Mixed Teen Retailer Results Portend Holiday Challenge

  • by November 20, 2008
teens shoppingA number of retailers focused on the teenage market released third-quarter earnings reports Thursday, with the results--and implications for the all-important holiday season--decidedly mixed.

Teen fashion retailer The Buckle bucked trends by reporting a 19.1% increase in comparable-store sales--and a 31% jump in the chain's net income. But themed-fashion retailer Hot Topic turned out to be more of a hot topic.

Hot Topic--which owns Torrid stores as well as its flagship outlets-- reported only a 1% rise in comparable-store sales for the quarter, but a significant 13% jump in earnings per share. This led Schaeffers Research analyst Jocelyn Drake ( to state that Hot Topic "may now be the hottest place to shop for teens.... It certainly doesn't hurt that the stores have become a Mecca for anyone seeking "Twilight" paraphernalia ... the popularity of "Twilight" is helping to boost Hot Topic's bottom line."



Wet Seal, a retailer to young women, saw its comparable-store sales drop 7.6% in the quarter. That included a dive of 25% for its older-targeted Arden B outlets, while the teen-focused Wet Seal stores fell just 3%. But as CEO Ed Thomas declared: "In these difficult times, we are very pleased that Wet Seal proves to be a key destination for young women to find fashionable, value-oriented apparel and accessories." The firm boasted operating income of $7.1 million compared to a loss of $4.4 million a year earlier, with Thomas attributing the improvements to "focused management efforts across all areas of our organization."

Beware the holiday season, however, as Wet Seal issued new fourth-quarter fiscal guidance to the financial community, including a projected comparable-store sales decline of 10-13%.

Thursday's reports followed last week's strong showing from Urban Outfitters (earnings up 31%, and comparable-store sales up 10% overall, including 17% for Urban Outfitters, 2% for Anthropologie and 4% for Free People) and weak showing from Abercrombie & Fitch (comparable-store sales down 14%, including 8% for Abercrombie & Fitch, 20% for abercrombie, 18% for Hollister, and 25% for RUEHL).

With teenagers refusing to take definitive sides on their shopping habits, maybe it's time to weigh in on their younger siblings.

Tween Brands, a leading retailer to the 7 to-14-year-old set through its Justice and soon-to-be-converted Limited Too stores

(, has also reported its third-quarter results. Not mincing words, the press release begins with the following three bullets:

"--Weak traffic and macro-economic pressures drive decline in comparable-store sales.

--Company withdraws previous earnings guidance and holds off on providing fourth-quarter and full-year earnings guidance due to lack of visibility into holiday season.

--2009 capital investment forecast reduced to $10 to $15 million."

Stated Michael Rayden, Tween Brands chairman and CEO: "The economic pressures being experienced across our country and around the globe have caused virtually all of us to take measures such as preserving cash, tightly managing inventories, and minimizing expenses. We believe the incredibly challenging conditions we are experiencing today are likely to persist for some time and will have a sustained impact on consumers' desire and need for value. Our early move to shift to the Justice brand, which offers its customers the hottest fashion at a great value, situates our company to proceed from a position of strength when the storm clears."

If teens and tweens aren't necessarily going to spend in this economy, perhaps a child can lead the retail charge. Yes, those kids still too young to shop for themselves are doing okay--thanks to their parents--if third-quarter results from The Children's Place are any indication.

The retailer's net sales were up 5%, comparable-store sales rose 2%, and income from continuing operations increased 91%.

According to Chuck Crovitz, interim CEO for The Children's Place Retail Stores: "We offer parents the fashion and value they are looking for, coupled with an excellent customer experience to help expedite and simplify their holiday shopping." But he still cautioned: "We expect this holiday season to be a very challenging one, as the macroeconomic environment remains weak and is impacting consumers' purchasing power."

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