As malls and brick and mortar stores became one of the favorite shorts among hedge funds, many retailers have suffered. Aeropostale (OTCPK:AROPQ) was nearly saved from total liquidation last year and more recently both The Limited and American Apparel have filed for chapter 11 bankruptcy. This has come as a consequence of the lower mall traffic in recent years due to the increasing predominance of the online retail sector led by Amazon (NASDAQ: AMZN). Mall traffic actually declined a breathtaking 50% between 2010 and 2013, and it has continued that trend ever since. According to a study by Green Street Advisors, 15% of the malls in America will disappear in the next decade.

It seems that only discount retailers as Ross Stores Inc. (NASDAQ: ROST) and The TJX Companies, inc. (NYSE: TJX) are surviving this environment. Companies such Abercrombie and Fitch (NYSE: ANF) (-18.01% on the last year), L Brands (NYSE: LB) (-42.45%) and Macy’s Inc. (NYSE:M) (-45.11%) have had a rough year. American Eagle Outfitters is not the exception as it is down 24.91% in the past year. However, I believe the current fear towards retail apparel stocks has created a huge opportunity to buy AEO.

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