American Eagle Ditches Grown-Ups for Kids

Out with the old and in with the new. That's the message that American Eagle Oufitters (AEO) is sending to consumers.

American Eagle announced will close its 28-store Martin + Osa line, which was geared toward adults between 25 and 40. Martin + Osa lost $44 million in the most recent fiscal year. The company needs to "focus our efforts on the brands that capitalize on our strengths and have the highest potential," said CEO Jim O'Donnell.
To that end, the apparel retailer is launching the first stores in children's line 77kids this year. Previously, the line was available only over the Internet.

Industry observers have anticipated the end of Martin + Osa for months. The chain launched in 2007, which in retrospect was terrible timing, and it's not clear that it met a demand in its targeted age range. Abercrombie & Fitch (ANF) shut down its 29-store Ruehl, which had a similar concept, last year.
American Eagle should have better luck catering to kids. The company's namesake brand already serves a younger clientele, and the first 77kids store, a temporary location in Pittsburgh's Mall at Robinson that was only supposed to be open during the holidays, will stay there through the spring.

Other players in the space are performing well. The Children's Place (PLCE) turned in strong fourth-quarter earnings with respectable sales. Gymboree (GYMB) recently upped its earnings guidance for the year.

"It's a business that if you get it right, it's 40 percent of the business," O'Donnell said during the retailer's fourth-quarter conference call. "If you don't get it right, you know you're going to struggle."

Photo: Flickr user M Skaffari.