Teen retailers grapple with holiday blues

Teen retailers' struggles extend into holiday season

Associated Press

NEW YORK (AP) -- Clothing stores that cater to teens just can't seem to shake themselves from a funk — even during the holiday shopping season.

American Eagle Outfitters Inc., based in Pittsburgh, was the latest teen fashion merchant to lower its profit outlook for the rest of the year as it resorts to heavy discounting to pull in cautious shoppers. American Eagle's third-quarter profit dropped 68 percent on a 6 percent revenue drop.

Robert Hanson, American Eagle's CEO, called the results "clearly unsatisfactory."

"We continue to operate in the most challenging sector of retail where there has been intense promotional competition and tepid consumer spending," Hanson told investors on a conference call.

Aeropostale Inc. reported on Wednesday that it swung to a loss in the third quarter as the chain aggressively marked down clothing to attract shoppers. Revenue dipped 15 percent. The company expects a loss in the fourth quarter that could be greater than what analysts had expected.

And Abercrombie & Fitch, based in New Albany, Ohio, announced on Nov. 22 that it had a loss in the third quarter, and it reported a 12 percent revenue drop. It said that sales weakness continued into the fourth quarter.

Abercrombie & Fitch, American Eagle Outfitters and Aeropostale had once defined fashion for fickle teens, but a yo-yo economic recovery and tough competition from the likes of H&M, which offer disposable and cheap fashion, have led to an uneven performance since the recession.

Aeropostale thrived during the downturn as shoppers were drawn to its low prices, while Abercrombie and American Eagle struggled. But the two responded by cutting prices and making their clothes edgier.

Meanwhile, Aeropostale has scaled back its logoed merchandise in favor of trendier items this fall to rev up sales, which have been sluggish since 2010. Aeropostale told investors earlier this week that shoppers have been slow to warm to the new styles.

The downbeat reports follow a tough back-to-school shopping season. Teen merchants have faced a fight to get young people to spend as they deal with still high teen unemployment. And parents, worried about the economy, are being cautious about spending themselves.

These clothing retailers also facing stiff competition from gadgets like Apple's iPads that's leaving less room to spend on jeans and other fashions.

The fierce battle for teens' dollars played out over the Thanksgiving weekend, which traditionally starts the holiday season. Abercrombie, American Eagle and Aeropostale all joined a rush of retailers opening Thanksgiving night. American Eagle's promotions included 50 percent off the entire store, up from 40 percent a year ago, according to Stifel Nicolaus analyst Richard Jaffee.

"Teens just don't have the money to spend," said Ken Perkins, president of RetailMetrics LLC, a research firm, which tracks 121 stores overall.

In fact, fourth-quarter earnings for the overall teen clothing sector are expected to be down 39 percent, compared with a year ago, Perkins said. That is the worst performance for any retail segment, he said.

Shares of American Eagle fell nearly 9 percent, or $1.41 per share, to $14.99 in mid-day trading, while Aeropostale's stock slipped 6 cents to $9.15. Meanwhile, Abercrombie's shares fell more than 1 percent, or 40 cents, to $34.97.

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