Free-spending teens return to malls

The most coveted shopper these days isn’t a Beverly Hills housewife toting a Chanel handbag. It’s more likely her daughter.
By most accounts, teenagers are ideal consumers: Typically unhampered by debt, bills and mortgages, they spend freely and impulsively. Unlike their time-strapped parents, they hit the malls frequently and stay longer. And peer pressure at school makes it easy to justify dropping all of last week’s allowance on the latest Lady Gaga album, Xbox 360 video game or premium jeans.
So retail industry watchers were alarmed when teen spending plunged during the recession. “Bank of Mom and Dad -- on pretty much all income levels -- basically shut down in the back end of ’08 and the beginning of ’09,” said Christine Chen, a retail analyst at Needham & Co.

But now teen shoppers are making a comeback. For two months in a row, teen retailers have soared past sales expectations. Notably, Abercrombie & Fitch Co., known for its sexy advertising and casual-but-pricey fashions, snapped its 20-month streak of negative sales with an 8% increase in January.

Teens are hanging out at the mall after school again, goofing around with friends in dressing rooms, snacking on junk food at the food court -- and giving retailers hope that they’ll help kick-start a greater wave of spending industrywide.

“Whether it be sports equipment, whether it be athletic footwear, whether it be fashion, whether it be electronics, the teen market is showing signs of life and positive growth,” said Marshal Cohen, chief industry analyst at market research firm NPD Group.

To be sure, not everyone is joining the spending party, and many teens say they are more cautious than before and continue to hunt for bargains. Yet teens today are spending about 6% to 8% more in general compared with a year ago, Cohen said. “Clearly the teen is leading the charge when it comes to the return.”

At the Westfield Topanga shopping center recently, Sabrina Sigal, 14, was browsing through racks of brightly colored dresses and striped shirts at trendy retailer XXI Forever, one of her favorite stores.

“Last year I didn’t shop as much,” the eighth-grader from Calabasas said. But now, “the urge has come.”

Sabrina, who was shopping for spring clothing and a friend’s birthday present, said she visits the mall about once a week. Her favorite trends include high-waisted skirts, cardigans, florals and small details such as lace, zippers and studs.

“I don’t really set a budget for myself,” she said. “I just buy what I love.”

Nearby, her best friend, 14-year-old Makenna Spiegel, was checking the price tag on a bright red jacket with silver shoulder embellishments.

“The deals are great, and it makes us want to shop,” Makenna said. “So we may as well get more.”

That has retailers breathing a sigh of relief.

“2009 was a very difficult year for us, and we’re starting to see the uptick,” said Patti Whisler, regional planning manager of Macy’s southwest region, which includes California. “Juniors is at the forefront of our improved business, so it’s outpacing some of the other businesses that we have right now.”

At surfwear seller Billabong, teens appear to be less concerned about price lately as they buy dresses, tops and shorts for beach season, said Candy Harris, women’s brand director.

“Last year there was a hesitation when it came to making the final purchase,” she said. “Teens were second-guessing their premium purchases and instead were really focusing on price-point items. The tide has started to turn this year.”

Since the holidays, the Best Buy in West Los Angeles has seen business pick up among teen boys, who are snapping up the latest video games, celebrity headphones and online game cards, said Jackie Martinez, a store supervisor.

“They always come in. It was just a matter of whether they were buying or not,” she said. “Before, they were probably just getting a main product, but now they’re also getting the accessories to go with it because they have more to spend.”

That’s given many retailers the go-ahead to move forward with plans for new merchandise, stores or concepts.

Macy’s is working on expanding its juniors assortment and increasing its social media and digital marketing efforts. Los Angeles retailer Forever 21 recently launched HTG81, a kids’ line, and Love & Beauty, a cosmetics line. It also added categories such as swimwear and active wear, expanded its plus-size Faith 21 line and relaunched its men’s line.

JCPenney is also upping its social media efforts and recently launched a celebrity fashion line for teens with Mary-Kate and Ashley Olsen called Olsenboye. Meanwhile, H&M, which sells merchandise for men, women, teens and kids, is aggressively opening new stores.

“We’re inspired by how teens dress -- they’re influencers, they’re not afraid to take fashion risks,” H&M spokeswoman Nicole Christie said. “When we do trend forecasting for seasons ahead, we definitely look to them on new takes on existing trends. They are key to our design process, but they’re also key to our business, saleswise.”

In January, Billabong launched its Runway swim collection, which features higher-ticket pieces that focus on novelty trims, prints and silhouettes.

“This could have been a tougher sell in 2009 but is enjoying some great success this season,” Harris said.

Alexander Keto, 19, of Newport Beach, said he usually spends nearly $250 a week on eating out, entertainment and shopping, which he charges to two credit cards bankrolled by his dad. His favorite clothing items include shirts and jeans from Urban Outfitters and Nike skateboarding shoes.

“I would consider myself a free spender,” the Ohio State University freshman said. “If I really want it, I usually do purchase the item. I really haven’t had too many restrictions.”

The resurgence in spending has led to two straight months of year-over-year sales increases for teen retailers after 18 months of declines, according to Thomson Reuters.

In January, the sector -- which includes American Eagle Outfitters Inc., Aeropostale Inc. and Wet Seal Inc. -- posted a 6.5% year-over-year increase, making it the month’s biggest outperformer.

Last month teen retailers again beat expectations with a 5% sales increase, far better than the 2.3% decline analysts had forecast, Thomson Reuters said. At the top of the pack was action sports retail chain Zumiez Inc. of Everett, Wash. Results are based on sales at stores open at least a year, known as same-store sales, and considered a reliable measure of retail health.

“You’ve seen teens come back pretty aggressively in terms of spending,” retail analyst Chen said. “Teenagers are not a savings-oriented bunch. They spend every dollar they get.”

Part of the strength comes from easy-to-beat 2009 sales figures, but it’s also due to pent-up demand among an age group that derives a lot of enjoyment and a sense of identity from material purchases, analysts said. Also, as parents slowly recover from the downturn, money tends to get funneled to their children first, industry analyst Cohen said. And because teens are still growing, there’s often a real need for a new jacket or pair of sneakers.

Beyond giving retailers a much-needed sales boost, teen shoppers may also be growing in importance thanks in part to the rise of social media, which allows them to reach an audience far wider than their usual circle of friends, industry watchers said.

With websites such as Twitter and Facebook, tech-savvy teens can publicly post what they’re thinking of buying while they’re at the mall and even shoot and upload photos of merchandise. Young shoppers are also using YouTube to post videos of themselves showing off their latest purchases.

“Teens set the trends of pop culture,” Harris, of Billabong, said. “Their preference toward fashion, music and lifestyle trends are studied and adopted by everything from electronics to record labels and beyond. They are also becoming more global by nature, and their influences aren’t restricted by economic or geographic boundaries.”

Of course, many teens continue to be hampered by tight budgets. Some complained of difficulty finding part-time jobs or said their parents had cut them off to save money.

“I used to spend $100 a week, and now I spend like nothing,” said Ali Ghassemi, 18, of Irvine, while hanging out at the Fashion Island shopping center recently.

So retailers say they’ll carefully monitor teen shopping patterns in the months to come.

“It’s very important to keep our eye on that and make sure it’s moving in the right direction and not take anything for granted in assuming that everything we’ve done is right,” Whisler, of Macy’s, said. “Juniors tends to be a faster business in every way. When you get it wrong, you learn that quickly.”