Abercrombie, Aeropostale and American Eagle Aren't For Cool Kids Anymore

Teen shoppers are so over Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO) and American Eagle Outfitters (NYSE:AEO). All three have been forced to lower sales expectations for the fall while searching for new ways to cope with their apathetic target customers.

Even teens are having to learn to adjust in the current economy, and with fewer jobs for them and their parents, plus higher taxes and gas prices putting the squeeze on their families, younger shoppers are turning to more affordable outlets where they can get more for less. What money they do have they're spending more often on things like electronics than clothes.

"The teen retailers seem to be not in style or in vogue at this point in time for their target consumers," Bryan Keane, a portfolio manager at the Alpine Global Consumer Growth Fund, told Business Insider. "That usually does not turn around quickly."

The shift led American Eagle to resort to price cutting that chief executive Robert Hanson described as "unprecedented." His company released a weak financial forecast this Wednesday, while Aeropostale announced earlier this month that comparable sales fell 15 percent last quarter. Wall Street analysts predict Aeropostale's earnings per share will plummet more than two-thirds to 21 cents this year.

Abercrombie reported a 10 percent drop in comparable sales for the second quarter on Thursday (Aug. 22), a huge difference from the 2.5 percent dip that was expected, and added its own poor forecast to the pile.

Those retailers' loss has been H&M, Gap and Forever 21's gain. Teens have flocked to fast-fashion outlets where they can get a variety of clothing as opposed to the highly focused niche selection at the 3A's stores.

"This team (young shoppers) wants to be fashionable but they don't want to spend a lot of money, and fast fashion works very well for that," Brean Capital analyst Eric Beder told Business Insider.

So what's left for them if they want to be the cool kids in town once again? Well, they could follow Aeropostale's lead and begin focusing on pricier high-end clothes, something KeyBanc analyst Ed Yruma calls a "tacit acknowledgement that the targeted teen customer base may have moved elsewhere."

For more:

- See this Business Insider story
- See this Bloomberg story

Related articles:

Teens Abandoning Malls For High End Shopping
Is Abercrombie & Fitch Ready To Let Go Of Its (Mildly) Aging Shoppers?
H&M Finally Opening US Online Store