We need a concise term for the teen/young adult retail consumer. Tweens has been taken and is pre-teen plus teens so let’s agree to call the long and clumsy mid-teen through young adult market teensup for expediency.
The day logoed hoodies died
It’s been almost two years in the making, but it’s clear the death of the logo on teensup apparel is here. Even the tweens are not as impressed with the cool factor wearing an Abercrombie & Fitch Co. (NYSE:ANF) or Aeropostale, Inc. (NYSE:ARO) logo bestows.
Aeropostale, Inc. (NYSE:ARO) was the canary in the coalmine; it took a little longer for Abercrombie & Fitch Co. (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO) to roll over.
American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF) reported quarterly results August 21 and August 22, respectively, and business is not good if you are selling distressed denim, logoed hoodies, and graphic tees stuck in a past where these used to be hot fashion items. Teensup are finally tired of paying Abercrombie and Aeropostale, Inc. (NYSE:ARO) for the privilege of being the company’s billboard with ubiquitous logos splashed across much of the merchandise.
Aeropostale who?
As far back as Q4 2011, it was obvious that yawn-worthy denim, logoed hoodies, fleece, and tees were piling up on the shelves higher and deeper every quarter and only moved out at giveaway pricing. Same store sales and margins have been in a death spiral since 2011. This was a company turning in same store sales up to 10% and revenue growth in the high teens in 2009-2010.
By Q2 2013, same store sales were the worst in two years at -15% and net sales continued to decline down 6%. In spite of heavy discounting, there were fewer items sold per ticket and fewer transactions overall. Even at discount pricing, traffic was down. They lost $0.43 per share and guidance was for more of the same — Q3 losses are estimated at $0.21 to $0.26 per share.
Mr. Johnson has yet to find a fashion to follow and believes it’s a macro-consumer issue in spite of other retailers seeing positive sales trends.
Thomas P. Johnson:
Our business was pressured by a challenging teen retail environment with weak traffic trends and high levels of promotional activity. Our results were particularly disappointing given the level of change we have registered with the Aéropostale brand in recent periods.
Since Aeropostale, Inc. (NYSE:ARO) is merely a follower of fashion, they were the first casualty with cheap non-cachet branding. It took longer for American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF) to lose their customers for the classier brands.
Abercrombie & Fitch gets punched in its perfect six-pack
The mighty Abercrombie & Fitch Co. (NYSE:ANF), famous for its perfect half naked models with cut and ripped abs, didn’t escape the hit. Even sex couldn’t save them and Q2 was the culmination of string of disappointing quarters that finally crashed the price after a run up in 2013. Investors weren’t impressed by Q2 and the decreasing revenue and earnings and in spite of the big push to trim costs, operating margins were down.
From the company:
“We have also made excellent progress on our profit improvement initiative during the quarter, and we now expect savings from this initiative to exceed $100 million annually”
Throughout the conference call, management used buzz words to project enthusiasm: pleased, excited, encouraged, optimistic, and excellent. Results were none of these.
