1. Retail Company Comparison AMERICAN EAGLE OUTFITTERS, INC. COACH INC. Darrin Nandhavan

2. Table of Contents Retail Industry Overview Company Overview Financials Valuation and Ratios SWOT Analysis Stock Price History Discounted Cash Flow Questions and Comments

3. Retail Industry Overview Retail multinationals expanding to middle class outside of US Consumer spending remains fragile and depends on job creation and income growth Input costs increasing Must increase prices to maintain margins Must cut costs by finding cheaper inputs and suppliers Companies discounting heavily to drive sales

4. American Eagle Outfitters, Inc. Stock price: $12.49 Consists of AE brand, 77kids, Aerie and Aerie Fit Closed down MARTIN+OSA operations by end of June Opening new stores outside of North America Significant market share in denim Denim price points between competitors Aeropostale and Hollister Targets15-25 year olds for AE and 2-10 year olds for 77kids Implements aggressive promotional strategies

5. Coach Inc. Overview Stock Price: $37.28 Coach operates factory and Coach stores Expanding in Western Europe with growing market in China and Japan Partnership with Printemps and Hackett Ltd. Opened distribution center in China Sweet spot of price points between $298-$358 Poppy line, released in April extremely successful Launching Reed Krakoff Collection

6. American Eagle OutfittersSnapshot of Income Statement

7. American Eagle OutfittersSnapshot of Balance Sheet

8. American Eagle Outfitters Snapshot of Statement of Cash Flows

9. American Eagle OutfittersMargins

10. Coach Inc.Snapshot of Income Statement

11. Coach Inc.Snapshot of Balance Sheet

12. Coach Inc.Snapshot of Statement of Cash Flows

13. Coach Inc.Margins

14. American Eagle Outfitters Valuation and Ratios Retail-Specific Ratios

15. COACH Inc. Valuation and Ratios Retail-Specific Ratios

16. American Eagle Outfitters SWOT Analysis Strengths Retains significant market share in denim category Strong brand awareness Implemented aggressive stock buyback program – 6M shares YTD; 24 M remaining Weaknesses Struggling for market share in women’s knit top category Weak comp sales in most recent quarter Gross margins under pressure in 2011 Threats Struggle for market share in teen space with Aeropostale’s high brand awareness and Hollister’s more promotional business Opportunities Opening stores in Middle East

17. Coach Inc.SWOT Analysis Strengths Affordable high quality leather products More design innovative than competitors Positive handbag comps – 22% more units sold High brand awareness $1.2 billion stock repurchase plan Weaknesses Cannibalization – factory stores stealing sales from Coach stores Small men’s market share in global market Threats Gross margin pressures in 2011 Opportunities Expansion into Western Europe Initiative to expand men’s line

18. Stock Price History and Movement COACH vs. AMERICAN EAGLE vs. S&P500 (Index, 2 year period) 10/08 1/09 4/09 10/09 7/09 4/10 1/10 7/10

19. Discounted Cash Flow Analysis Coach, Inc. American Eagle Outfitters, Inc. Neutral, Underpriced Stock highly undervalued; most undervalued in teen space – seen in EV/EBITDA measure Currently has high levels of inventory and low comps, trouble with operating margins Stock price will look up next quarter with decrease in inventory (back to school and holiday season) Solid balance sheet with little debt Overpriced More pricey but stock has beaten S&P500; upward trend Many opportunities for growth abroad will increase market share and sales Margin pressure will be mitigated with Coach‘s new distribution center in China More innovative in design than competitors Solid balance sheet

21. Works Cited Yahoo Finance Google Finance FactSet CallStreet Reuters.com EDGAR SEC Filings Lots of help from Amory and Thad