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Teen Jobless Rate Hobbles These Retail Stocks

Carla Fried

The 7.5% overall unemployment rate is still well above average for an economy in year four of a recovery. But for the CFOs of teen/young adult clothing retailers Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Guess? (GES) and Aeropostale (ARO), 7.5% unemployment for their key demographic would be a reason to celebrate.

US Unemployment Rate: Age 16 to 19 Chart

In 2008 before the financial crisis hit full boil, the teen unemployment rate, for 16-19 year olds, was below 16%. Since the beginning of 2011, the overall unemployment rate has fallen nearly 20%, while the 16-19 year old subset has seen its unemployment rate ease by just 4% Moreover, the labor participation rate for the younger set has eroded at a clip far worse than the general population.

US Labor Force Participation Rate Chart

Those are stiff headwinds for specialty clothing retailers eyeing sales growth. Factset expects first quarter same store sales for Aeropostale to be off 13%, for Abercrombie & Fitch, a 7.4% decline in same store sales is anticipated, and American Eagle Outfitters is expected to see a 6% decline in same store sales.

That goes a long way to explaining the dragging performance of the stocks compared to the 20% gain for the market over the past year. By comparison, Michael Kors (KORS), which caters to the other end of the spectrum -- the well heeled -- is crushing it, as seen in a stock chart.

KORS Chart

Until the teen/young adult unemployment rate starts to fall significantly, it’s a hard sell to expect the stocks of the teen clothing retailers can outpace the market.

Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at editor@ycharts.com.

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