American Eagle Outfitters, Inc., specializes in high-quality trendy clothing geared toward 15-to 25-year-olds. American Eagle Outfitters has over 1,100 mall-based stores nationwide and sells a large amount of clothing online and through its AE Magazine. Let’s take a look at American Eagle Outfitters, Inc.’s 2010 annual report and see how American Eagle Outfitters’ financial statements look. Then we will compare those results with another company in the same industry, Abercrombie & Fitch, Inc. To view American Eagle Outfitters’ 2010 annual report, visit http://phx.corporate-ir.net/phoenix. zhtml?c581256&p5irol-reportsAnnual./phoenix.zhtml?c581256&p5irol-reportsAnnual. Click on the 2010 Annual Report to open. Then scroll down until you reach the Consolidated Statements of Operations on page 35. Using the consolidated statements of operations, answer the following questions:

1. In its annual report, does American Eagle Outfitters, Inc., present its comparative financial statements horizontally or vertically?

2. What was American Eagle Outfitters’ net income for each of the three years ended January 29, 2011 (Fiscal Year 2010), January 30, 2010 (Fiscal Year 2009), and January 31, 2009 (Fiscal Year 2008)? What does that information tell you about how American Eagle Outfitters performed over those three years?

3. Abercrombie & Fitch Co. reported net income of $ 150,283,000, $ 254,000,000, and $ 272,255,000 for fiscal years 2010, 2009, and 2008, respectively. Compare these two companies by using the net income (loss) data for the three years. What trends do you see? Which company would you consider the better investment based on the information provided? Explain your reasoning.

4. You have compared two similar- size closing retailers. Would it be reasonable to compare American Eagle Outfitters, Inc., to a much smaller or larger clothing store? Why or why not?