American Eagle Outfitters, Inc. (AEO) Presented April 26, 2007

Investment Managers Jessica Boghosian Ashley Qiao jboghos2@uiuc.edu fqiao2@uiuc.edu

Presentation Outline The Company RCMP Position Comparable Analysis Company Overview Store Expansion Business Risks RCMP Position Role in Portfolio Correlation Matrix Comparable Analysis Competitors 1&5 Year Comparables Ratio Analysis DCF Analysis Assumptions DCF Model Sensitivity Analysis Recommendation

The Company

Company Overview American Eagle Outfitters was founded in 1972 and is headquartered in Warrendale, Pennsylvania. In 1977 and 2001, the first American and Canadian stores were opened, respectively. As of February, 2007, AEO operated 911 stores in Canada and the U.S. Designs, markets, and sells its own brand of laidback, current clothing targeting 15 to 25 year-olds. Sells jeans, graphic Ts, accessories, outerwear, footwear, basics, and swimwear. Provides high-quality merchandise at affordable prices. Distributes merchandise via e-commerce in 41 countries.

Merchandise Groups 35% 34% 60% 61% 5% Total 100% FY 2006 FY 2005 Men’s apparel and accessories 35% 34% Women’s apparel, accessories & intimates 60% 61% Footwear – men’s and women’s 5% Total 100%

Company Overview In 2006, American Eagle launched its new aerieTM intimates sub-brand. This collection sells dormwear and intimates including bras, undies, camis, hoodies, robes, boxers, and sweats for girls. In the fall of 2006, American Eagle introduced MARTIN +OSA. Encompasses a new sportswear concept targeting 25-40 year old men and women which sells apparel, accessories, and footwear for sports.

Store Expansion In fiscal 2006, total store based increased by 5% and gross square footage increased by 8%. Currently targeting the western and southwestern U.S., with these regions accounting for 66% of store openings in 2006 50% of AEO store base is in these regions

Store Expansion In Fiscal 2007, AEO plans to open 45-50 new stores, 15 aerie stores, and 12 MARTIN + OSA stores. Square footage growth is expected to be 10%. Fiscal 2002 Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Stores at beg. of per. 678 753 805 846 869 Stores opened during per. 79 59 50 36 Stores closed during per. (4) (7) (9) (13) (8) Total stores at end of per. 911 Up from 8 % in fiscal 2006

Business Risks Changing consumer preferences and fashion trends The specialty retail apparel business fluctuates according to changes in the economy and customer preferences, dictated by fashion and season. Retail must be ordered well in advance of the selling season. Changes in fashion trends could lead to lower sales, excess inventories and higher markdowns, which could negatively affect AEO’s financial condition.

Business Risks Current level of sales and earnings growth The 12th consecutive quarters of record high sales and earnings was recorded in the 4th quarter of Fiscal 2006. Gross margin & operating margin rates are near historic highs. “It is difficult to maintain this level of performance and to continue to reach higher levels.” AEO has in place growth initiatives to increase earnings by at least 15% per year long-term.

Business Risks The success of American Eagle operations depends significantly on discretionary consumer spending U.S. Department of Commerce, Bureau of Economic Analysis

Business Risks Growth through the development of new brands MARTIN + OSA and aerie by American Eagle were launched in FY 2006. Ability to succeed in these new brands requires significant expenditures and management attention. These new brands are subject to risks of customer acceptance, competition, product differentiation, and the ability to obtain suitable sites for new stores.

Business Risks Seasonality The fourth and third quarters have historically provided a large portion of net sales & income to American Eagle due to the year-end holiday season and back-to-school selling season, respectively. 60% of sales and 65% of income are accounted for in these quarters. Any factors affecting the performance in these quarters can have adverse financial effects.

RCMP Position

Transaction History December 10, 1999 January 10, 2000 May 3, 2000 BOT 200 shares at $44.00 January 10, 2000 BOT 200 shares at $27.00 May 3, 2000 BOT 600 shares at $15.63 February 23, 2001 3-2 split March 8th, 2005 2-1 split April 25th, 2005 SLD 600 shares at $26.28 November 16th, 2005 SLD 700 shares at $23.33 December 28th, 2006 3-2 Split

RCMP Position Currently own 1,950 shares of AEO, trading at $29.93 as of April 25th, 2007 for an unrealized gain of $48,174.36 or 472.80%. American Eagle Outfitters accounts for 19% of our portfolio.

Correlation Matrix

Comparable Analysis

Competition FAsHiOn SeRViCe QuALiTy SeLeCTiOn PRiCe The retail apparel industry, including retail stores and e-commerce, is highly competitive. FAsHiOn SeRViCe QuALiTy SeLeCTiOn PRiCe

Competitors Who Why Abercrombie & Fitch, Co. (ANF) Aeropostale Inc. (ARO) Gap Inc. (GPS) Why Industry Specific Similar Size Similar Target Market

5-Year Comparables

1-Year Comparables

American Eagle Outfitters, Inc. Abercrombie & Fitch, Inc. Ratio Analysis American Eagle Outfitters, Inc. Abercrombie & Fitch, Inc. Gap Inc. Aeropostale Inc. Industry Market Cap 6.59B 7.27B 15.17B 2.21B 1.11B P/E 17.65 18.07 19.98 21.58 20.03 Profit Margin 13.86% 12.72% 4.88% 7.55% 3.78% Operating Margin 21.22% 19.83% 7.36% 12.29% 10.63% ROE 30.11% 35.18% 14.68% 35.73% 16.76% Price/Sales 2.37 2.18 0.96 1.56 1.50 Current Ratio 2.60 2.14 2.21 2.42 2.30 Payout Ratio 16.00% 15.00% 34.00% N/A 17.02%

DCF Analysis

Ratio Analysis DuPont Breakdown

Assumptions

Assumptions

Discounted Cash Flow

Discounted Cash Flow

Sensitivity Analysis

Recommendation HOLD HOWEVER THEREFORE Management expects there to be a significant amount of success with the launch of their new brands, MARTIN + OSA and aerie. AEO continues to expand their store base, with the goal to open 45-50 stores in FY 2007 Relatively good diversifier against other holdings HOWEVER We expect there to be a significant slow of growth in the future. Historically, AEO has realized growth rates that are not possible to sustain in the long-term. THEREFORE It is important to watch AEO with a close eye, especially to see if the expected success of the two new brands is realized. Upon this success, we foresee AEO continuing to grow at a relatively pleasing rate that will prove profitable to our investor.