Designer menswear brands don't make for popular acquisition targets — especially for teen retailers — and so it was with much surprise that American Eagle announced Tuesday that it had acquired Todd Snyder's five-year-old designer menswear label in a deal worth $11 million in cash and stock.
But it was Snyder's lesser-known business — Tailgate, a sports-inspired apparel brand with a vintage, collegiate feel that he launched with his family in 1997 — that appears to be American Eagle's real target in the acquisition. Tailgate is sold both online and adjacent to the University of Iowa campus in Iowa City, offering a selection of campus-branded merchandise, like graphic-printed tees and sweatshirts, that's a little more stylish than what you'd find at a typical campus bookstore. American Eagle jeans and other apparel will soon be integrated into the retail offering, Snyder says.
Between the rise of fast-fashion brands, the declining purchasing power of American teenagers and the ongoing decline in US mall traffic, American Eagle has had a tough couple of years, though it's enjoyed a sales turnaround in recent quarters. Tailgate could allow the Pittsburgh-based company to expand its retail footprint into more college campuses, taking a slice of the market currently occupied by the aforementioned campus bookstores. The retailer plans to open two to three Tailgate stores next year, eventually increasing that number to more than 200, a spokesperson said. A standalone Todd Snyder store in New York is also in the works.
As part of the deal, Snyder, who once served as senior vice president of menswear at J.Crew and director of menswear at Gap, will be joining American Eagle as executive vice president, reporting to Chad Kessler, global brand president of American Eagle. Jimmy Olson, who has served as president and CEO of Todd Snyder and Tailgate for the past four and a half years, is also joining the company as vice president, where he will continue to lead the day-to-day operations of both brands.
In conjunction with the acquisition announcement, American Eagle announced that comparable sales are up 9 percent so far in the third quarter, and raised its earnings-per-share estimate from $0.28-$0.31 per share to $0.34 per share. Jay Schottenstein, interim CEO of American Eagle, attributed the better-than-expected growth to product enhancements at its American Eagle and Aerie brands, as well as greater sell-throughs at full price. Investors, however, were unmoved, with shares of American Eagle trading flat Tuesday morning.