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How Should Investors Feel About American Eagle Outfitters' (NYSE:AEO) CEO Remuneration?

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Simply Wall St
·4 min read
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Jay Schottenstein became the CEO of American Eagle Outfitters, Inc. (NYSE:AEO) in 2014, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for American Eagle Outfitters.

See our latest analysis for American Eagle Outfitters

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

Our data indicates that American Eagle Outfitters, Inc. has a market capitalization of US$3.8b, and total annual CEO compensation was reported as US$8.1m for the year to February 2020. That's a notable decrease of 21% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.5m.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$7.0m. This suggests that American Eagle Outfitters remunerates its CEO largely in line with the industry average. Moreover, Jay Schottenstein also holds US$241m worth of American Eagle Outfitters stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2020

2019

Proportion (2020)

Salary

US$1.5m

US$1.5m

19%

Other

US$6.6m

US$8.7m

81%

Total Compensation

US$8.1m

US$10m

100%

On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. Our data reveals that American Eagle Outfitters allocates salary more or less in line with the wider market. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

American Eagle Outfitters, Inc.'s Growth

Over the last three years, American Eagle Outfitters, Inc. has shrunk its earnings per share by 57% per year. It saw its revenue drop 11% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

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

We think that the total shareholder return of 43%, over three years, would leave most American Eagle Outfitters, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

As we noted earlier, American Eagle Outfitters pays its CEO in line with similar-sized companies belonging to the same industry. Some investors may take issue with this, especially considering shrinking EPS for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shareholders might think performance needs to be improved before paying any more.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for American Eagle Outfitters that investors should think about before committing capital to this stock.

Switching gears from American Eagle Outfitters, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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