivalents and short-term investments, up from $206.1 million a year ago.

Aside from naming executives for its new concept, American Eagle said December same-store sales gained 32.8 percent. The comps gain is well ahead of what analysts are expecting the retail sector to perform. Same-store sales estimates for December range from 3 to 4 percent. Also ahead of Wall Street expectations is Nordstrom, which said Wednesday that same-store sales rose 9.2 percent. Most retailers release comps results today.

American Eagle is the third specialty retailer to divulge plans for a new store concept. Last fall, Abercrombie & Fitch unveiled its Ruehl concept store, a well-designed, high-end format that aims its sights on an uberhip crowd.

After showcasing three Ruehl-branded stores in the fall, the retailer said it was looking to grow the brand to 13 stores while also expanding its existing formats internationally. Ruehl targets consumers aged 22 to 30, and currently operates three units, in Paramus, N.J.; Tampa, Fla., and Chicago. Additional Ruehl stores will be opened in Detroit; Columbus, Ohio; the Washington metropolitan area, and Denver in the first half of 2005. Five to eight more stores are expected to open through the end of this year.Internationally, A&F is planning to enter Canada by the end of fiscal 2005. Management said Canada is the first step in an eventual overseas expansion including Europe, Asia and possibly Latin America.

Last September, Gap Inc. said it plans to introduce a store concept targeting women aged 35 and older. The retailer could take two years to roll out the stores in a significant way, the company said. Gap disclosed few details about the new division, but up to 10 stores are seen opening in the fall of this year.

— With contributions from Arthur Zaczkiewicz and Vicki M. Young

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