American Eagle May Fly Higher Without Martin + Osa

Many youth-apparel brands have tried -- and failed -- to create spin-offs aimed at holding onto their customers as they age. Abercrombie & Fitch's 29-store Ruehl chain closed last summer, for instance. Now, speculation is that American Eagle Outfitters' chain of 28 Martin + Osa stores, aimed at 28- to 40-year olds, will be the next to fall.

Some have had the four-year-old M+O chain on a deathwatch since 2008, after seeing the brand lose upwards of $60 million in 2007. Possibly the most bullish recent report, from FBR Capital Markets (available to clients only online), put the chain's survival chances at 50-50. But the December departure of division president Laura Dubin-Wander after less than two years at the helm has left many with the feeling the chain is on the way out.

The company's talk has remained upbeat, with American Eagle CEO Jim O'Donnell telling investors on last year's third-quarter call that M+O saw a 10 percent same-store sales rise in the period. It's expected that management will say more about M+O's fate next month, as it announces sales for its critical fourth quarter. O'Donnell was noncommittal in discussing the money-losing division at a recent industry conference, saying the company would discuss M+O in its fourth-quarter release.

Here's something telling, though: On its main site, there's no tab for M+O, though there are quick-linking tabs for the company's aerie and 77kids store chains. Nothing says lack of enthusiasm like not promoting your own brand on your own site.

January sales for American Eagle were on the rise, up 18 percent overall with a 7 percent same-store sales gain from the same month in 2009. That builds on decent gains made in December.

In a tough retail marketplace, with its core brand starting to rise again, American Eagle would probably be smart to cut its losses here and concentrate on keeping its momentum building with the teen crowd.

American eagle image via Flickr user Steve Snodgrass, CC 2.0