AMERICAN EAGLE O UTFITTERS, INC. NYSE: AEO 10/11/2011

1. AMERICAN EAGLE OUTFITTERS, INC.NYSE: AEO10/11/2011 Aaron Czerkies Amrin Razwin Chris Tsoukalas Ya Zuo

2. Agenda • Investment history • Company overview • Industry analysis • Competitors • DuPont analysis • Ratio analysis • DCF model • Multiple Valuation • Recommendation

3. Investment History • Transaction history • Dec 1999 – BOT 200 @ $44 • Jan 2000 – BOT 200@ $27 • Mar 2000 – BOT 600 @ $15.63 • Feb 2001 – 3:2 Split • Mar 2005– 2:1 Split • Apr 2005 – Sold 600 @ $26.284 • Nov 2005 – Sold 700@ $23.33 • Nov 2006 – Sold 400 @ $47.15 • Dec 2006 – 3:2 Split • Nov 2007 – Sold 450 @ $22 • Dec 2008 – BOT 1000 @ $9.07 • Nov 2010 – Sold 500 @ $17.00 • Apr 2011 – Sold 500 @ $16.04 • Current Price: $12.05 • Currently holds 1500 shares of AEO with a weighted average price of $5.23 and an unrealized gain of $10,237 As of 7-Oct-2011 Source: Yahoo! Finance

4. Portfolio Allocation As of 7-Oct-2011

5. Company Overview • American Eagle Outfitters is a retailer of casual apparel, lingerie, accessories, and footwear targeted at teens and young adults. • The retailer maintains control over its proprietary brand by designing and sourcing all of its own merchandise. • The company operates 931 American Eagle, 151 aerie, and 21 77kids stores in the United States and Canada. • American Eagle also ships to 76 countries worldwide through its retail website. Source: 10K 2011 report

6. Brands • American Eagle • Targets 15 to 25-year old men and women • aerie • New brand launched in 2006 fall • Intimates and personal care product for girls • 77kids • Introduced in Oct 2008 • On trend, high quality clothing and accessories for kids and babies Source: 10K 2011 report

7. Store Growth Source: 10K 2011 report

8. Key Risk Factors • Changing consumer preferences and fashion trends • Economic pressures • Raw material, labor, and energy prices increase • New store openings and existing store remodels • Internal development of new brands • International merchandise sourcing strategy • Seasonality • International expansion through franchising Source: 10K 2011 report

9. SWOT Analysis • Strength • Strong brand • Ample free cash flow • Weakness • Low customer switching cost • 930 AE branded stores has saturated the domestic market • Opportunities • aerie and 77kids brands • International markets • Threats • Intense rivalry • Fast fashion trend • Increase of labor and material cost • Economic recession

10. MACRO-ECONOMY AND CONSUMER TRENDS • GDP US Bureau of Economic Analysis • Consumption expenditure • Slowly increasing for clothing and footwear

11. Global Apparel Industry • IBISWorld forecasts that industry revenue will grow by 3.7% over the five years through 2016. • Growth expected to be dependent on population growth, disposable income and the sourcing of products from low-wage countries. [1] [1]http://clients.ibisworld.com/globalindustry/summary.aspx?indid=470

12. Porter’s Five Forces Model • Competitive rivalry within the industry (High) • Competitive market with extensive price competition • Bargaining Power of Buyers (Moderate) • Consumers have high level of choice • High product differentiation • Bargaining Power of Suppliers (Low) • Globalization has liberalized trade. • Low switching cost for retailers • Threat of New Entrants (Low) • Clothing companies have high existing brand loyalty built up over time • Threat of New Substitutes (Low) • Brand image and loyalty important for consumers

13. Competitors • GAP • Own Old Navy • Abercrombie & Fitch • Own Hollister • Pacific Sunwear • Urban Outfitters

14. DuPont Analysis • AEO falls in the middle of its peers in the Dupont analysis

15. Management Overview • The planned opening of 11 new American Eagle stores, 12 new 77kids stores and 10 new aerie stores in the United States and Canada during Fiscal 2011; • The selection of approximately 60 to 65 American Eagle stores in the United States and Canada for remodeling during Fiscal 2011; • The planned closure of 15 to 25 American Eagle stores in the United States and Canada during Fiscal 2011; • The planned opening of 18 new franchised American Eagle stores during Fiscal 2011; • The expected payment of a dividend in future periods; • The possibility to engage in future franchise agreements, growth through acquisitions and/or internally developing additional new brands; • The possibility that our credit facilities may not be available for future borrowings; • The possibility that rising prices of raw materials, labor, energy and other inputs to our manufacturing process, if unmitigated, will have a significant impact to our profitability; and • The possibility that we may be required to take additional store impairment charges related to underperforming stores.

16. Performance Source: 10K 2011 report

17. Ratio Analysis

18. DCF Model

19. Public Comparables Analysis • Abercrombie & Fitch is trading at much higher premium relative to the other firms • Gap is trading lower than its peers • Most likely because it’s a more mature company with less growth opportunities • Pacific Sunwear has been struggling, and with the weak economy, is expected to be in a worse financial situation than its peers

20. Public Comparables Analysis • AEO has a relative value ranging from $14.36 to $16.48 a share • Based on fully dilutive shares

21. Liquidity Analysis • AEO has fairly strong cash position but takes on no debt, including a revolver which drastically reduces it’s liquidity • Days cash is the number of days between when a firm disburses cash to when it collects cash

22. Stock Price Analysis • The stock market as a whole, including these firms, have taken quite a dive over the last three months due to a weak economy and rising commodity costs • AEO has outperformed its competitors over the last month

23. Recommendation • The DCF ranged from $12.21 to $15.64 • Public Comparables ranged from $14.36 to $16.48 • Less emphasis on the $16.48 because based on the P/B • High market volatility and increasing costs make it a skeptical environment to buy • HOLD