1. American Eagle Outfitters Presented December 5, 2002

2. Summary Purchasing History – 300 shares on December 10, 1999 for $29.33 – 300 shares on March 10, 2000 for $18 – 900 shares on May 3, 2000 for $10.42 Current Trading Price – Past 30 days has fluctuated between $15.48 and $20.17 – Today’s trading price has fluctuated between $15.91 and $17.90

3. Summary (cont.) Prior reasons for purchasing – Constant increase in EPS – Better performance and margins than its peers – Excellent website for convenient shopping – P/E ratio below the historic average – Strength in the industry

4. Specialty Store Retail Industry Traditionally …. – Specialty store retails have been more volatile than other retail sectors – Customers are more fashion sensitive than department store and discounter store customers

5. Specialty Stores in the Present Economic Environment Recently the shopping environment in this sector has been mostly promotionally driven rather than due to any underlying strength in the consumer Current markdowns in the industry have provided a boost to volume and total sales, yet margins are suffering

6. What is American Eagle Outfitters? Specialty retailer of casual apparel, accessories, and footwear for men and women ages 16-34. Vertically-integrated retailer that designs and markets a versatile line of timeless and relaxed clothing like jeans, khakis and t- shirts. Located in urban mall settings.

7. Past Growth During fiscal year 2001 AE Outfitters … – Opened 81 new stores in the US, initiating their presence in Southern California – Opened 46 new stores in Canada – Renovated 40 stores in the US – Opened a new design center – Established a network between AE stores for improved customer service and store communication. – Ran their first national TV ads during back-to-school and holiday seasons

8. Past Growth (cont.) AE Outfitters also … – Successfully absorbed their first major acquisition and now operates 112 Bluenotes/Thriftys stores in Canada. Bluenotes/Thriftys has a younger more urban-inspired teen demographic (ages 12-22) – Expanded their website AE.com to include expanded size ranges, easier checkout and a Wish List function AE.com was ranked by a third party research firm (comScore Networks) as generating the highest conversion rate among their direct competitors.

9. Potential Growth 2002 plan to open 80 new stores in US and 10 stores in Canada AE has opened 22 new stores in the US this fiscal year and 10 in Canada Long-term goal is to operate 1,000-1,200 stores in the U.S. giving several more years of expansion possibilities Total stores in operation in the US is now 700

10. Porters 5 Forces Bargaining Power of Suppliers – LOW – Vertically Integrated System – Suppliers are wools, dyes, etc. Bargaining Power of Customers – LOW – No one customer is big enough to influence price – The influence comes from the economy as a whole Threat of New Entrants – LOW – Takes a lot of time and capital to build up a name brand like AE Threat of Substitutes – MEDIUM to HIGH – Other name brands – Other style of clothing Rivalry Between Existing Players - HIGH

11. Net Sales ’97-’01

12. Gross Profit ’97-’01

13. Earnings Per Share ’97-’01

14. Stock Movement

15. Stock Movement (cont.)

16. American Eagle Outfitters in the News Citing weak performance in its men's clothing line, AE Outfitters same-store sales fell 6.5%, including a 30.1% decline for their Bluenotes/Thriftys chain. American Eagle expects a low single-digit decline in comparable store sales in December and reaffirmed that it expects to post earnings of 56 cents per share for the fourth quarter. The company earned 60 cents per share in last years fourth quarter.

17. The Word on the Street Lehman Bros : Taking down the full-year EPS estimate to $1.23 per share, following the company's sub-par November sales results. AEOS ended the month on a poor note. We expect higher promotional activity in December. Maintain Equal-weight rating. Warburg Dillon Read : AEOS' consolidated November same store sales declined 6.5%, below our expectations of a comps decline of 2-4% and versus easy year-ago comps of (10)%. We continue to recommend shares of AEOS as we continue to believe that opportunity for improvement in Spring 2003 is significant.

18. Common-Size Balance Sheet

19. Consolidated Income Statements

20. Competitors

21. DuPont Analysis American Eagle Outfitters

22. DuPont Analysis (cont.) American Eagle Outfitters Abercrombie & Fitch

23. Weighted Average Cost of Capital Terminal WACC used is 16.00%

24. Discounted Cash Flow Analysis

25. Recommendation On the positive side … – Constant increases in net sales, gross profit and EPS – Better performance and margins than its peers – Excellent website for convenient shopping – Growth opportunities created through acquisitions On the negative side … – Pressure being put on the industry – Constant decrease in % increases in net sales, gross profit and EPS – Setbacks created by acquisitions RECOMMENDATION: HOLD