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Presented by Robert Eberhard, Rob Jannusch and Jeffrey Li March 13, 2014

Presented by Robert Eberhard, Rob Jannusch and Jeffrey Li March 13, 2014 . Agenda. Company Overview Investment History Recent Events/Earnings Analysis Macroeconomic Analysis & Industry Stratification Industry Analysis & Comparables Valuation Metrics Recommendation. Company Overview.

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Presented by Robert Eberhard, Rob Jannusch and Jeffrey Li March 13, 2014

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  1. Presented by Robert Eberhard, Rob Jannusch and Jeffrey Li March 13, 2014

  2. Agenda Company Overview Investment History Recent Events/Earnings Analysis Macroeconomic Analysis & Industry Stratification Industry Analysis & Comparables Valuation Metrics Recommendation

  3. Company Overview Founded in 1977, American Eagle is a retailer that designs, markets and sells apparel to its target audience of 15-25 year-old males and females primarily via its retail stores in the United States and Canada and online via ae.com. As of February 1, 2014, the Company operated 1,066 stores in the United States, Canada and Puerto Rico under the American Eagle Outfitters and aerie brands as well as 66 international stores. AEO Direct, its e-commerce operation subsidiary, ships to more than 80 countries worldwide.

  4. Key Facts Founded in 1977 by brothers, Mark and Jerry Silverman Currently headquartered in Pittsburgh, Pennsylvania Publicly traded since 1994 (NASDAQ: AEOS) Listed on NYSE as of March 8, 2007 (AEO) Approximately 44,000 employees as of February 2, 2013 Operates 3 main divisions:

  5. Investment History Transaction history 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 Current Price: $13.10 (AS OF MARKET CLOSE 3/11/14) Current Position: Long 1500 shares of AEO with a weighted average price of $5.2252 Source: Yahoo! Finance and RCMP portfolio history

  6. Recent Setbacks March 2010: Closed all 28 Martin + Osa stores for a loss of $44 million August 2012: Shuttered all its 77Kids stores at a cost of $24 million and sold off to Ezrani Corp. January 22, 2014: CEO Robert Hanson unexpectedly steps down; Jay Schottenstein named interim CEO March 11, 2014: Earnings disappoint; stock drops 9.64%

  7. Earnings Report Analysis Company acknowledges that they failed to drive traffic to their stores Markdowns and promotions affected both the top line and margins Aerie brand delivering online and globally Expanding pilot program of “ship from store” by fall New distribution center opens this summer CapEx over FY2013 and FY2014 expected to be ~$508M Nearly 900 full and partial day weather-related store closures in February CEO search continues, but focus remains “on doing what’s right for the customer, what’s right for the company.” Source: Seeking Alpha transcript of earnings call

  8. SWOT Analysis

  9. Macroeconomic Analysis Source: FRED – St. Louis Federal Reserve Bank

  10. Industry Stratification Low $ High $ Medium $

  11. Comparables Performance Source: Yahoo! Finance

  12. Revenue Projections

  13. Valuation - WACC Source: Yahoo! Finance

  14. Valuation - DCF

  15. Valuation - Comparables Source: Yahoo! Finance

  16. Recent Stock Performance Source: Yahoo! Finance

  17. Recommendation Based on our weighted valuation, we feel the stock is worth $15.34 a share. It is currently trading at $12.75, so we have room to hold onto our shares. The company is competing well with its main competitors, has no debt, and is investing for the future by expending capital over the next two years.

  18. Recommendation HOLD

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