Financial Statement

Articulate the purpose and context of the analysis:

1. Statement of the purpose or objective of analysis.

The purpose of this analysis is to assist the investors in choosing best company to invest their money in, in this paper we talk specifically about American eagle outfit store and how they do their business according to equity security and liabilities side. And our objective is to give an opinion with high level of clarity and consistency.

2. Make a list of specific questions to be answered in the analysis

· How well a company can liquidate its assets to meet its current obligations?

· How well the company can utilize equity investments to earn profit for investors?

· How much cash the company has as a result of its operations?

· How each line item or component affects the financial position of the company?

· How can you present common-size income statements?

· How can you present common-size balance sheet?

· How the company's growth over a number of years?

· How much earnings is retained by a company to grow its operations?

· Is a company made a profit or loss in its previous fiscal year?

· Is the companies have ability to pay its debts as they come due?

· what is the proportion of operational expenses to revenue generate?

Business Model

Customer Segments

American Eagle offers accessories and apparel for the general consumer population. 

The Company’s core customers:

· Younger Consumers, between 15 and 25 usually who are high school or college students

· Wealthier Consumers, Consumers from middle to higher income, USD 50,000 to in excess of USD 100,000

· Fashion Conscious Consumers, consumers who are aware of the fashion trends and happy to spend disposable income on accessories and apparel.

American Eagle serves both women and men.

Value Propositions

American Eagle provide value to its customers in the following ways:

· Brand Strength and Reputation – American Eagle one of the most recognizable and popular clothing brands in the US, and the company reputation as the manufacturer of high-quality goods

· Design and Quality – American Eagle develops and designs its own clothing that follow current fashion trends around the world

· Product Range – American Eagle provides a wide range of goods to suit the requirements of its customers

· Accessibility and Reach – American Eagle operates an extensive network across the Americas, Asia Pacific, Europe, and the Middle East, and online store, make sure that they able to reach a large customer

· Customer Service – American Eagle seek to provide high quality customer services.

Channels

American Eagle has a large sales network in US and internationally.  American Eagle serves its customers directly with its network of physical retail outlets, and online through its own ecommerce portal.  934 American Eagle stores and 115 independent stores under the Company’s brand. American Eagle also operates another two emerging brands: Tailgate, it is a vintage, sports-inspired apparel brand. The other one is Todd Snyder New York brand, a premium menswear. American Eagle’s stores are typically located in lifestyle centers, shopping malls and street locations. American Eagle use the services of third party for its manufacture operations.

Customer Relationship

The company serves its customers in-store, and through its online shop.  American Eagle’s stores are staffed by sale personnel who seeks to provide service to customers. The website works also to provide information on its store locations, its returns policy, its products, shipping options and order tracking service.

American Eagle maintains social media presence and operating a number of accounts – including with Twitter, Facebook, Pinterest, Instagram, YouTube and LinkedIn –to connect deals and updates to its customers, company developments and handle customer feedback. 

Key Activates

The Company offers a range of accessories and apparel for women and men under the American Eagle, and under the Aerie brand is the personal care products for women. The Company’s other brands include menswear brand Todd Snyder New York and sports-inspired brand Tailgate. The company operates a large network about 1,000 locations across the Americas, Europe, Asia Pacific, and the Middle East, Canada, Mexico, China and the UK and the online store

Key Partners

· Supplier and Vendor Partners, suppliers of equipment and materials used in the Company design and retail operations, and the third-party providers services that support the Company’s activities

· Content Management and Technology Partners, Range of ecommerce support the Company’s website design and online retail operations; 

· Sales and Distribution Partners, Range of logistics companies support the Company’s delivery operations and distribution,

· Manufacturing Partners, it’s a third-party factory manufacturing companies and operator that produce the American Eagle merchandise by using the Company’s proprietary designs

· Social and Community Partners, Range of charitable organizations and non-profits collaborates on community and social projects, mainly in the US

· Strategic Partners, other commercial brands and enterprises with which a Company collaborate on brand marketing, development and other strategic projects.

Key Resources

American Eagle’s business model success depends on providing on trend fashion to the customer with reliably and efficiently item. The other key resources of the company are intellectual properties and brands ‘American Eagle and ‘Aerie’, its network, its suppliers and supply chain infrastructure, retail outlets, its online store and IT infrastructure, and its partnerships –its manufacturing and distribution partners and the Company’s network of 1,000 physical outlets 

Cost Structure

In 2019, the company recorded total cost of sale of USD 2.55 billion, and general and administrative expenses, selling total of USD 980,61 million

The cost includes occupancy and utility costs, the procurement of third-party manufacturing and distribution services, the procurement of materials and equipment, the development and maintenance of its IT and communications infrastructure, the operation and maintenance of its online store, the develop and implementation of marketing and branding campaigns, the management of its partnerships, and the payment of salaries and benefits to its workforce. 

Revenue Streams

The company collect revenue directly from the customers by selling clothing and accessories. In 2019 the company recorded net revenue of $ 4.04 billion and in 2018 the company recorded $ 3.80 billion.

particular issues or problems for the company for the year just passed or to be expected in the future

The company experienced stock plummets in the month of September in 2019 as the school reopening schedule was interfered with and the impact was that the sales dropped. Furthermore, shares of the company decreased by a margin of around 13%. Traditionally, American Eagle outfitters operations have been reliant on the seasons of the year, with a large percentage of total net income and transaction income taking place in both the third and fourth financial quarters, evidencing higher demand during schools reopening and year end celebration periods, in a relative manner. Due to this seasonality, elements negatively impacting the company in the third and fourth financial segments comprising harsh weather or displeasing economic situations, could have a material antagonistic impact on the company’s financial situation and consequences of transactions for the whole year. This issue can be in general defined as a seasonality and can also be expected in the future whereby the sales can vary irregularly and thus have a negative impact on the company’s operations.

