By  on February 28, 2006

NEW YORK — American Eagle Outfitters' intimate apparel subbrand will be called "aerie by American Eagle" and launch in the fall with a multipronged real estate strategy and an expanded collection.

Aerie represents an aggressive effort to maximize a category that has been building at the sportswear chain for six years and challenges the dominance of Victoria's Secret. Company executives said aerie won't have the edginess or raw sexuality of Victoria's Secret, but will still come across as romantic for a narrower segment of consumers ages 15 to 25.

Susan McGalla, president and chief merchandising officer of American Eagle, based in Warrendale, Pa., outlined the plans and showed the aerie logo, both of which are to be announced today. She said in an interview Monday that the strategy involves:

  • Three or four stand-alone aerie by American Eagle stores, including a 2,400-square-foot unit in Haywood Mall in Greenville, S.C. McGalla declined to specify the other locations.

  • All intimate apparel areas operating within American Eagle stores will be converted into aerie by American Eagle in-store shops, with enhanced fixtures and graphics.

  • There will be expanded collections, including bras, panties, dormwear for the fall, and personal care by spring 2007. Bras have been tested since February.

  • The seven American Eagle intimates shops that are next to existing American Eagle stores will be renamed aerie by American Eagle. Six are in the U.S. One is in Canada.

  • The label on the merchandise will just say aerie.
"There is really one major market share player out there in addition to department stores," McGalla said, referring to Victoria's Secret. "We don't really look at it as us going after them. We look at it as a good market share opportunity with a business we've been in. We are very interested in extending our lifestyle. We are a lifestyle brand and a destination. Six years ago, we started to pursue the intimate business. It's a natural extension of our [female customer] and her more personal side."

Prices will be the same as now, including $24.50 for bras and hoodies, sleek Ts and madras for $15.50 and dorm and yoga pants for $29.50.Aerie means bird's nest, McGalla noted. "We considered a lot of feminine names, but there's a wonderful romantic feeling to aerie. It really flows and leverages the lowercase a and e."

She would not disclose how much intimate apparel represents in revenues, saying it is a "significant comp contributor" and that for fall "we are converting to a higher square footage model."

"Intimates lives in every store that we own," McGalla noted. Five hundred have shops of 500 to 800 square feet for intimates, while the remaining 300 stores have about 150 square feet. American Eagle stores average 5,500 square feet. All will be changed by the week after Labor Day, with a soft launch for back-to-school in mid-July, and the official launch after Labor Day.

The expansion of intimates will not result in a reduction in space for sportswear or accessories, McGalla said. In many locations, the additional space will come from store remodels and expansions.

"Anywhere American Eagle is successful we feel aerie has the potential to be successful," McGalla said.

Asked about the character of the collection and the target customer, McGalla said "Sweetly sexy really personifies the mood" with products that represent a lifestyle extending from the dorm room to the coffee shop. "This girl has a romantic side and a playful side. It's more sweetly sexual than overtly sexual. I wouldn't tell you it's edgy. It's modern, very current, very comfortable and accessible and real to this girl. It's absolutely unique."

She said the company is putting the finishing touches on a store design that will feel "natural, optimistic, light and airy." There will also be a focus on gifting, she added, with the bulk of the collection built around underwear, dormwear and personal care. As far as personal care products go, "We will not be seeing a lot of personal care until spring '07," when an aerie fragrance will launch.

The aerie team was pulled from people already on the American Eagle staff and some talent new to the organization. Key personnel include LeAnn Nealz, chief design officer; Cindy Hall, vice president of intimates design; Betsy Schumacher, vice president and general merchandise manager of intimates. The team was built over the past 18 months.Aerie is considered American Eagle's first subbrand since it targets the same core customer as American Eagle. That's different from Martin + Osa, which is considered a separate division of American Eagle since it targets an older demographic.

Asked if the company is considering additional subbrands, McGalla replied, "American Eagle has its eye on growth. We will be developing businesses and being opportunistic about businesses to grow into."

One of the keys to Victoria's Secret is its ability to introduce new products often, based on research and development. McGalla said she will meet the challenge, stating, "We will be offering newness 10 times a year to the customer" through 10 floor sets a year involving updates and launches.

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