Whenever Stephanie Tucci and her friend Allie Wilke hit the mall, more times than not, their first stop is Aéropostale.
"They're nice clothes, good quality, and you can get them for a lot less than you can at Vanity or Hollister or someplace like that," said Stephanie, 11, after snagging a pair of shorts and T-shirt for less than $20 on a recent outing at Eden Prairie Center.
The fifth-graders at Oak Point Intermediate School are helping to drive record sales at Aéropostale, as recession-stung retailers fight for survival in the highly competitive youth market.
With its deep discounts and frequent promotions, Aéropostale is racking up sales as teens trade down from higher-end Abercrombie & Fitch, which has seen sales in existing stores plunge by double digits for nine straight months.
Young people may not be the canary in the retail coal mine, but their shopping behavior provides important clues into what might be in store for the broader economy in the months ahead. And teens seem to be showing us that we haven't hit bottom yet.
"A lot of kids went back to school last year with the previous year's duds," said Ken Perkins, founder of the Massachusetts research firm Retail Metrics Inc. "They had a few new things, but they had to make do. And that trend continues to affect sales [at teen retailers], where so many of them have been negative or drastically negative."
This is not just their parents' recession. Teenagers themselves are having trouble finding work, and they've cut their fashion budgets by 14 percent in the past six months, according to a nationwide survey of 8,100 students released last week by Minneapolis-based Piper Jaffray & Co.
Last year, teen employment was at its lowest level in 60 years, and labor experts aren't expecting the job outlook for young workers to improve much this summer.
Still, the youth retail market tends to be more immune to economic downturns than other retail categories, and it bounces back more quickly, because teens usually spend the money they make, Perkins said.
Because teens don't have to worry about paying for food and shelter -- jeans and MP3 players are more of a priority -- they have more discretionary dollars to spend. Teens' wallets also get fattened by parents willing to forgo their own spending to help the kids keep up on the fashion front.
The shakeout continues
But even in good times, teens are more fickle about fashion and brand loyalties than adults. With lack of a must-have fashion item and a sameness among many of the teen-fashion stores, the recession is causing upheaval in an already fragmented market.
Morningstar analyst Brady Lemos predicts teen retailers will see same-store sales drop 10 to 20 percent in 2009 compared with last year, and that liquidations among regional and already struggling specialty stores will continue through the end of this year.
Steve & Barry's began liquidating its stores in November, and national retailers such as Aéropostale, Limited Too and Pacific Sunwear are closing boutique concept stores that failed to bring in hoped-for niche youth markets. American Eagle's struggling Martin + Osa helped pull down the flagship's year-over-year profits 77 percent in the fourth quarter.
Upscale teen-specialty retailer Abercrombie & Fitch has taken the biggest hit. Same-store sales crashed 34 percent in March from the previous year, among the largest loss of any publicly traded retailer. The company remains profitable, and analysts such as Perkins seem to think they'll be able to ride out the recession.
"They're taking a short-term hit over their unwillingness to dilute their brand and start really slashing prices," Perkins said. "There's cachet to their brand name and a certain edginess to it. It'll be interesting to see when the economy does turn if they see a significant spike" in sales.
A few shining stars
Teens spend most of their time and money at specialty stores in malls. In recent months, discount chains such as Target, as well as department stores and other major chains, have lost share to the mall-based stores, according to the Piper Jaffray teen survey.
Midrange teen retailers that have been able to keep their cool factor and distinguish themselves from the pack of surfer-themed stores have fared much better in recent months.
Buckle has been one of the brightest stars, posting monthly same-store sales increases of 13 to 21 percent since this fall, when the markets tumbled and many monthly retail same-store sales comparisons hit the red. With the bulk of its stores in the nation's midsection, Buckle hasn't been hurt as much as retailers with stores concentrated in California and the East Coast.
Another exception: Hot Topic. Sticking with its rock 'n' roll theme, the teen-clothing retailer saw same-store sales rise 7 percent in March, on strong sales of accessories and DVDs of the vampire movie "Twilight."
"Buckle is cool to walk in and check out," said Tyler Olson, 19, a student at Hennepin Technical College. "If I find something I like, sometimes I'll splurge. ... But I don't have to have the name-brand stuff. If I can look the part but not have to pay the price, that's what I go by."
Piper Jaffray research analyst Jeff Klinefelter, who directs the twice-a-year survey of teens, said the springtime survey indicates the economy is "in the process of bottoming." Young male shoppers like Olson are offering hints of a turn in the cycle based on trends from late 2002 and early 2003, as the nation was pulling out of the previous recession.
Back then, young men started spending a little bit more money, and they also started visiting more stores on their trips to the mall, "which typically means you're out searching for the next thing," Klinefelter said.
The needle started moving on both areas in the most recent survey, Klinefelter said, calling it an "encouraging sign."
Stephanie's mom, Nancy Tucci, said she continues to be "more practical" in what she spends on herself and her young daughter.
"We're a little wiser about how we spend money," she said. "You see people down the street losing jobs, and you realize it can happen close to home."
Jackie Crosby • 612-673-7335
