American Eagle Outfitters 2004 Annual Report Download - page 5

consistently surpassing expectations.
James V. O’Donnell
Chief Executive Officer
During the year, our brand gained momentum and we strengthened our
organization throughout. Our customers responded with enthusiasm to
compelling merchandise assortments and a renewed AE brand focus.
We ended the year in excellent financial condition. Sales for the year
reached a record $1.9 billion, increasing 31%, driven by a comparable
store sales increase of 21%. Strong full-priced selling and significantly
lower markdowns drove our income from continuing operations
to a record $224 million for the year, reflecting a 170% increase
Cash, short and long-term investments increased $312 million to a
year-end balance of $674 million.
Fiscal 2004 marked an important turning point for our company. The
year was driven by significant changes that were made throughout
our organization. We strengthened our talent, retooled our process
upgraded systems and re-connected with our core customers. All of
these improvements remain in place today, which I am certain have
enhanced our brand’s position in the marketplace, and will enable us
to sustain earnings growth for years to come.
Today, I believe we have the best, most talented and experienced
professionals our company has ever had. Our merchandising and
I believe we have one of the best real estate portfolios in all of
specialty retail. Over the past five years, we have vastly upgraded our
store base. Since 2000, we have opened 220 “A” center stores, located
in the busiest and most productive malls. We completed 257 store
renovations, giving new life to some of our older real estate. And for
94 additional stores, we relocated to a better location within the mall
providing greater access and visibility to the American Eagle brand.
Over the next several years, we will continue upgrading stores across
the country, penetrating existing markets, expanding important regions
including the West Coast and adding new flagship stores to key
markets like Manhattan and Seattle. While obtaining the best real
estate is important, we clearly recognize that highly productive stores
are created by more than brick and mortar. I can say with confidence
that we have one of the best teams in the industry operating our store
base, with the experience and know-how to drive our business further
Gaining efficiencies through new systems continues to be a top
priority. Last year, we invested in markdown optimization software
We expect this tool to help us more effectively manage and reduce our
markdowns. Within stores, we have traffic counters fully installed
design teams are creating fashion-right collections that are defining
the American Eagle brand. As we move forward, delivering trend-right
quality merchandise is our number one priority.
Last year, we strengthened the commitment to our 15 to 25 year-old
target customers. Several thousand one-on-one interviews led us to
make changes to our fits and styles. Just as importantly, we enhanced
our value message, offering great items at great prices, everyday. Our
customers have responded with enthusiasm. Strong comparable store
sales in 2004 were led by higher transaction counts and increased
full-priced selling. We recognize now more than ever, the importance
of staying true to our core customers - and that’s a key focus at
American Eagle Outfitters today.
With that in mind, we’ve built a powerful, brand-defining denim
business. American Eagle has become a true destination store for
jeans. In 2004, we nearly doubled our market share in specialty
store denim, making AE jeans the 2nd most purchased brand by 15 to
25 year-olds. Now, we’re after the number one slot. We have tremendous
opportunities in other product categories as well. Driving productivity
across key areas of our business is a major initiative going forward.
across the chain. Everyday, we are learning more about store traffic
trends and transaction data –knowledge that I believe will lead us to
increased store productivity.
With the American Eagle brand refocused and on-track, the time was
right to start building the groundwork for our next concept. In late
2004, we hired a seasoned and highly talented team to lead the
development and expansion of our next brand. I am confident that we
will create an exciting new specialty retailer that is unique in the
marketplace and complementary to the AE brand.
We entered the new year with optimism and passion about our future
opportunities. Our outlook is bright, and our enthusiasm is high. I am
absolutely convinced that we are very well positioned for continued
success. We have a lot to look forward to!
Thank you for your loyalty and continued support.
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