Tough Back-To-School Season For Teen Retailers

Forbes.com – Retailers catering to the teen set are navigating a rough back-to-school season.

Choppy store traffic at Abercrombie & Fitch, Aeropostale and American Eagle Outfitters AEO -0.75% during July and August is hurting year-over-year sales comps and full-year earnings outlooks, according to J.P. Morgan retail analyst Brian Tunick. The most obvious reasons: a teen unemployment rate that hit 23.7% last month in the U.S., and household spending shifts toward big-ticket durable goods.

New categories like footwear and athletic wear, such as American Eagle’s recent introduction of Hollister goods, has only partially offset the slump in traditional core teen categories like denim, which some retailers rely on for as much as 30% of sales.

“With back-to-school off to a shaky start, one wonders about the upcoming holiday season, which can represent 40% of our retailers’ annual net income,” Tunick wrote in a research note on Friday.

It all adds up to a tougher outlook for sales and margins than previously thought. Tunick cites flat denim and women’s tops sales at Abercrombie & Fitch in cutting his full-year 2013 EPS target to $2.20 from $3.28 per share.

He’ cutting his 2013 EPS estimate at American Eagle, forced into deeper promotions by slowing mall traffic, to 85 cents a share from $1.16, while also chopping the 2014 full-year outlook to a dollar a share from $1.34. At Aeropostale, whose new “lifestyle” offerings have been slow to catch on, Tunick predicts a full-year loss of 80 cents a share, down from a previous outlook of plus-18 cents.
 
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