American Eagle 'Down-Sizing' Into
October 23, 2008
Today's kids have a lot to say about what they wear.
A core team of 22 people at American Eagle Outfitters
Inc. found that out as they spent a year studying the
children's clothing market.
"We went across the country and talked to hundreds of
moms, and hundreds of 8-, 9- and 10-year-old girls and
boys," Chris Fiore of the South Side-based company said
"We went to their homes and to their schools, and picked
their brains about what they like and don't like."
American Eagle will find out, starting today, whether it
has hit on the right combination -- the first collection
in its new 77kids by american eagle brand debuts for
sale online only.
The first 150 designs for toddler boys and girls and
older children are pioneers of sorts for the company's
fourth clothing brand. The collection is American
Eagle's first step into the $10.4 billion-a-year
children's clothing-store market.
As 77kids gets rolling, American Eagle's year-old
headquarters at SouthSide Works will be a center of
While design and production work are run from a New York
office, all marketing, merchandising and electronic
commerce operations come out of the Hot Metal Street
buildings. That even includes photography for the Web
site, said Fiore, senior vice president for the brand.
American Eagle announced 77kids in January, just as most
retailers were starting to hit on hard times.
The weak economy likely will dampen sales at first, said
George Van Horn, senior analyst at IBISWorld Inc., a Los
Angeles-based market research firm. Still, "the outlook
over the next five years shows there are a lot of good
reasons to get into this sector that they hasn't been
exposed to before."
The 77kids brand targets ages 2 to 10, within a
population segment that's projected to grow by at least
0.8 percent a year for the short term.
"We expect the share of first-born children to go up --
those are the kids who tend to get the stuff, and aren't
prone to hand-me-downs," Van Horn said.
Fiore said he realizes the challenges of convincing
parents and kids through computer screens to buy
merchandise that will be judged by touch and fit. That's
why, he said, the fashions come with trademarked
guarantees for durability and softness.
"We did wash every item 77 times, and we photographed it
and stand behind it. It's not just marketing gibberish,"
Fiore said, adding the results are documented on the
site. Free shipping and returns are offered to spur
sales, and an online "size wizard" and printable
footwear chart ensure a good fit.
The brand name is a reference to American Eagle's 1977
founding date, and 7s are sprinkled throughout its
Seven "gotta have" outfits for boys and girls are
modeled on the site, and the company is sending seven
boys and seven girls who win a sweepstakes to Los
Angeles with family members for a Nov. 14 Jonas Brothers
concert. The 77kids site will play the concert two days
The clothing is priced for value, Fiore said. Although
it differs substantially from American Eagle styles for
teens and early 20s customers, "the basic DNA of the AE
designs has been infused into the 77kids assortment."
That means lots of denim, with jeans for older kids
priced at $19.50 to $39.50. Hoodies, T-shirts, jackets
and cargo pants are in the mix, but so are sparkly
It's all designed to land in the common ground between
the durable, safe, good-quality and value-priced
clothing that parents want, and the cool, soft and
stylish items -- sometimes based on their older
siblings' or celebrities' fashions -- that children
crave, he said.
Retail analyst Seth Jayson said the 77kids styles that
he has seen resemble AE items. "That's a formula that
has worked well for them, with AE and aerie," he said,
referring to the company's dormwear and underwear brand.
The Martin + Osa brand for older customers has
struggled, partly because prices were too high at first,
said Jayson of The Motley Fool, which owns American
Eagle stock through its Million Dollar Portfolio. He
owns shares as well.
With the children's brand, "they really need to make
sure they deliver the right value proposition to people
who come in right now," Jayson said. "If you scare them
now, it might end up choking the concept off."
Top retailers, such as Gymboree and Tween brands, have
struggled in recent times, Jayson noted. And Talbots
closed its children's stores this year.
American Eagle has said its online launch for 77kids is
a way to gauge customers' tastes and to tweak styles
before the first stores open late in 2009. Orders will
be shipped from a distribution center in Ottawa, Kan.
The company's sales, like those of most retailers, have
declined in the past year. American Eagle's stock has
lost about half its value this year and closed at $10.26
yesterday, down 80 cents.
September same-store sales were down 6 percent compared
to a year ago, although e-commerce sales were up 33
"The good news is, they are still making a lot of cash,"
Jayson said, "and I don't worry that a recession will
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