American Eagle Outfitters 2004 Annual Report Download - page 36

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Part II
We caution that these statements are further qualified by factors that could cause our actual results to differ
materially from those in the forward-looking statements, including without limitation, the following:
Our ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner
The Company's future success depends, in part, upon its ability to identify and respond to fashion trends in a timely
manner. The specialty retail apparel business fluctuates according to changes in the economy and customer
preferences, dictated by fashion and season. These fluctuations especially affect the inventory owned by apparel
retailers, since merchandise typically must be ordered well in advance of the selling season. While we endeavor to
test many merchandise items before ordering large quantities, we are still susceptible to changing fashion trends and
fluctuations in customer demands.
In addition, the cyclical nature of the retail business requires that we carry a significant amount of inventory,
especially during our peak selling seasons. We enter into agreements for the manufacture and purchase of our private
label apparel well in advance of the applicable selling season. As a result, we are vulnerable to changes in consumer
demand, pricing shifts, and the timing and selection of merchandise purchases. Changes in fashion trends, if
unsuccessfully identified, forecasted or responded to by the Company, could, among other things, lead to lower sales,
excess inventories and higher markdowns, which in turn could have a material adverse effect on the Company's
results of operations and financial condition.
The effect of competitive pressures from other retailers and other business factors
The specialty retail industry is highly competitive. The Company competes primarily on the basis of quality, fashion,
service, selection and price. There can be no assurance that the Company will be able to successfully compete in the
future.
The success of the Company's operations also depends to a significant extent upon a number of factors relating to
discretionary consumer spending, including economic conditions affecting disposable consumer income such as
employment, consumer debt, interest rates, and consumer confidence. There can be no assurance that consumer
spending will not be negatively affected by general or local economic conditions, thereby adversely impacting the
Company's continued growth and results of operations.
Our ability to grow through new store openings and existing store remodels and expansions
The Company's continued growth and success will depend in part on its ability to open and operate new stores and
expand and remodel existing stores on a timely and profitable basis. During Fiscal 2005, the Company plans to open
approximately 35 to 40 new American Eagle stores in the U.S. and Canada. Additionally, the Company plans to
remodel or expand approximately 60 existing stores during Fiscal 2005. Accomplishing the Company's new and
existing store expansion goals will depend upon a number of factors, including the ability to obtain suitable sites for
new and expanded stores at acceptable costs, the hiring and training of qualified personnel, particularly at the store
management level, the integration of new stores into existing operations and the expansion of the Company's buying
and inventory capabilities. There can be no assurance that the Company will be able to achieve its store expansion
goals, manage its growth effectively, successfully integrate the planned new stores into the Company's operations or
operate its new and remodeled stores profitably.
Our ability to grow through the internal development of a new brand
During Fiscal 2004, the Company announced that it would begin development of a new brand concept. The ability to
succeed in this new concept requires significant capital expenditures and management attention. Additionally, any
new concept is subject to certain risks including customer acceptance, competition, product differentiation and the
ability to attract and retain qualified personnel, including management and designers. There can be no assurance that