American Eagle's 'Laser Focus' Is The Key To Competing With Europe's Fast Fashion Brands

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Photo: Stephen Chernin / AP

Ever since European “fast-fashion” brands Zara and H&M moved to the U.S., retailers like American Eagle have had a tough time.But the company is taking some bold steps toward reclaiming its market share. It replaced its longtime CEO Jim O’Donnell with Robert Hanson in January, and analysts are now more bullish on the company.

In a research note, investment bank Jefferies says AE is beginning to “take flight again”: 

It is clear that Mr. Hanson is laser focused on returns, consistent in his approach, and unwavering in his commitment to a clear and stable direction. We think this added layer of discipline will lead to more stable margins and returns which shareholders should like.

Given Mr. Hanson’s laser focus on returns, we think there is potential for real estate paring in the American Eagle chain as well as in the marginally profitable Aerie brand. … We look for his imprint on the business from a strategic perspective to beginning taking hold in the middle of the back half of 2012 and to bear fruit in 2012 and beyond.

A big part of this laser focus is directly competing against the fast-fashion brands. The European labels are known for sourcing close to their headquarters — for example, Zara, which is owned by Spanish company Inditex SA, sources from Morocco and Portugal — whereas American brands largely manufacture in China.

The International Business Times reports that Hanson “is looking for ways to cut down on delivery times and respond faster to styles and trends. … American Eagle is planning to cut down on the piles of t-shirts, dresses and jeans that stores have stocked up in the past. Hanson says he would rather have fewer items in stores, but sell everything.”

Now read more about how Zara realised the big disadvantage with outsourcing to China >

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