Response to the following problem:
King of Jeans If you have bought a pair of jeans at American Eagle (AE), you're not alone. American Eagle sells the most jeans of any U.S. specialty store brand. In 2006, the company sold over 6.5 million pairs of jeans. And, American Eagle doesn't sell only jeans. An AE T-shirt is sold every 10 seconds. American Eagle describes the style of its brand as "laidback, current clothing" and targets 15-to-25-year-olds. It strives for high-quality merchandise while offering it at affordable prices. Their strategy seems to be working. Sales have increased from $1.39 billion in 2003 to $2.29 billion for the year ending February, 2007. These sales are from 911 stores in the U.S., Puerto Rico, and Canada as well as through ae.com. In 2006, AE launched its new lifestyle brand under the name of Martin + OSA. This brand is described as being able to go from the workplace to leisure activities and is targeted at 25-to-40- year-olds. American Eagle hopes that this new brand will boost sales even more in the future.
Critical Thinking:
1. What account titles might you find on a balance sheet for American Eagle?
2. Why would American Eagle start a new brand of sportswear focused on the 25-to-40-year-old market?