2011 total domestic revenue $169 billion

Annual Retail Apparel Sales

Represents 5% of all retail sales (excluding

180,000

automotive)

Most profitable sector: Womens Apparel

160,000

Highly competitive
Brand name
Product differentiation

140,000

40,000
20,000

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

0
1995

Inventory, inventory, inventory!

60,000

1994

Labor-intensive Cost of sales management

80,000

1993

Seasonal
Holidays
Back-to-school

100,000

1992

economy

Sales in $M

Highly sensitive to changes in the overall

120,000

Data from U.S. Census Bureau Annual Retail Trade Survey

 Founded 1977, Incorporated in 1994

Headquartered in Pittsburgh, PA
Market cap: $2.23 billion
Brands include:
Aerie
77Kids (discontinued in 2012)
Martin + Osa (discontinued in 2010)

994 U.S. stores, 96 international stores

Honest, real, individual and fun. Priced to be worn by everyone, everyday,

delivering value through quality and style.

 Founded in 1892, Incorporated in 1996

Headquartered in New Albany, OH
Market cap: $2.75 million
Brands include:
abercrombie kids
Hollister Co.
Gilly Hicks
RUEHL No.925 (discontinued in 2009)

946 U.S. stores, 99 international stores

Classic, casual, confident, intelligent, privileged and possessing a sense of humor
4

 Founded in 1973, Incorporated in 1995

Headquartered in New York City
Market cap: $0.374 billion
Brands include:
P.S. from Aropostale
JimmyZ (discontinued in 2009)

936 U.S. stores, 95 international stores

High-quality, active-oriented fashion and merchandise at compelling values

American Eagle

Abercrombie & Fitch

Aropostale

2011
2010
2009
2011
2010
2009
2011
2010
2009
Net sales
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales
64.29% 60.54% 60.09% 39.42% 36.23% 35.68% 74.03% 63.08% 62.01%
Gross profit
35.71% 39.46% 39.91% 60.58% 63.77% 64.32% 25.97% 36.92% 37.99%
SG&A expenses
23.29% 24.03% 24.67% 55.92% 57.38% 60.75% 21.13% 20.80% 20.83%
Other operating expense (income)
5.11%
4.73%
4.69%
0.08%
-0.29%
-0.46%
Operating Income
7.31% 10.69% 10.56%
4.57%
6.69%
4.03%
4.85% 16.11% 17.16%
Non-operating income (expense)
0.19%
-0.75%
-0.20%
-0.09%
-0.10%
0.05%
-0.02%
0.00%
0.01%
Income before tax
7.50%
9.94% 10.35%
4.48%
6.59%
4.08%
4.83% 16.11% 17.17%
Provision for tax
2.70%
3.81%
3.09%
1.43%
2.26%
1.38%
1.86%
6.47%
6.88%
Income from continuing operations
4.80%
6.13%
7.26%
3.05%
4.33%
2.70%
2.97%
9.64% 10.29%
Loss on discontinued operations
-1.39%
-1.51% 0.02%
-2.69%
Net income
4.80%
4.74%
5.75%
3.07%
4.33%
0.01%
2.97%
9.64% 10.29%

American Eagle
2011
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable
Merchandise inventory
Other current assets
Total current assets
Property and equipment, net
Other non-current assets
Total assets

2010

2009

Abercrombie & Fitch

2011

2010

2009

Aropostale
2011

2010

2009

36.88% 35.51% 32.46% 19.14% 28.09% 23.74% 30.43% 34.34% 43.79%

1.31%
3.57%
0.22%
2.78%
1.15%
2.07%
1.95%
1.63%
2.93%
2.54%
3.22%
19.40% 16.02% 15.27% 18.69% 13.12% 11.01% 22.24% 20.25% 16.78%
6.34%
5.41%
5.01%
5.30%
4.75%
4.32%
7.42%
6.13%
6.33%
66.00% 62.47% 54.58% 48.84% 48.51% 43.44% 60.09% 60.73% 66.90%
29.84% 34.21% 33.35% 39.28% 39.26% 44.08% 39.09% 38.70% 31.75%
4.16%
3.32% 12.07% 11.88% 12.23% 12.48%
0.82%
0.57%
1.35%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

American Eagle
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Gift card liability
Other current liabilities
Total current liabilities
Non-current liabilities:
Long-term debt
Other non-current liabilities
Total non-current liabilities
Stockholders' equity:
Common stock
Contributed capital
AOCI (loss)
Retained earnings
Treasury stock
Total stockholders' equity
Total liabilities and equity

