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Teen stores in tight spot for back-to-school

Half-priced jeans and promotional freebies are already popping up at the mall with the start of school still weeks away.
Tanya Alvarez, center, of Manhattan, and Courtney Strange, left, of Philadelphia, shop during the grand opening of the Material Girl clothing line at Macys in New York.
Tanya Alvarez, center, of Manhattan, and Courtney Strange, left, of Philadelphia, shop during the grand opening of the Material Girl clothing line at Macys in New York.Mary Altaffer / AP
/ Source: The Associated Press

Half-priced jeans and promotional freebies are already popping up at the mall with the start of school still weeks away.

Teen clothing sellers may have had some misplaced optimism about the strength of the economic recovery when orders were placed in the spring, and department stores are armed with hip jeans and fast fashion of their own. The battle for back-to-school dollars is giving parents more affordable choices for back-to-school clothing.

Aeropostale Inc. just started marking down all new jeans by 50 percent. They're 40 percent off at Abercrombie & Fitch Co. Other sales gimmicks include free cell phones and a chance to audition for a movie.

The economy, which seemed on the mend a few months ago, has hit some speed bumps, and that has some industry experts wondering if teen merchants will be able to get rid of the piles of jeans and flashy T-shirts they bought expecting a stronger consumer rebound.

Stubbornly high unemployment, especially bad among teens, has shoppers keeping a lid on spending and spurring bargain-hunting in a teen back-to-school clothing market worth $11 billion, according to market research firm NPD Group Inc.

Consumers have been shopping increasingly later for back-to-school needs, with the bulk of the buying in August and September. That's why stores are trying to grab shoppers now with big discounts, though they could take a hit on profits if the discounting goes too far.

Often, that's what it takes to get parents to spend.

"If my kids really want something that's not on sale, I make them use their own money," said Lori Ahrenhoerster, 40, of Whitefish Bay, Wis., the mother of two daughters, ages 7 and 15, and a 12-year-old son.

With Americans spending more of their limited discretionary dollars away from clothing and more toward gadgets like flat-panel TVs and Apple Inc.'s iPads, the fight to get shoppers to spend for back-to-school fashions will be intense for all clothing merchants. But for teen chains in shopping malls, it's been a slower climb out of the recession's sales funk than for their bigger rivals. More-expensive merchants such as A&F had to cut prices to cater to thriftier shoppers.

J.C. Penney Co. and Macy's Inc. are muscling in on their turf as well, taking a page from white-hot fast-fashion chains such as Forever 21 and Swedish fashion retailer Hennes & Mauritz AB by quickly changing assortments of exclusive, affordable fashions.

Macy's is betting its new Material Girl fashion line, created by pop star Madonna and her 13-year-old daughter Lourdes, will resonate with a younger generation who didn't go clubbing in sheer lace tops. The collection, a modern twist on that 1980s look, is priced from $12 to $40.

Department stores are going after teens where they hang out online. Penney recruited six trend-setting teens to create YouTube "haul" videos, where they critique fashions from their latest shopping trips (which Penney paid for). These videos are a key ingredient in the chain's fall marketing.

Teen retailers have more to lose. They get about 25 percent of annual sales from the back-to-school season, instead of 10 percent to 15 percent for department stores, according to Kurt Salmon Associates, a retail consultancy.

They were also hurt more by the recession. Teen merchants' 1.5 percent revenue increase since February, the start of the industry's fiscal year, is hardly a rebound compared with last year's 10.5 percent drop during the same period. Department stores had a 4.5 percent increase so far this year, a firmer bounce from a 5.9 percent decline. The figures are based on revenue at stores open at least a year.

Complicating everything is teen clothing specialists were much more optimistic than rivals when they placed orders earlier in the year when the economy looked stronger, said Eric Beder, retail analyst at Brean Murray, Carret & Co. That forced them to cut prices more than planned on summer goods to make room for fall deliveries.

"The mistakes of the second quarter are still piling up into the third quarter," Beder said. "We are going to see very aggressive discounting." Department stores will fare better, he said.

Also working against the teen chains: In tough economic times, spending decisions shift more toward parents. That favors discounters and department stores, which tend to carry more wholesome brands, Beder said.

The slump for the teen chains, which had routinely posted strong sales gains for a decade or more, began in 2008 with the recession. Teen unemployment has since risen steadily and is now at 26 percent. The burgeoning recession also meant teens couldn't rely on their parents to buy extras and pushed the teen chains to double-digit sales declines.

One bright spot has been Aeropostale, which has consistently posted sales increases and whose jeans are 20 percent less expensive than A&F's, which run about $53 for the premium washes. But even Aeoropostale sees the need to discount. Business at The Buckle, which offers name-brand clothes like Lucky jeans ($89 and up), has sputtered since April.

Besides discounts, teen retailers are rolling out a raft of gimmicks.

A&F resurrected its racy and controversial catalog after a seven-year hiatus. The theme: a "VIP Backstage pass" to an A&F screen test. Tied to that is an online marketing campaign in which Abercrombie fans can win an audition for a Hollywood movie by buying jeans and photographing themselves in them and submitting them through the company's Web site and Facebook site.

American Eagle aimed to jump-start denim sales by offering anyone who tries on jeans a free smartphone (the catch: they had to sign up for a two-year contract). That offer ended Tuesday. Company officials declined to disclose how the promotion fared.

The gimmicks may only go so far.

Senegal Mabry, 12, of New York budgeted $100 for fall, money he received from an allowance from his mother but controlled by her. He'll be shopping at J.C. Penney for jeans and is staying away from A&F, because he thinks it's too pricey. He just finished attending a finance-themed camp, and is already a tough audience.

"I know what I want to spend my money on," he said.