For Teens, Lavish Spending on Clothes Is So Last Week

Fickle young female consumers have warmed to a surprising new trend: the closed wallet.

Fad-embracing teens and young women, normally vigorous shoppers who keep store cash registers ringing even through tough economic times, have trimmed their spending -- casting a pall over the specialty apparel business.

In recent months, youth-focused retailers including California-based companies Wet Seal Inc., Bebe Stores Inc. and Charlotte Russe Holding Inc. have reported downturns in same-store sales compared with last year.

Over the last five years, women ages 18 to 24 have boosted their spending by an average of 7.7% annually, according to NPD FashionWorld, a business unit of NPD Group, a market research firm in Port Washington, N.Y. Last year, their spending jumped almost 16%, even amid an economic slump and the aftermath of terrorist attacks.

But this year, that same group of consumers has cut spending by 8%, as of the end of August.

For companies that cater to this niche, several factors are at play, analysts say. Specialty retailers have expanded aggressively in recent years, crowding malls with stores such as Rampage, Arden B and Forever 21. As a result, too many companies are chasing the same customer.

From 1995 to 2000, 14 teen apparel companies followed by Brian Tunick, with J.P. Morgan Securities Inc., expanded their store count nearly three times faster than did the specialty retail sector as a whole.

An even bigger issue may be what’s on retailers’ shelves these days. Apparel sellers are peering into a sort of black-hole of fashion with no hot new trend on the horizon to take the place of now-waning bohemian styles.

In a downbeat bit of analysis, Joseph Teklits, with Wachovia Securities Inc., said in a recent report that the bohemian trend may have “marked a fashion ‘bubble’ from which consumers will retreat to anti-fashion for some period -- not a pleasant thought for many teen retailers.”

In many stores, jeans are about the only must-have item in stock, and most young shoppers already have plenty of jeans in their closets.

“There’s no newness in the products, no fad, no excitement,” said Walter Loeb, an analyst with Loeb Associates and a director of Wet Seal, which operates the Wet Seal, Arden B and Zutopia chains.

Certainly Jennifer Vinovich, 19, would welcome some new styles. The Newport Beach resident, who frequents Rampage and Express stores, said that a dearth of anything eye-catching has led her to spend less of late than she normally does.

“I don’t see anything I necessarily want to buy,” she said.

At least not at home. In Europe this summer, Vinovich collected hip-huggers in Nice, France; a lacy spaghetti-strapped top in Paris; a swimsuit in Florence, Italy; and a trendy little black purse in Cambridge, England. The prices were right and the styles seemed “maybe a step ahead of America,” she said.

Yet it’s a matter of frugality -- not just fashion -- that also is damping Vinovich’s enthusiasm for shopping. Concerns about the economy, the UC Irvine student admits, have caused her to think more recently about “saving for the future a little bit.”

When specialty apparel companies began their full-fledged charge after shoppers such as Vinovich a few years ago -- rapidly opening stores and creating concepts -- no one imagined that young consumers would start fretting about the economy, let alone trim spending, said Marshal Cohen, co-president of NPD FashionWorld.

“They never thought it would happen because it hadn’t happened in the past,” he said. Young women “were the ones that spent most of their discretionary income on fashion. But times have changed.”

Indeed, more and more it looks as though youth apparel companies face the same troubles that other retailers do -- a rocky employment market and mounting fear of war.

Negative indicators abound.

Wet Seal, based in Foothill Ranch, has logged a decline in same-store sales for the last three months. Bebe Stores of Brisbane, Calif., and Guess Inc. of Los Angeles have registered decreases in same-store sales for six months, as has Ohio-based Abercrombie & Fitch Co., which caters to teens and college-age consumers.

Even Aeropostale Inc., a New York-based teen retailer that has been outperforming the competition -- partly, analysts say, by offering lower prices -- slipped into negative territory last month when its comparable-store sales dipped 2.5%.

Some bright spots exist. Hot Topic Inc., a City of Industry-based retailer that analysts say sets itself apart with counter-culture styles, saw same-store sales jump 5.9% in the five weeks ended Oct. 5.

Yet overall the outlook remains gloomy. San Diego-based Charlotte Russe Holding, which operates Charlotte Russe and Rampage stores, warned last month that comparable store sales probably will fall short of previous expectations in the fourth quarter.

“It appears as though the first part of October is shaping up similarly to the back half of September,” analyst Jennifer Black of Wells Fargo Securities said in a recent report on Abercrombie. “Mall traffic has been spotty and we do not foresee a turnaround in the next month.”

With sales slackening, some retailers have slowed expansion plans for this year and next. For instance, Wet Seal, which had said it would open 100 to 125 stores in 2003, says it will trim its expansion to 75 stores if current trends continue.

Mall location also is part of the problem, retail experts say, because more people now buy clothes outside shopping centers at stand-alone stores such as Target, Kohl’s, Ross or T.J. Maxx.

In 1998, 62.1% of apparel purchases took place in malls, J.P. Morgan’s Tunick said. By last year, that number had dropped to 55.6%.

Mall-based retailers have responded with a flurry of promotions. But lower prices aren’t a panacea in today’s difficult retail environment, analyst Anne-Marie Peterson, with Thomas Weisel Partners, noted recently.

“We think it is possible consumers are responding less to promotions, or becoming somewhat ‘numb,’ after extended retail promotional activity,” Peterson said.

Nonetheless, analysts expect retailers will continue to rely heavily on markdowns, despite the effect on profits.