Abercrombie & Fitch

Aropostale

2011

2010

2009

2011

2010

2009

2011

2010

2009

9.42%
2.31%
9.06%
20.78%

8.92%
2.18%
9.53%
20.63%

7.41%
1.84%
9.87%
19.13%

6.93%
1.56%
14.64%
23.14%

4.67%
1.60%
12.51%
18.78%

5.32%
1.76%
8.84%
15.92%

14.07%
3.79%
8.41%
26.28%

13.32%
3.58%
11.05%
27.95%

11.47%
3.10%
15.96%
30.52%

0.00%
6.59%
6.59%

0.00%
7.50%
7.50%

0.00%
7.05%
7.05%

1.90%
13.86%
15.76%

2.33%
14.61%
16.94%

2.52%
16.77%
19.30%

0.00%
18.03%
18.03%

0.00%
16.10%
16.10%

0.00%
14.64%
14.64%

0.13%
0.13%
0.12%
0.03%
0.04%
0.04%
0.12%
0.12%
0.17%
28.34% 29.07% 25.93% 12.11% 11.87% 12.03% 28.11% 25.27% 21.69%
1.47%
1.49%
0.79%
0.21%
-0.22%
-0.32%
-0.11%
-0.06%
-0.88%
90.81% 91.06% 82.50% 76.13% 77.25% 77.38% 62.47% 50.41% 116.47%
-48.11% -49.89% -35.51% -27.39% -24.66% -24.36% -34.90% -19.79% -82.61%
72.63% 71.87% 73.83% 61.10% 64.28% 64.78% 55.69% 55.95% 54.84%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Sales per Square Foot

Net Store Openings/Closings

$700

70
60

$600

50
40
30

$500

20
10

$400

0
AEO

ANF

ARO

-10

$300

-20
-30

$200

-40
2009

$100

AEO
$AEO

ANF
2009

2010

ARO
2011

2010

2011

ANF

ARO

2011 2010 2009 2011 2010 2009 2011 2010 2009

Store Openings 30
34
29
37
23
49
68
53
Store Closings
26
51
24
64
24
4
8
15
Total Stores 1090 1086 1103 1045 1069 1096 1057 1012 952

Current Ratio

Quick Ratio

3.50

3.50

3.00

3.00

2.50

2.50

2.00

2.00

1.50

1.50

1.00

1.00

0.50

0.50
0.00

0.00
AEO
2009

ANF
2010

2011

AEO

ARO

ANF

2009

Industry Average

2010

2011

ARO
Industry Average

Inventory Turnover
12.00
10.00
8.00
6.00
4.00
2.00
0.00
AEO
2009

ANF
2010

2011

ARO
Industry Average

10

Debt Ratio

Debt-to-Equity

2.00

1.40
1.20

1.50

1.00
0.80

1.00

0.60
0.40

0.50

0.20
0.00

0.00
AEO
2009

ANF
2010

2011

ARO

AEO

Industry Average

ANF

2009

2010

2011

ARO
Industry Average

Operating Cash Flow to Debt

1.00
0.80
0.60
0.40
0.20
0.00
AEO

ANF
2009

2010

ARO
2011

11

Gross Profit Margin

Net Profit Margin

70.00%

12.00%

60.00%

10.00%

50.00%

8.00%

40.00%

6.00%

30.00%

4.00%

20.00%

2.00%

10.00%
0.00%

0.00%
AEO
2009

ANF
2010

2011

ARO

AEO

Industry Average

2009

ANF
2010

2011

ARO
Industry Average

Return on Equity

Return on Assets
35.00%

70.00%

30.00%

60.00%

25.00%

50.00%

20.00%

40.00%

15.00%

30.00%

10.00%

20.00%

5.00%

10.00%

0.00%

0.00%
AEO
2009

ANF
2010

2011

ARO
Industry Average

AEO
2009

ANF
2010

2011

ARO
Industry Average

12

Price to Earnings Ratio

Book Value Per Share

40.00

$25.00

30.00

$20.00
$15.00

20.00

$10.00

10.00

$5.00

0.00

$AEO

ANF
2009

2010

ARO

AEO

2011

ANF
2009

Dividend Payout

2010

ARO
2011

Dividend Yield

100.00%

4.00%

80.00%

3.00%

60.00%

2.00%

40.00%

1.00%

20.00%

0.00%

0.00%
AEO

ANF
2009

2010

ARO
2011

AEO

ANF
2009

2010

ARO
2011

13

 American Eagle

Abercrombie & Fitch

Strong position of liquidity

Receding store count

Competitive inventory turnover

Poor inventory turnover

Lacks long-term debt

Strong gross profit margin, but

lowest net profit

Highly-valued stock
Growing international sales

Gradually declining profitability

Modest dividend yields

Aropostale
Efficient use of selling space, while

expanding store count

Strong inventory turnover
Sharp decline in profitability
Pays no dividends
Less transparency in financial reporting

DO NOT BUY!

14

American Eagle (down 19.6%)

Abercrombie & Fitch (down 26%)
Aropostale (down 71.1%)
Dow Jones Retail Apparel Index (up 43.0%)
S&P 500 (up 42.8%)

End of fiscal year 2011

Today

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