Those Troubled Teen Retailers

Those Troubled Teen Retailers

The news in the teen apparel sector has been especially grim of late. We were starkly reminded of this on a recent walkthrough of the Natick Mall, just outside Boston. Across the corridor from each other in this beautiful and successful center were two retailers running liquidation events, Delia’s and Naartjie Kids. It is especially telling that these two companies couldn’t make it through the holiday season and that they are both completely liquidating. This is a trend we saw earlier in the year with Coldwater Creek.

Misery, in this case, loves company. As opposed to a time when there are clear winners and clear losers, the entire teen segment seems to be experiencing a generalized malaise.

Wet Seal, which has over 500 stores, is trading for pennies on the dollar, conducting its relationship with lenders on a week- to-week basis and is struggling to hang on.

Deb Shops has filed for Chapter 11 bankruptcy and is likely looking at liquidation come January.

Among the bigger names in the sector, trouble is also in evidence. Abercrombie & Fitch saw the resignation of its long-time CEO amid continuing struggles. Aeropostale faces double-digit comp store sales declines and has already closed more than 100 stores this year, with more closings planned for 2015 as the chain attempts a turnaround. And finally, American Eagle Outfitters is faring only slightly better, with comp store sales down “only” 5 percent in the latest quarter.

What’s happening here? There seem to be three main culprits for everyone’s struggles:

Teens have shifted their spending towards fast fashion specialists like H&M and Forever 21. And the continued expansion of Uniqlo and pending entry by Primark will only heighten competition from this channel.

Sales are rapidly shifting online, and while these teen retailers can still benefit from the trend, it changes the in-store economics.

Fashion trends have changed. These “logo-heavy” retailers are not stocking enough trend-relevant products for their target customers and have neither created, nor benefitted from, any hot new fashion trends.

All in all, it looks like a significant restructuring of the sector is inevitable. Perhaps when the herd is thinned, we will see a healthier teen segment.

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