Abercrombie & Fitch Co, Aeropostale Inc and American Eagle Outfitters Inc have fallen out of fashion and arent likely to win back their business anytime soon. as U.S. teen shoppers switch their taste. The “three As” as companies have been called, have long been popular for their cool basics like jeans, hoodies and t-shirts. But young shoppers are now less interested in their clothes and more eager to shop for low-cost, fast-fashion chains like Zara, Forever 21 and H&M that offer greater variety more quickly.
“The teen retailers seem to be not in style or in vogue at this point in time for their target consumers,” said for Reuters Bryan Keane, portfolio manager of the Alpine Global Consumer Growth Fund. “That usually does not turn around quickly.”
American Eagle yesterday gave a weak forecast for the fall, sending its shares to their lowest levels in a year and a half. American Eagle Chief Executive Robert Hanson told analysts the level of price slashing now is “unprecedented.”
Aeropostale earlier this month said that sales fell 15% last quarter, and Wall Street analysts expect earnings per share to fall by more than two-thirds to 21 cents this year. The company will post earnings today same day as Abercrombie. Last week, Barclays lowered its profit estimate on Abercrombie because of the “intense promotional environment.”
The competition has been fierce as U.S. government statistics show young shoppers have gradually directed more of their spending toward electronics and less on clothes. This comes as teens are experiencing lower employment levels this year, according to Challenger, Gray & Christmas, and their parents are struggling with higher payroll taxes, gasoline prices and a slow job recovery.
On top of all that, the three chains are facing an ever more crowded field as international fast-fashion rivals are aggressively expanding in the United States. H&M, a Swedish retailer, said its U.S. sales rose 10% in the first half of 2013 and it just launched a U.S. e-commerce site. It has 269 U.S. stores, after opening 40 last year. Uniqlo, owned by Japans Fast Retailing, is opening six more U.S. stores this fall with a goal of having 200 by 2020. U.S. sales at Zara, owned by Spains Inditex S.A. more than tripled between 2007 and 2012, according to Euromonitor International.
The “three As” are experiencing share drop on both daily and yearly basis which according to analysts would keep its downward trend as it would be difficult for retailers to diversify their shops so quickly.
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