Excerpted from WSJ: “Retailers Catch Teenage Blues”, August 8, 2008
Teens may dread going back to school, but the retail chains catering to them eagerly await this season for a reliable boost from kids who need new clothes. In this slow economy, however, teen retailers are showing signs of stress and beginning to worry that the late-summer boom might not arrive this year.
The teen stores have long been considered recession-resistant because young customers’ spending — often linked to allowances and summer jobs — typically holds constant in a slow economy. Back-to-school purchases were viewed as a must for taste-fickle teens who often cajole their parents in August and September into giving them extra cash.
The July results show that this year’s economic slowdown is dealing wider blows. The principal culprit: energy prices, which analysts say are fast stripping teens of their ability to buy the gas they need to get to the malls where many of these stores are located.
Strong performance in junior apparel from Wal-Mart, the world’s largest retailer, suggests it might be taking sales away from teen retailers.
For many retailers, this time of year is typically the second most profitable of the year. If performance is down this fall, it could be an unpleasant preview of what is usually the chains’ most promising time of year, the holiday season.
The industry appears divided on how to respond.
Middle-end stores like Hot Topic and American Eagle already are looking to promotions in the middle of the back-to-school selling season.
But higher-end operations like Abercrombie appear to be clinging to their price points, a bet that its brand name can weather the storm and competition with department stores. Abercrombie “prides itself being an aspirational brand, and part of that is not to mark down and have sale events. They feel like that dilutes brand equity.”
Other stores are learning to sit pretty at lower price points. Teen retailer Aeropostale Inc. is running a fleet of more than 800 stores throughout the U.S. with clothing styles not too dissimilar from those found at Abercrombie — but at prices about 30% lower.
Other chains are taking a fast turn toward markdowns.
It is unclear whether these moves will be enough to lure young buyers back into the mall. Megan Tysoe, a 19-year-old Georgetown University student, says she spent $300 a month on clothes last summer using paychecks from a summer job. But this year she is working an unpaid internship as a paying job couldn’t be found. And Ms. Tysoe has words that should cause worry for retailers: “Instead of buying new things, my friends trade clothes with each other.”
Full article:
http://online.wsj.com/article/SB121810860555720233.html?mod=hps_us_whats_news
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