Teens Abandoning Malls For High End Shopping

Despite trying to kick start the back-to-school season early this year, many retailers are still bracing themselves for a letdown in shopping's second-most important season.

July has already come up short for many, while American Eagle Outfitters (NYSE: AEO) and Aéropostale (NYSE: ARO) are warning investors to expect lower earnings than they expected. Abercrombie & Fitch has started mulling over the possibility of abandoning its older customers (older being a very relative term) in an attempt to refocus on a younger audience. According to KeyBanc analyst Ed Yruma, that might not be enough.

"What we are seeing is that teens are spending more for some of these 'need to have' accessories," he told CNBC. "Whether it be the Michael Kors' handbag [or] the North Face backpack, what they're doing is mixing and matching that with less expensive items.…So really giving it a high-end plus a fast-fashion-type look."

A panel of high school students at a recent Piper Jaffray Consumer Conference told attendees that they were planning on dropping their back-to-school cash on products like Coach (NYSE:COH) handbags and Louis Vuitton iPad cases. Some of those can be bought at department stores in traditional malls, but mall traffic has been weak this summer.

Where teens appear to be flocking is outlet malls, where they're on the lookout for high-end deals. Department stores like Saks and Nordstrom are keenly aware of that trend. Both have more outlets than full-line locations and the latter recently announced four new Nordstrom Rack stores.

"The vacancy rates in outlet malls right now are running about 5 percent," with those on the traditional retail side "somewhere between 10 and 15 percent," said Ken Lombard, a partner at Capri Capital Partners.

This Saturday will mark the second annual "Back-to-School Saturday," an event created by Teen Vogue in which some 45,000 stores are expected to offer promotions and make big social media pushes. Some analysts, like Jeffries' Daniel Binder, believe customers are just timing their purchases this year and that this weekend could still redeem the season.

"We think the consumer has a propensity to shop closer to need," he said in a note to clients. "We have seen this in many instances since the Great Recession, and we only have to look to first quarter and early second quarter to see when it happened last. We may witness this again as consumers shop late for back-to-school."

Come this Saturday morning, retailers across the country will have their fingers and toes crossed that he's right.

For more:

- See this Business Insider story

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