American Eagle Outfitters on Tuesday said it will expand its flagship and Aerie lingerie brand throughout Europe.
The effort is part of a multi-year license agreement with AEO EU, a partnership of European brand builders with "more than 30 years of experience launching and growing brands across European markets through a multi-channel distribution network," led by Sunil Shah, according to a company press release.
The first American Eagle stores are set to open in Ireland this summer. After that the retailer will launch European Union-based e-commerce and a three-year store expansion across Germany, Switzerland, Austria, the Czech Republic, the U.K. and the Netherlands, the company said.
This move underscores how successful American Eagle's recent U.S. rebound has been, and demonstrates new-found levels of confidence and ambition.
But it doesn't come without risk, according to GlobalData Retail Managing Director Neil Saunders. "The European market is extremely crowded and competitive, and a lot of the dynamics are currently unfavorable," he told Retail Dive in an email. "The economies of mainland Europe are fairly weak, and the UK is in a period of turmoil over Brexit — something that has weakened consumer sentiment and spending."
Even if American Eagle has the patience for the long view, it faces a tough market that isn't necessarily primed for what the brand is selling, he also said. "I think it has its work cut out to differentiate and bring something new to the European market where fast fashion is more developed than it is in the US," he said. "There is also the issue of taste; while I don't think there are major differences in consumer attitudes, there are subtle differences in the type of products consumers like and I think AEO is a very American brand that will put off some European consumers."
Its Aerie brand isn't poised to make the splash there that it has here, mostly because global market behemoth Victoria's Secret isn't quite as big a player there, diluting Aerie's opportunity to grab attention and share, he said. Still, the authenticity that Aerie has prioritized in its marketing is valued by Europeans. "I think Aerie has quite a lot of potential — mainly because its authentic marketing and positioning will resonate with a lot of social trends in Europe, just like it has done in the US," he said.
In Abercrombie & Fitch, American Eagle will be facing a familiar rival when it goes abroad, but not enough to worry a lot about because they won't overlap much — except when it comes to Hollister, according to Saunders. "Although they are both American brands, their positioning is different," he also said. "Abercrombie has limited its expansion in Europe, opting to open a small number of large flagship stores. That said, competition with Hollister will be more significant as it has a much larger footprint in Europe and serves a similar demographic."