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American Eagle buys Canadian clothier chain
Friday, August 25, 2000 By Patricia Sabatini, Post-Gazette Staff Writer
American Eagle Outfitters Inc., struggling with sluggish sales, spread its wings into Canada yesterday by agreeing to buy a Toronto-based chain of casual clothing stores for young teens.
The Warrendale-based clothier signed a letter of intent with ailing Dylex Ltd. to buy its 115-store Thriftys chain, which sells the private label Bluenotes brand of jeans and casual wear and had sales of $100 million last year.
The deal, for $74 million in cash, also includes the 57-store Braemar women's clothing chain and a warehouse and distribution operation.
American Eagle said it intends to close the Braemar stores and convert them to American Eagle or Bluenotes stores. Dylex has been switching some of its Thriftys stores to Bluenotes, a strategy American Eagle said it would continue.
American Eagle Vice Chairman George Kolber called the deal "an excellent opportunity."
"We get a seasoned management team, a solid infrastructure, an established brand and prime real estate," he said in a recorded message on the company's investor line.
Kolber said the transaction, which is expected to close in October, will have no material impact on earnings this year. It is expected to add to earnings in fiscal 2001, which begins in February.
Dylex, which operates a number of specialty retail stores, put itself up for sale at the end of last year amid mounting losses, mainly from its troubled BiWay chain of discount department stores, which it is revamping. It sold its Tip Top Tailors men's clothing stores earlier this year, and retains several other divisions.
Although Dylex lost about $25 million last year, sales and profits were up at the Thriftys unit.
Kolber said American Eagle plans to expand the assortment of merchandise at the stores and use its resources to "provide better product at lower cost."
"Thus, over time, we expect to increase Bluenotes sales and profit margins."
Dorothy Lakner, an analyst with CIBC World Markets in New York, said the acquisition was a good fit.
"It gives American Eagle a second concept [young teens] and a foothold in Canada. I think it's a good deal for them."
American Eagle, which makes its own brand of jeans, cargo pants and T-shirts and recently launched a line of unisex fragrance and personal-care products named Alive, targets shoppers ages 16-34. It has 519 stores nationwide, and posted sales of $832 million last year.
The company's stock, which started the year in the $40 range, was subsequently pummeled by surprisingly sluggish spring and summer sales.
Shares have been on the rise since early August, when they were trading at around $14, on anticipation that the back-to-school season will be a good one.
The stock closed yesterday at $25.56, off 31 cents.
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