Other issues which can affect the company in the future can either be natural calamities, political instabilities or adverse global climate trends. Public health issues such the coronavirus pandemic had a negative impact on the last quarter of the 2019 financial year as well as the first quarter of the 2020 financial year because operations such as supply of the goods were affected.

Another problem that the company experienced was the impact of economic pressures and different business elements on discretionary client spending and modifications in client preselection. The financial profitability of American Eagle outfitters highly relies upon client spending which can be impacted in a negative manner by economic situations in addition to factors influencing disposable client income like income and payroll taxes, occupation, client debt and client confidence. In the future, the company may be negatively affected by alterations in client preferences and discretionary spending behaviors like client habit of changing the purpose of his or her resources to non-retail discretionary client spending

Collect economic data

According to American Eagle Outfitters second quarter report released on 9th September 2020, the following are company’s economic and financial data;

a) Total revenue as at August 1, 2020 was $884million while at the end of August 3, 2019 the total revenue was $1.04billion.

b) Gross profit is $ 265 million in 2020 while in 2019 it was valued at $383 million.

c) Selling, general and administrative expense are $224 million in 2020 while in 2019 they were worth $253 million.

d) Depreciation and amortization expense decreased from $45million in 2019 to $39 million in 2020.

e) Operating loss of $12 million had been incurred in 2020. On the other hand the company obtained an operating income of $82 million in 2019.

f) Net interest expense was at $9 million on August 1, 2020. In 2019 however, American eagle had a net interest income of $2 million.

g) The Earning per share decreased from $0.38 to $0.08 in 2019 and 2020 respectively.

h) Total closing inventory is estimated at $421 million

i) Capital expenditures on a year to date basis is estimated at $61 million. For the full fiscal year 2019, capital expenditures amounted to $210 million.

j) During the second quarter of this year, the Operating cash flow was $899 million. This is an increase from $317 million in 2019.

k) On Shareholder returns, dividend pay outs were cancelled by the company in June 2020 and deferred to 2021.

Collect information about industry of company and about competitors

American Eagle Outfitters has several competitors including the following organizations; The Buckle, UNIQLO, GAP, Pull and Bear, A&R, Forever 21,H$M, Inditex, and Abercrombie & Fitch. This essay will provide a detailed description of the competition that the company faces from its three main competitors including Gap, Pull and Bear, and A&R). In addition, it will also provide an in-depth analysis of the industry in which the American eagle is being operated.

Gap is a clothing retail corporation based in San Francisco, United States. It engages in the provision of clothing, accessories, and individual care products for children, women, and men. The varied products include tees, denims, khakis, button-downs, fitness and lifestyle apparels. Pull & Bear also on the other hand, is a Spanish entity that engages in the retailing of urban clothing and accessories launched in 1991. The third competitor to American eagle is A& R which is a corporation situated in Bulgaria involved in the selling of custom T-shirts and Athletic attires. From the above analysis on the three competitors, it is clear that American Eagle Outfitters is facing stiff completion in the fashion industry. Therefore, it should establish efficient procedures and policies that will guide its operations to ensure effectiveness and market dominance.

American Eagle Outfitters, Inc. is a retail company that specializes in a range of brands. The corporation through its American Eagle brand which has about 940 stores offer a variety of clothing and accessories for both men and women. In addition, women are able to get personal care products through their Aerie brand which has more than 148 separate stores. The firm has opened and is operating stores in countries including Hong Kong, United States of America, Mexico, and Canada. Its retail stores that are functioning and licensed are approximated at a value of 1,300 and are found situated in shopping malls, street places, and lifestyle hubs. The other two brands that have been developed by American Eagle Outfitters are Tailgate and Todd Snyder New York.

Despite its outstanding performance over the years, American Eagle Outfitters, Inc. is facing many challenges in 2020. This has been supported by the continued drop in their gains since the WHO announcement that the Coronavirus had become a global pandemic. This was followed by lockdowns in many areas of the world thus negatively affecting the apparel industry globally. Furthermore, the following have continued to be experienced; increasing unemployment rates, decrease in purchasing power, stay at home directives, and condensed flexible spending. This firm however continues to enjoy a resilient financial position as it is supported by its stout cash position, cash flow, and benefits from tax reforms.

References

· American Eagle Outfitters. (2019, June 27). Retrieved October 05, 2020, from https://www.cleverism.com/company/american-eagle-outfitters/

· American Eagle Outfitters Competitors. (2020, August 28). Retrieved October 07, 2020, from https://www.comparably.com/companies/american-eagle-outfitters/competitors

· Company Overview And History Of American Eagle Outfitters Marketing Essay. (n.d.). Retrieved October 07, 2020, from https://www.ukessays.com/essays/marketing/company-overview-and-history-of-american-eagle-outfitters-marketing-essay.php

· Diversity at American Eagle Outfitters. (2020, August 28). Retrieved October 07, 2020, from https://www.comparably.com/companies/american-eagle-outfitters/diversity