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Is American Eagle Outfitters, Inc.'s (NYSE:AEO) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2014 Jay Schottenstein was appointed CEO of American Eagle Outfitters, Inc. (NYSE:AEO). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for American Eagle Outfitters

How Does Jay Schottenstein's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that American Eagle Outfitters, Inc. has a market cap of US$2.5b, and reported total annual CEO compensation of US$10m for the year to February 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.5m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$5.1m.

Thus we can conclude that Jay Schottenstein receives more in total compensation than the median of a group of companies in the same market, and of similar size to American Eagle Outfitters, Inc.. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at American Eagle Outfitters has changed over time.

NYSE:AEO CEO Compensation, December 2nd 2019

Is American Eagle Outfitters, Inc. Growing?

On average over the last three years, American Eagle Outfitters, Inc. has grown earnings per share (EPS) by 11% each year (using a line of best fit). It achieved revenue growth of 5.0% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.

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

With a three year total loss of 2.7%, American Eagle Outfitters, Inc. would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We examined the amount American Eagle Outfitters, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. On the other hand returns to investors over the same period have probably disappointed many. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling American Eagle Outfitters shares (free trial).

Important note: American Eagle Outfitters may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.