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Teen retailers revamp business as they battle crowded field for back-to-school dollars
NEW YORK (AP) ' Teens are heading back to school, but it's the retailers catering to them that are getting the first test.
They're hoping their expanded selections of funky tee shirts and hip-hugging jeans will attract students like Dale Gibson, 15, who struggles to find trendy clothes in their stores. Ditto for Danielle Martinez, 14, who thinks their merchandise is dull. Same goes for Rochelle Wilson, 19, who stopped shopping them altogether.
"All the clothes seem the same," said Wilson, a native of Pembroke Pines, Fla. who prefers shopping at H&M. "There's nothing to make people say, 'Oh wow, where did she get that from?'"
The "Big Three" teen merchants Abercrombie & Fitch, Aeropostale and American Eagle once defined fashion for fickle teens. But they lost their mojo by not stocking the jeans and tees that their customers covet. So, teens flocked to chains like H&M and Forever 21 that cater to twenty-somethings with up-to-the minute trendy styles that they can mix and match. Now, as the down economy batters both teens and their parents, teen clothing chains are having mixed success as they try to lure young people back into their stores by offering more of the things they love __ boot cut jeans, fleece bottoms and accessories.
"The teen consumer has always been a fickle consumer and if you're not on trend, you're going to be punished,'" said Michael Appel, an apparel industry consultant and director at AlixPartners. "A lot of teens have all the loyalty of a flea."
Teen merchants depend on the back-to-school season, the second-biggest shopping period of the year behind the winter holidays, because during that time they can make up to 25 percent of their annual revenue. This year, the average family is expected to spend about $603.63 during the back-to-school season ' which runs from mid-July through mid-September ' down slightly from $606.40 last year, according to the National Retail Federation. And spending in teen stores accounts for about 19 percent of the $85.8 billion in annual revenue generated from family's spending on clothes.
But teen clothing sellers, which had routinely posted strong sales gains for a decade or more, have had a tough time since the recession began in 2007. One challenge is that their core customers have been pummeled by the economy: Teens have record high unemployment, about 25 percent compared with the overall unemployment rate roughly at 9 percent. Adding to that, their parents who give them allowance money have been hit with a combination of stagnant wages and higher costs.
Michelle Scott, from New York, says she's cut nearly in half the amount she's spending on school clothes for her 15-year-old twins to $250 apiece this year because her household budget is being stretched. "Rent just went up, the cost of living is different, food went up, clothes went up," she lamented.
Another hurdle has been the shift in how teens shop, says Kit Yarrow, co-author of "Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail." She said teen stores once resonated more with teens with their logos emblazoned on graphic tees. But now, teens want variety so they can create their own look.
"The old way to create status was by buying a look from a retailer that is hot," she said. "Today, status is more about the attention they get being the curator of a look themselves."
That's true for Gibson, of Pensacola, Fla., who recently bought a skirt with a peacock feather print and a brown belt with a small satchel attached __ both for $23 __ at Forever 21 in New York because they are "unusual." ''If I go to Aeropostale, I see the same skirt at American Eagle," she says.
The main problem, though, is that teen retailers weren't nimble enough to keep up with teen's whims.
Abercrombie & Fitch Co., known for its edgy catalogs and racy advertising using scantily-clad models, lost sales to cheaper competitors during the recession when teens and their parents were cutting back on buying its higher priced line of jeans and shirts. The chain didn't discount and subsequently had several consecutive quarterly decreases in sales at stores open at least a year ' a key indicator of a retailer's health ' including six straight double-digit declines.
To get its customers back, Abercrombie, which runs its namesake Abercrombie & Fitch and surf-themed Hollister stores, made its assortment trendier, lowered its prices and cut costs. That meant adding jackets and sweaters with faux fur collars and offering jeans with different types of stitching and embroidery. The company, which recently drummed up publicity by offering the hard-partying cast of TV reality show "Jersey Shore" money not to wear its clothing, now is expanding its denim selection, offering more jean fits and washes, including a "super skinny" jean and boot cut jean.
The strategy has paid off. The chain reported second-quarter revenue at stores open at least one year rose by 9 percent __ its sixth straight quarterly increase. "Our back-to-school strategy was to get our new fits on as many new customers or old customers as possible," Mike Jefferies, the company's CEO, said on the second-quarter call.
American Eagle Outfitters, which offers preppy clothes with lots of plaid flannel shirts and blazers, also is turning in encouraging results after three straight years of revenue declines in stores open at least a year. The chain had gone wrong by offering too broad of a selection, leading to too little inventory of its most popular items ' particularly jeans. Now, the Pittsburgh-based chain has more T-shirts and fleece pullovers and has expanded its jean selection with new items such hip-hugging jeans that ride low on the waist and flare at the leg.
There are some early signs that the revamp is working. American Eagle reported its second-quarter net income more than doubled, helped by a 4 percent increase in revenue and fewer markdowns. But revenue in stores open at least one year, the key measure, was flat.
"Denim is obviously a critical driver for the back-to-school business and fall," said CEO Jim O'Donnell in the company's most recent quarterly earnings call earlier this month. "The response has been encouraging."
While its competitors are getting back on track, Aeropostale, known for low-priced basics like T-shirts, and jeans, is struggling. The chain, which benefited during the recession because it had lower prices than other teen clothing stores, lost its way with a series of fashion faux pas. As a result, the company has recorded three straight quarters of sales declines after years of positive results during the recession. In the second quarter, it posted a 14 percent decrease.
Aeropostale said it miscalculated its women's business last year, offering too many items in dark colors like grey and brown. It also didn't stock enough items that are popular with girls, including fleece bottoms. The company, based in New York, winded up with tons of inventory of unpopular items, which led to higher-than-expected markdowns in the first part of this year. It was also hurt by aggressive discounting by competitors.
Now, the chain is offering more accessories like an Aeropostale-branded five-pack pencil set for $6.99 and broadening its selection of clothing by adding more dorm-wear like fleece bottoms for girls and expanding its selection of boy's clothes. It also has more colorful items, including a pink and white floral-print cardigan for $29.99 and floral woven "dorm pants" for $16.25.
While the chain has made improvements, CEO Tom Johnson said Aeropostale still needs to add trendy clothes along with its basics. And while results were weak for the quarter, Johnson said the clothing store has gone back to being a "fun, inclusive and parent-friendly brand offering our teen customer the best mix of fashion and basics at compelling prices."
But for Martinez, 14, it may be too little too late. She says she's stopped going to Aeropostale last year because she thought the clothes were "plain and dull." She prefers wearing clothes with "lots of color."
"It makes you feel happy," said Martinez, who for now prefers going to Forever 21. "I like the type of skirts they have, with flowers and butterflies, they're colorful."
Anne D'Innocenzio in New York contributed to this report.