Malls Lose Their Cool Among Teen Apparel Shoppers

If you’re a manager or sales executive in teen apparel, you need to be “reading the tea leaves.” Reduced mall attendance, bad weather and stiff overseas competition are beginning to sink sales, and reversing the trend in these tough times won’t be easy.

Aéropostale, Wet Seal and Delia's are learning to deal as they gear up for the summer's all-important back-to-school season. Each is facing tough competition from overseas rivals Uniqlo (the Japanese retailer has opened four outposts in the last 18 months) and megastore H&M.

But perhaps more alarming is the growing trend among teen shoppers to label malls as “uncool.” Enclosed mall traffic dropped 1.1% last year compared to 2011, according to ShopperTrak. "There has been this general exhale across the Street on holding these stocks," said Stephanie Wissink, a retail analyst at Piper Jaffray. "Some of it was a 'hold your breath, maybe we can get through it,' but now it feels like there's a bit of a purge."

Teen retailer’s fair-haired child, Aéropostale, known for drawing in price-conscious teens, has seen its share price nose dive nearly 40% in the past 12 months. After opening a huge 19,000-square-foot flagship in Times Square and forking out $10 million in annual rents, the company trimmed its fleet, shut nearly 100 stores, and slashed prices to attract fickle teens who began abandoning its youthful styles. "We had to sell our graphic T-shirts and hoodies lower," said Kenneth Ohashi, vice president of Aéropostale's investor and media relations. "We had too much inventory."

Likewise, teen retailer Delia's began discounting excess inventory after its shares fell 30%, losing $21.6 million for the year. California-based Wet Seal (with 10 New York area stores), which depends heavily on strong teen mall traffic, saw its stock drop 12% in the past year to $3 per share.

Teen retailers are uniquely vulnerable, since today’s cash strapped teens increasingly surf social media websites for styles and the lowest price. It’s faster than trudging through store after store at the mall. To add to their woes, retailers are facing another challenge: the U.S. teen population is shrinking. According to the U.S. Census Bureau, the number of 15- to 19-year-olds has dropped 2% from 2008.

"The only people who are increasing market share are the people who are really good at what they do," said retail consultant Bob Grayson, pointing to the success of American Eagle Outfitters. The Pittsburgh-based retailer combines clever teen marketing with more preppy styles, versus the surfer-oriented offerings at say, Aéropostale. A recent marketing success included a tongue n’ cheek campaign touting jeans so skinny they're spray-painted on. Efforts like these helped American Eagle boost sales and elevate its stock to nearly $19.

To attract a teen market that’s both shrinking and shrinking from malls, today’s retail executives need to offer more trendy apparel, clever marketing, and shorter production cycles to keep up with rapidly changing fads.

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