Analysis: New tastes, nimble fashion rivals squeeze top U.S. teen chains

Thu Aug 22, 2013 1:53pm EDT
 
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By Phil Wahba and Dhanya Skariachan

(Reuters) - Abercrombie & Fitch Co, Aeropostale Inc and American Eagle Outfitters Inc have fallen out of fashion with fickle U.S. teen shoppers and aren't likely to win back their business anytime soon.

The retailers, known as the "3As," have long been popular for their cool basics like jeans, hoodies and t-shirts. But young shoppers are now less interested in their logo-centric clothes and more eager to shop for electronics or go to low-cost, fast-fashion chains like Zara, Forever 21 and H&M that offer greater variety more quickly.

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

American Eagle on Wednesday gave a weak forecast for the fall, sending its shares to their lowest levels in a year and a half. Chief Executive Robert Hanson told analysts the level of price slashing is unprecedented.

Aeropostale earlier this month said comparable sales fell 15 percent last quarter, and Wall Street analysts expect earnings per share to fall by more than two-thirds this year. The company was due to report full quarterly results on Thursday.

Abercrombie reported a 10 percent drop in same-store sales on Thursday, far worse than expected, and forecast a similar drop this quarter, which includes the back-to-school season.

One of the big problems the 3As face is a narrower clientele than that of H&M and Gap Inc, which draw shoppers of all ages.

American Eagle gets about 80 percent of sales from its standard merchandise, and Hanson conceded that it has been tough to compete as his company tries to offer more fashion, more quickly.   Continued...