American Eagle Reports Higher Earnings But Discontinues Sub-Brand

Fashion retailers that know how to read the market can survive, and even thrive, in tough economic times. The latest news from American Eagle Outfitters proves this point. The company announced this week that its fourth-quarter earnings were up from $33 million a year ago to $59 million this year. Sales for the quarter were $972 million this year versus $906 million for the fourth quarter last year.

At the same time, American Eagle announced yesterday that it is closing down its Martin + Osa brand, a chain of 28 stores, and an online store. The four-year-old brand just wasn't producing, so American Eagle said it would focus on its core brands – AE, aerie, and 77Kids – all of which have "a greater potential of creating long-term shareholder value," according to CEO Jim O'Donnell.

Martin + Osa was named after early 20th Century adventurers Martin and Osa Johnson of Kansas. Denims, women's, and men's clothing were marketed under the brand, but there did not appear to be anything that differentiated it from other retailers.

Clearly, American Eagle decided to cut its losses rather than invest additional dollars in Martin + Osa. While it's always a difficult decision to abandon a floundering brand, it's likely that America Eagle made the right move in the long run.