"Beauty is truth, truth beauty, – that is all ye know on earth, and all ye need to know" John Keats

Keats notwithstanding, American Eagle Outfitters (NYSE: AEO) is trying out what shouldn't be such a revolutionary thought--engaging real models in their ad campaigns, tattoos, muffin tops, and all--no Photoshopping. These aren't your "American stick insects" as referred to in Bridget Jones ' Diary.  They are Real Women like Unilever's Dove campaign (although they are professional models, these aren't your L Brands (NYSE: LB) Victoria's Secret supermodels and certainly not the anemic high fashion runway type.)

The company is initiating the new strategy with a social media engagement campaign on twitter and Instagram called Show Off Your #AERIEREAL. This iniative preceded a major stockphoto company’s announcement last month  to present less stereotypical images of women.

Aerie Real's Jenny Altman, a style/fit expert, told Good Morning America, "We left everything. We left beauty marks, we left tattoos, what you see is really what you get with our campaign." The campaign also kicks off a new online bra guide featuring real model wearing different cup sizes so women of all sizes can better visualize what it looks like on them. Accompanying this is an initiative they call, “Let your bedroom be the fitting room”, backing it up with free shipping and free returns of Aerie bras. At its bricks and mortar stores Aerie will feature fitting experts.

If you're a guy investor, you're thinking so what? What's so bad about Victoria's Secret, anyway?

Fantasy vs. reality

Nothing is wrong at L Brands. The big cap retailer continues to produce its mega-million production of the Victoria's Secret Fashion Show spectacular and the famous catalogs. The company has successfully created an international brand that women like. It has some 1,000 US stores and has been opening more of its very successful college co-ed targeted PINK freestanding stores.

However, certain trends have been emerging around women's body image: the intense pressure on American Eagle's rival Abercrombie & Fitch (NYSE: ANF) to start carrying larger sizes (which it eventually succumbed to), the success of the Unilever Dove Real Women campaign, the backlash against Lululemon Athletica when its founder insinuated women whose yoga pants pill at the thighs are fat, and even a call to change the Barbie doll to more realistically represent actual women.

The bull in the Aerie shop

American Eagle is riding this trend and Trefis wrote in Forbes its bullish case on American Eagle partly hinges on Aerie intimates. Trefis thinks Aerie can crack the $12 billion US lingerie market that L Brands now dominates. It noted the strength of lingerie even during the recession, adding the Aerie division outperformed  namesake American Eagle brand in the second and third quarters of FY 2013.

Although Aerie only represents 6% of the company' sales, that number could easily ramp up if, as Trefis recommends, the company installs more shop in shop Aeries. Current revenue of $514 per square foot could improve to over $700 and bring margins up to 29% if macroeconomic trends improve and promotions wane.

That's a big (and beautiful) if.

In January, CEO Robert Hanson gave a downbeat preannouncement on holiday sales for American Eagle.  Like other teen retailers he commented the environment was highly promotional.  The company reports again on March 11 and Trefis remains bullish, updating its thesis just last week based on improving omnichannel numbers at American Eagle.

Rivals Aeropostale and Abercrombie & Fitch have both had problems gauging the pulse of the 15-25 year old man and woman. So has American Eagle but in its favor it recently hired as chief merchandising officer, Chad Kessler, from uber-hip Urban Outfitters.  International expansion and online commerce, which include the Aerie brand, are both humming along, deserving their 35% lion's share each of 2014 capital expenditures.

A more honest and beautiful 2014

American Eagle is trading at a forward earnings multiple of 15.94 with a yield of 3.40%. L Brands offers a 2.40% yield at a 15.42 forward multiple. Abercrombie & Fitch has a 14.40 forward multiple and a 2.0% yield.

American Eagle bared it all about its challenged 2013 and now seems to be proactive with a new CMO hire and this Aerie Real campaign. L Brands' Victoria's Secret has reason to look over its airbrushed shoulder as Aerie, warts and all, takes share in a more beautiful 2014.