American Eagle Outfitters
MKTG 3310: Retailing
Professor: Dr. Gao
Retailing Financial and Strategic Analysis
Abercrombie and Fitch and American Eagle Outfitters
Gross Margin Percentage
Abercrombie and Fitch (A&F) has higher gross margin percentage than American Eagle Outfitters (AE) due to its higher average selling price (ASP) than AE’s; the approximate average price for a pair of men’s jeans at A&F is $80 compared with $45 at AE. This is because of the different strategies between A&F and AE. A&F targets higher income level market than AE’s with more fashionable and higher quality items. To maintain the loyal customers, A&F is required to maintain its brand image with certain price level and one of the strategies that A&F has been taking is putting more …show more content…
The detailed distributions of the costs are not listed in the 10K report, but I assume the largest source of the expenses is its labor costs. A&F has more employees than AE (more than twice than AE has), despite of the similar number of stores (A&F: 1,045 and AE: 1,090 in FY11); if you go to A&F stores, you will see models (men and women) standing at the entrance who are just saying hi to customers coming into the store. Look back the last 3 years, both companies’ overhead percentage have been decreasing. This is because of the slower store expansions and closure of unprofitable …show more content…
The main cause of the different ROA numbers between AE and A&F are mainly due to their profitability including OPM and net profit margin numbers. The more successful AE’s strategy including offering basic and core fashion items and focusing on more operating efficiency in terms of better cost control, resulted in the higher numbers in OPM and net profit margin. While AE’s last 3 years ROA is somewhat stable moving between 7.5% and 8%, A&F’s ROA had been moving more volatile from 0% in FY09 to 5% in FY10. These differences come from the ability of cost controlling between the two companies; AE has been done better job for cost control than A&F, thus less volatile ROAs last 3 years. In addition to the better cost control, AE has been putting more efforts in direct-to-customer sales than A&F, which is more profitable than the sales at retail stores since direct sales does not require any physical spaces to display its products and result in much less operating expenses including labor costs, thus contributes making higher profitability
Professor: Dr. Gao
Retailing Financial and Strategic Analysis
Abercrombie and Fitch and American Eagle Outfitters
Gross Margin Percentage
Abercrombie and Fitch (A&F) has higher gross margin percentage than American Eagle Outfitters (AE) due to its higher average selling price (ASP) than AE’s; the approximate average price for a pair of men’s jeans at A&F is $80 compared with $45 at AE. This is because of the different strategies between A&F and AE. A&F targets higher income level market than AE’s with more fashionable and higher quality items. To maintain the loyal customers, A&F is required to maintain its brand image with certain price level and one of the strategies that A&F has been taking is putting more …show more content…
The detailed distributions of the costs are not listed in the 10K report, but I assume the largest source of the expenses is its labor costs. A&F has more employees than AE (more than twice than AE has), despite of the similar number of stores (A&F: 1,045 and AE: 1,090 in FY11); if you go to A&F stores, you will see models (men and women) standing at the entrance who are just saying hi to customers coming into the store. Look back the last 3 years, both companies’ overhead percentage have been decreasing. This is because of the slower store expansions and closure of unprofitable …show more content…
The main cause of the different ROA numbers between AE and A&F are mainly due to their profitability including OPM and net profit margin numbers. The more successful AE’s strategy including offering basic and core fashion items and focusing on more operating efficiency in terms of better cost control, resulted in the higher numbers in OPM and net profit margin. While AE’s last 3 years ROA is somewhat stable moving between 7.5% and 8%, A&F’s ROA had been moving more volatile from 0% in FY09 to 5% in FY10. These differences come from the ability of cost controlling between the two companies; AE has been done better job for cost control than A&F, thus less volatile ROAs last 3 years. In addition to the better cost control, AE has been putting more efforts in direct-to-customer sales than A&F, which is more profitable than the sales at retail stores since direct sales does not require any physical spaces to display its products and result in much less operating expenses including labor costs, thus contributes making higher profitability