American Eagle Outfitters (NYSE:AEO) has acquired Tailgate Clothing, as the retailer attempts to steer the brand away from an overreliance on discounts and promotions.
Tailgate is a vintage, sports-inspired apparel brand that targets the college market. There is currently a single store at the University of Iowa in Iowa City, and American Eagle plans to open up to 200 additional locations.
Tailgate also owns Todd Snyder, an upmarket men's apparel line, which marks a move away from the low-price fast fashion focus that has hindered American Eagle's turnaround.
"We'd been trying to compete by screaming with the loudest promotions from the windows, having among the lowest price points on fleece and T-shirts," Chad Kessler, global brand president, told The New York Times. "It wasn't working."
American Eagle has struggled along with other teen-oriented retailers, including Abercrombie & Fitch and American Apparel, to remain relevant with younger shoppers, who are now more in tune with fast fashion than higher-priced looks. Rather than compete with the likes of H&M and Forever 21, the retailer pared back some promotions and created new apparel lines at slightly higher prices. It's an attempt to create a new kind of value proposition.
Todd Snyder products promise to take American Eagle even more up market. The label is currently sold at Barney's, Bergdorf Goodman and Neiman Marcus. Although there are no immediate plans to incorporate Todd Snyder into current stores, Kessler said there are plans for a flagship store in New York, according to The New York Times.
"We are thrilled to add these unique brands to our portfolio, which provide exciting new business opportunities," said Jay Schottenstein, interim CEO. "Capital investments in the Tailgate and Todd Snyder brands will be paced, with a test and scale approach based on profitability and return on investment."
"Joining a leading American retailer is an exciting step for our brands and provides a strong foundation for future growth," said Todd Snyder. "Our new Tailgate store concept is an ideal outlet to integrate AE jeans and apparel, creating a unique lifestyle destination on college campuses. I look forward to contributing to AEO's future success."
In the past year, the retailer closed 150 stores, gutted its management team, and bought in new talent, including Kessler. CEO Robert Hanson was fired in January 2014 and American Eagle has been looking for a permanent chief executive ever since. Schottenstein serves as chairman and interim CEO.
The acquisition, worth roughly $11 million in cash and stock, also adds Snyder to the company as exec-VP, reporting to Kessler. Tailgate's Jimmy Olsson joins as VP and will continue to lead the day-to-day operations of Tailgate and Todd Snyder New York.
-See the American Eagle Outfitters press release
-See the article in The New York Times
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