Presented By Jiaqi (Tommy) Jiang Ming Li Yen-Ju (Annie) Lin Lu Han Yanan (Phoebe) Tan

Agenda Company Review Macroeconomic and Industry Review Financial and technical Analysis Comparable analysis and Projection Valuation Recommendation

Company Review Founded in Delaware in1977 A retailer of apparel and accessories in the U.S. and internationally Two brands: American Eagle Outfitters & aerie 1056 retails stores, 920 in U.S., 101 in Canada, 18 in Mexico, 9 in China, 6 in Puerto Rico, 5 in HK, 3 in UK Online business AE Direct ships to 81 countries.

Business model & Strategy Design in NY Third party suppliers overseas Distribution Centers Stores/ Customers Factory stores Profit improvement through more compelling products, marketing, and customer experience Growing digital business through site enhancements, expanded product line, improved customer engagement Improvement in profitability by repositioning the stores 2014 AEO 10-K

SWOT Analysis Threat Opportunity Weakness Strength 1.Strong brand image 2.No debt 1.Social media engagement-low 2.Brand loyalty-mild 1.Fast fashion retailers 2.Increased competition in factory outlet 1. Online business 2. International expansion 2014 AEO 10-K

Macroeconomic Review http://www.bea.gov/national/pdf/nipaguid.pdf

Industry Review Seasonal cyclical

Industry Review Seasonal adjustment of inventory sales ratio http://www.economagic.com/em-cgi/data.exe/cenret/ninv25#USRat_SASource:

Industry Review Cont’d Source: http://www.emarketer.com/newsroom/index.php/apparel-drives-retail-ecommerce-sales-growth/

Porter’s Five Forces Porter’s Five Forces Competitive rivalry—High Threat of substitutes-Low Bargaining power of suppliers– Low Porter’s Five Forces Bargaining power of suppliers-There are many suppliers of raw materials worldwide. If a supplier raises the cost, the company can simply switch to other suppliers. Threat of new entrants -Large capital costs are required for branding and advertising, which limits the entry of newer players in the apparel market. Competitive rivalry:-The apparel industry is highly competitive with various clothing companies. As fashion constantly changes, companies have to be quick respond to consumer preferences. Bargaining power of customers– Low Threat of new entrants—High

Financial Analysis 2010-2014 AEO 10-K

DuPont Analysis DuPont Analysis 2010 2011 2012 2013 2014 Tax Burden 44.32% 55.12% 57.73% 58.41% 50.36% Interest Burden 93.47% 102.18% 101.88% 100.72% 102.40% Profit Margin 11.53% 8.63% 11.35% 4.27% 4.74% Assets Turnover 1.64 1.88 1.92 1.94 Leverage Ratio 1.38 1.44 1.45 1.49 2010-2014 AEO 10-K

Technical Analysis Yahoo Finance http://finance.yahoo.com/echarts?s=AEO+Interactive#{"showSma":true,"smaColors":"#cc0000,#009999","smaPeriods":"20,200","smaWidths":"2,2","smaGhosting":"0,0","allowChartStacking":true}

Comparable Analysis Comparable Companies Similarities Differences Apparel Retailers based in US Similar product lines and target Major competitors Differences Gap has much bigger size A&F and Express have smaller sizes URBN has more product lines such as electronics Express has formal apparel Source: Company information from Yahoo Finance

Market Performance Yahoo Finance http://finance.yahoo.com/echarts?s=AEO+Interactive#{"allowChartStacking":true}

Comparable Analysis Gross Profit Margin Net Profit Margin Sales/Ft^2 Inventory Turnover Source: LTM Data of ANF, GPS, URBN, EXPR and AEO from Capital IQ

Comparable Analysis Output Calculation for Implied Price   EV/Revenue EV/EBITDA Trailing P/E Forward P/E P/B Median Multiples 0.7x 5.3x 13.7x 13.8x 2.8x Implied Price 14.61 13.25 9.89 10.00 16.72 Weightings for each multiple 20% Price $12.89 Implied Price: $12.89 Downward Potential: 14.24% Source: Company information from Yahoo Finance

Revenue Projection Gross Sales Gross Square Feet Average Square Feet Per Stores Estimated Stores Numbers Sales Per Square Foot Past Sales Per Square Foot Short-term Growth Rate

Assumption Quarter Data Store Numbers Short-term and Long-term Growth Rate New Stores Sales Are Included

WACC

Discounted Cash Flow

Recommendation Sell – 1000 shares # of Share Current Value Cost Market Value Gain 1000 Shares $15.03 $5.23 $15030.00 $9804.80/187.64% Sell – 1000 shares