Robert Hanson’s long-term vision for American Eagle Outfitters Inc. includes fewer promotions, a rejiggered store base and, ultimately, a global expansion that will pay for itself.
But as Hanson talked up his long game, investors were apparently disappointed the retailer didn’t boost third-quarter projections and the stock fell 3.8 percent on Tuesday to $21.22.
Hanson, the longtime Levi Strauss & Co. executive who took over the teen retailer as chief executive officer in January, is thinking in years, not quarters. His goal is first to fortify the American Eagle and aerie brands and grow the North American business while planning global Web and retail expansion.
“It is critical for us to make sure that we are as strong as possible domestically in order to achieve the long-term growth potential in North America as well as the opportunities we have for further expansion,” Hanson said.
For the American Eagle chain, that means focusing on branding and intrinsic value while “selectively pulling back against the promotional cadence of the past several years.”
The American Eagle chain will also cut 20 to 30 stores a year while opening 25 to 30 new ones, with a particular focus on urban malls and the West Coast and other underdeveloped areas. Hanson noted the brand does not have stores on New York’s Upper West Side or Upper East Side or in the Financial District.
As the U.S. business strengthens, Hanson said the company would expand its international presence, funding the effort by licensing operations in some countries. The ceo said the American Eagle brand has a consumer awareness of about 30 percent in the markets the firm tested.
American Eagle is already planning to open four stores in Mexico next year and Hanson said there’s an opportunity for 50 doors.
When the company goes into a new country, it plans to arrive digitally first.
“The new global flagship model is going to be driven by mobile and tablet experiences,” Hanson said. “The first entry point for almost every customer to our brand is going to be through technology.”
For now, Hanson has the help of Roger Markfield, who is vice chairman and executive creative director. But the ceo said Markfield would be stepping down in early 2014.
American Eagle continues to expect earnings of 37 cents to 38 cents a share this quarter, below the 39 cents analysts expected on average.
Jefferies analyst Randal Konik said investors were focusing on the third quarter and he saw the stock sell-off as a buying opportunity.
“Robert Hanson provided a consistent and focused vision for the company rooted in discipline and [return on invested capital],” Konik said. “We find his focus on improving consistency, driving better fundamentals and growing the business globally very encouraging and given his track record thus far, the plan has a high probability of succeeding.”