Teen retailers haven’t given young men and women much of a reason to shop in their stores over the past few years. But if the segment’s second-quarter earnings results are any indication, the Abercrombies and American Eagles of the world are finally starting to turn a corner—albeit, a small one—with their target demographic.
Although experts emphasized the category still has a lot of work ahead to have any hope of once again becoming a go-to for teen shoppers, it delivered a number of positive surprises in the most recent quarter, withAbercrombie & Fitch, American Eagle and Urban Outfitters beating on the bottom line. Experts were most encouraged by the segment’s more trend-right merchandise, a strong kickoff to the back-to-school season, and better-controlled inventories—which could reduce the number of storewide discounts in the second half.
Still, headwinds remain. Customers still prefer fast-fashion stores, which are expanding their store counts as teen stores trim theirs, and the environment is still highly promotional. Comparable-store sales are down 5.3 percent—the worst of any retail segment, according to Retail Metrics. “At each of [the teen retailers] there is marginal progress,” said Craig Johnson, president of Customer Growth Partners. “The one commonality they all share is that the brand concepts are much less relevant to the way kids shop and live today.”
Almost across the board, analysts cited improvement at all four major teen sellers, and applauded steps such as Abercrombie’s plan to exit the logo business in North America by spring 2015, and American Eagle’s plan to shift away from its denim-heavy assortment to more soft dressing trends, such as the red-hot “athleisure” category. Experts also sounded a bullish note on Aéropostale’s Bethany Mota and Tokyo Darling sub-brands, and Urban Outfitters’ comments that it is seeing little resistance to slightly higher prices on new items at its struggling namesake label.
Still, analysts cautioned that while things look better on the selling floor, it will likely take time for teens to respond to the changes. Following Abercrombie’s results on Thursday, Stifel Nicolaus analyst Richard Jaffe said in a note to investors that “change is underway, but 3Q is likely to prove challenging as consumer acceptance of the change is expected to take time.”