Stock Analysis

We Think Shareholders Are Less Likely To Approve A Large Pay Rise For American Eagle Outfitters, Inc.'s (NYSE:AEO) CEO For Now

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The share price of American Eagle Outfitters, Inc. (NYSE:AEO) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 03 June 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for American Eagle Outfitters

How Does Total Compensation For Jay Schottenstein Compare With Other Companies In The Industry?

According to our data, American Eagle Outfitters, Inc. has a market capitalization of US$6.0b, and paid its CEO total annual compensation worth US$15m over the year to January 2021. Notably, that's an increase of 83% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.5m.

For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$11m. Accordingly, our analysis reveals that American Eagle Outfitters, Inc. pays Jay Schottenstein north of the industry median. What's more, Jay Schottenstein holds US$374m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary US$1.5m US$1.5m 10%
Other US$13m US$6.6m 90%
Total CompensationUS$15m US$8.1m100%

On an industry level, roughly 14% of total compensation represents salary and 86% is other remuneration. American Eagle Outfitters pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NYSE:AEO CEO Compensation May 28th 2021

A Look at American Eagle Outfitters, Inc.'s Growth Numbers

Over the last three years, American Eagle Outfitters, Inc. has shrunk its earnings per share by 11% per year. In the last year, its revenue is up 6.7%.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has American Eagle Outfitters, Inc. Been A Good Investment?

We think that the total shareholder return of 70%, over three years, would leave most American Eagle Outfitters, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 4 warning signs for American Eagle Outfitters that you should be aware of before investing.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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