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American Eagle Outfitters Chris Glotzbach, Efe Faydali and Tom Van Spankeren 12/4/2014

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Agenda 1.Introduction 2.Macroeconomic Review 3.Relevant Stock Market Prospects 4.Company Review 5.Financial Analysis 6.Financial Projection 7.Application of Valuation Methodologies 8.Recommendation

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Current Position Dec 1999 Buy 200 @ $44 Jan 2000 Buy 200@ $27 Mar 2000 Buy 600 @ $15.63 Feb 2001 3:2 Split Mar 2005 2:1 Split Apr 2005 Sell 600 @ $26.284 Nov 2005 Sell 700@ $23.33 Nov 2006 Sell 400 @ $47.15 Dec 2006 3:2 Split Nov 2007 Sell 450 @ $22 Dec 2008 Buy 1000 @ $9.07 Nov 2010 Sell 500 @ $17.00 Apr 2011 Sell 500 @ $16.04 Long 1,500 shares at $5.22 Cost Basis: $7,830 Current Value: $21,540 Gain: $13,702.2 (174.82%)

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Allocation in Portfolio Sector: Services Industry: Retail Apparel 2013 10-K Page 17

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Macroeconomic Outlook St. Louis Federal ReserveSt. Louis Federal Reserve, St. Louis Federal ReserveSt. Louis Federal Reserve

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Teenage Apparel Industry Here's How Teens Really Spend Money, What They Like, And Where They Shop

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Teenage Apparel Industry Sales at retail stores increased 3.8% in 2013 versus 5.5% in 2012 o Projected at roughly 4% for all of 2014 Comparable same store sales for teen retailer is down 5.3% H&M, Zara and Forever 21 gaining market share as teens prefer cheaper generic clothing "The one commonality they all share is that the brand concepts are much less relevant to the way kids shop and live today."-Craig Johnson, president of Customer Growth Partners Is less bad good enough for teen retailers? Changing Teen Tastes Send Retailers Reeling http://www.cbsnews.com/news/changing-teen-tastes-send-retailers-reeling/

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Company Overview Apparel Retailer targeting 15 to 25 year old men and women o Cornerstone is denim products Founded in 1977 and headquartered in Pittsburgh, PA 40,000 Employees o 7,000 full time 2013 10k Page 3, 9

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Fundamentals 2014 sales expected at -5.25% Efficiency: o % change in inventory to sq. feet -11%, -16% and -8% (expected) respectively in 2012, 2013 and 2014 o Sales/ selling sq. foot declined from $700.35 in 2013 to $635 (expected) in 2014 Gross square footage has increased annually ~2% Gross margin declined from 40% in 2012 to 34.6% in 2013 o Due to weak traffic and deep-discount box off promotions Wells Fargo Equity Research Senior Analyst Paul Lejuez CFA

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Brands American Eagle o Denim is considered the cornerstone o Branded shirts, shorts, hats and outdoor wear o Growth rate: -8% 2 nd quarter y-o-y growth aerie o Intimate clothing A.K.A lingerie o Faster growing segment o Growth rate: 9% 2 nd quarter y-o-y growth Sale of 77kids in 2012 after losing $35 million since its launch in 2008 o Store for younger teenagers and children o Sold to Ezrani 2 Corporation for 65% of the cost of acquired inventory 2 nd Quarter 2014 Results Presentation

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Management Interim CEO Jay Schottenstein o Began in January of 2014 o Was CEO from 1992-2002 Still searching for a new permanent CEO after Robert Hanson left Company performance Stock up 10x while under CEO since 1994 American Eagle Investor Relations

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Management Strategy For Growth Fortify the brands, processes and capabilities Grow in North America through under-penetrated U.S. markets, factory stores, Mexico and e-commerce Transform the company into an omni-channel retailer with both domestic and international presence Return value to the shareholders through profitable growth 2013 10-K Page 4

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S.W.O.T. S: Brand Awareness, improvements with inventory, omni-channel retail experience, dividend yield, debt free B/S O: Store-to-Door program, E- Commerce, un-penetrated domestic market, Mexico and aerie W: Target market is becoming less brand dependent, no permanent C.E.O., low gross margins, in mature stage of market cycle T: Weak economy, continuing changes in consumer trends, intense competition especially cheaper non- As

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Porters Five Forces Power of Supplier Low Power of Buyers High Competition Very High Threat of Substitution Medium Threat of New Entry Medium

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Key Risks Changes in consumer preferences and fashion trends Decline in disposable income Increase in input costs Balancing the opening and closing of stores and the management of existing stores Seasonality Inventory management 2013 10-K Pages 10, 11

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Revenue Origination 2013 10-K Page 51, Investor RelationsInvestor Relations

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Technical Analysis Yahoo! Finance

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Financial Analysis-Ratios

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Financial Analysis-R.O.E.

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Comparable Analysis EV/EBITDAP/BP/RevenueTrailing P/EEV/RevenueForward P/E Multiples 5.762.800.7831.250.7613.73 Implied Price $10.34 $16.61 $13.30 $13.34 $14.29 $5.86 Weighting 20%10%25%10%25%10% Components $2.07 $1.66 $ 3.32 $1.33 $3.57 $0.59 Price $12.55 Weighting Enterprise Value Market Cap EBITDA EPS Shares Outstanding Net Income Book Value Revenue Abercrombie & Fitch 40.0%$1,950,000$2,010,000$420,350 $ 0.5271370000$37,112$1,546,154$4,117,000 Aeropastle 0.0%$231,260$250,000($104,190) $ (3.01)79090000($238,061)$247,525$2,091,000 Urban Outfitters 20.0%$3,950,000$4,190,000$497,720 $ 1.69134270000$226,916$1,406,040$3,087,000 Express 20.0%$1,150,000$1,200,000$227,480 $ 0.9384170000$78,278$468,750$2,219,000 The Gap 20.0%$17,140,000$16,720,000$2,620,000 $ 2.79424000000$1,182,960$2,853,242$16,148,000 American Eagle N/A$3,309,925$2,708,431$303,377 $ 0.23194431536$82,983 $1,153,191 $3,305,802 EV/EBITDAP/BP/RevenueTrailing P/EEV/RevenueForward P/ESales/Ft SqInventory Turnover Abercrombie and Fitch 4.641.300.4954.160.4713.014172.6 Aeropastle -2.221.010.12-1.050.11-1.724456.2 Urban Outfitters 7.942.981.3618.461.2816.116914.7 Express 5.062.560.5415.330.5213.403385.3 The Gap 6.545.861.0414.131.0613.113653.5 American Eagle 10.912.350.8260.571.0015.946627.0

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Weighted Average Cost of Capital

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Financial Projections

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Discounted Cash Flow Analysis

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Target Price

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Conclusion Weak topline growth Earnings are driven by the cost management Industry is at the mature stage Intense competition Uncertain management

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Decision Sell 300 shares at market price

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Questions?