Abercrombie & Fitch Co. (ANF), Aeropostale, Inc. (ARO), American Eagle Outfitters (AEO): The Three Amigos Shoot Themselves in the Foot

Fly like and eagle—or not

The last amigo, American Eagle Outfitters (NYSE:AEO), has had flashes of success over the past two years but hit the wall in the first quarter of 2013.

In the second quarter of 2013, total net revenue decreased 3% and comps were down 6% after an impressive string of quarters in 2012 with mid-to-high single digit comps. The run came to a screeching halt in the first quarter of 2013 when AEO turned in disappointing decreasing revenue on negative 5% comps. It looked like management was getting the style right, but the CEO admitted in the recent conference call they are wide of the mark.

Robert Hanson:

We didn’t deliver the trend relevancy, innovation and value. And that’s where I think we fell short in the second quarter, when we should have been innovating more aggressively in core and core fashion, and we didn’t. I think we probably could have read those results a little bit more self-critically and made adjustments.

It’s a good start. He takes the blame for the miss, but still holds fast to the idea there is a core and being true to the core will save the business. The core is denim, tees and fleece and AEO’s thinking is they missed on prints, color and washes when it may be a Richter Scale 8 shakeup happening beyond core denims. Since 70% of their business is core fashion and basics, caution is warranted but the first half of 2013 should be telling them something is fundamentally wrong.

The three amigos ruled teensup fashion for years, but there’s a whole lotta shakin’ going on in retail and they need to shake off the dust and cobwebs to get ahead of the competition.

The article The Three Amigos Shoot Themselves in the Foot originally appeared on Fool.com and is written by jean graham.

j.a.graham has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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