Amercian Eagle Taps Growing Android User Base

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- American Eagle Outfitters ( AEO) recently announced the launch of the Google Wallet mobile shopping experience in selected American Eagle Outfitters, Aerie and 77kids stores in five major U.S. markets. Google ( GOOG) Wallet is an Android app that enables shoppers to pay for merchandise, redeem discounts and earn loyalty points with a single tap of their phone at checkout.

We believe that this is a smart move by American Eagle as the company targets the 15- to 25-year old age group, which represents a major chunk of total smartphone users in the U.S. American Eagle Outfitters together with Aeropostale ( ARO) and Abercombie & Fitch ( ANF) form the teen apparel triad in the U.S.

See our complete analysis for American Eagle Outfitters.

With the number of smartphone users increasing in an exponential manner, retailers want to tap smartphones as a medium to enhance their business. According to a recent Nielsen report, U.S. smartphone penetration stood at 43% in Aug. 2011. Android is the biggest gainer in this surge, leading with a 56% market share in three months recent acquirers.

American Eagle is looking forward to tap this growing smartphone user base with its new offering. To make the experience even more attractive, the company is combining its loyalty program and also issuing promotions with a 15% off on its entire merchandise shopped via Google Wallet. We believe that this move will help American Eagle to strengthen its brand identity in its target customer base, which has one of the highest smartphone penetration demographically.

We currently predict American Eagle's revenue per square foot to decline in the near term on account of macroeconomic weakness; however, this new marketing move by the company may slightly ameliorate its revenue per square foot going forward.

We have a Trefis price estimate of $15.55 for American Eagle Outfitters, which is nearly 25% ahead of the current market price. You can drag the trend lines in the modifiable charts above to see the impact of these trends on American Eagle' stock value.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.