“And above all, watch with glittering eyes the whole world around you because the greatest secrets are always hidden in the most unlikely places….” So whispered the late, great Roald Dahl the peerless author of children’s literature. There is, though, nothing so great about the recent trading environment for American Eagle, the lifestyle clothing retailer that has been – along with everyone else involved in bricks and mortar retailing – in the thick of the Covid fur. Fading consumer demand, reduced discretionary spending, rising unemployment and nationwide stay-at-home-and-don’t-move orders have not been good for business. That said, Q2 results that hit the tape a few weeks ago beat analyst forecasts. The beat was driven by surging digital demand, noticeably a 113% jump reported by the Aerie brand. Now as hidden secrets go, Aerie is a gem, albeit a gem that is now circa 30% of the group and perhaps not such a hidden secret. Aerie is, for those not at the sharper end of ‘youth’ fashion, a brand that is ‘rooted in positivity and empowerment’ offering intimates, soft apparel, sleepwear, swim and personal care products. It is one of the fastest growing speciality retail brands in the market – half of it digital – and has a record twenty-one consecutive quarters of double-digit growth. Twenty-one quarters of double-digit growth at a time when Amazon has cut up everyone else’s lunch. Given its huge popularity with young women, some Wall Street analysts believe that Aerie is well on the way to hitting $3bn annual sales within five years. The context is current group revenue at a shade over $4bn. The opportunity is huge. Put Aerie on just half the juicy multiple of competitor Lulumelon, and you get the rest of the venerable American Eagle – behind Nike, the second most popular apparel brand among teens – for free. The risk in selling fashionable merchandise to teenagers, though, is that they are fickle. In one week, out the next, via a few viral posts on social media. Management need to execute. They need to execute. And they need to execute some more. Pre-Covid, American Eagle was also posting some lacklustre numbers which need to pick up. Customers, basically, need to keep buying jeans. That said, in the context of a potential economic recovery at some point in 2021, the upside to the shares is looking as sugary as a Willy Wonka Wonka bar.