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American Eagle to start selling cannabis-based balms, lotions this year

Stock MarketsJul 11, 2019 01:51PM ET
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© Reuters. American Eagle to start selling cannabis-based balms, lotions this year

By Uday Sampath Kumar

(Reuters) - American Eagle Outfitters Inc (N:AEO) will start selling cannabidiol (CBD)-infused personal care products in the United States later this year, entering a market that has seen booming demand among the apparel retailer's core younger customers.

The retailer will sell CBD-infused lotions, muscle balms and aromatherapy products developed and supplied by Green Growth Brands Inc (CD:GGB), the Toronto-headquartered cannabis company said on Thursday.

The products will appeal directly to American Eagle's mainly millennial audience as they view CBD as the next big trend in lifestyle focused on health, analysts told Reuters.

CBD is a non-psychoactive chemical found in cannabis plants that is known to ease anxiety and other ills without causing a high.

"American Eagle's image is about positive messaging and wellness, so it's not shocking that they would have CBD-infused products," Jane Hali & Associates analyst Jessica Ramirez said.

"The products complement their brand and customers."

The market for cannabis-based personal care products is getting increasingly crowded, with a number of companies including French luxury goods maker LVMH's (PA:LVMH) Sephora beauty chain and ULTA Beauty Inc (O:ULTA) already selling such products.

However, the regulatory environment around CBD products is still cloudy, with many major retailers refusing to stock items made with the cannabis derivative until it is made legal at the federal level.

Companies such as American Eagle will have to tread carefully due to a possible threat of a crackdown on the cannabis industry by the federal government, A Line Partners analyst Gabriela Santaniello said.

That has not stopped cannabis companies from developing their products and finding new retail partners as demand continues to grow.

This is the third major wholesale deal for Green Growth since the passage of the U.S. farm bill in December that legalized the cultivation and sale of hemp, a cannabis plant different from marijuana.

Green Growth said American Eagle is expected to start sales of the products in nearly 500 stores and on its website in October.

The addition of CBD products on American Eagle's store shelves could bring in curious younger customers, Santaniello said. "In terms of how its going to drive the top-line, It'll have a halo effect."

American Eagle shares have fallen 14% this year owing to a disappointing profit forecast in March and trade tensions weighing on the retail sector.

American Eagle to start selling cannabis-based balms, lotions this year
 

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