Retail, for the most part, has been relatively buoyant considering the state of broader economy and declining consumer attitudes. Both luxury and discount retailers have been thriving, with stores from Saks (SKS) to Target (TGT) releasing same-store earnings well beyond expectations. Not all retailers are created equal; however, and midlevel apparel companies that focus on the teen audience have been hemorrhaging in 2011. Mood swings dominate this age range and this seems to apply in equal measure to the companies that focus on the demographic at large. The latest string of earnings from some formerly top names indicate they’ve become the one thing they don’t want to be: out of style. Whatever the technical levels look like, sell shares of these companies or prepare to lose your lunch money.
While high-end retailers like Saks posted as much as a 9 percent same-store sales increase, Wet Seal (WTSLA) fell by 9.7 percent. The losses are disconcerting in and of themselves but Wet Seal had projected declines of only 1 percent for the period. Shares of Wet Seal plunged in excess of 20 percent following the announcement. Bouncing back may be difficult for the teen clothing company considering not only the underperformance but also their internal miscalculations that would make it difficult for an investors to assess the health of the company in advance of major announcements.
Beyond this, Wet Seal, while still weak, is hovering above its 52-week low and is actually three percent higher in the one-year period.
Wet Seal pointed to the elimination of its Halloween business in favor of other options more in-line with their new direction, but it did not appear to be well-received, indicating they may be out of touch with their target audience.
Hot Topic (HOTT)-Shares of Hot Topic, which focuses on music/pop culture-influenced apparel and accessories for the 12-22 audience also declined sharply. Shares tumbled by around 11 percent after the company announced same store sales had declined by 1.6 percent in the last 13 weeks. While some might suggest investing on the dip, the company adjusted its third and fourth quarter earnings lower to be more in line with the current teen-retail atmosphere. Hot Topic expects flat or lower same store sales for the fourth quarter and earnings between 16 and 20 cents per share, on the lower end of the previously anticipated range. It may be wise to hold off on a sell until it recovers some of what it lost. Hot Topic has rise somewhat in early morning trading.
Abercrombie & Fitch (ANF)-Abercrombie pointed not to the fickle attitudes of teenagers but to the slowing European economy as the source of its woes. Sales at Abercrombie, which is more expensive than either of the previously mentioned, have been weak in the region, where it previously did quite a bit of its business. Same store sales of Abercrombie actually grew by 7 percent, which could be interpreted as a positive sign, but with European economics becoming increasingly tenuous, it may be wise to shed shares when they recover somewhat after the holiday earnings season. Shares of Abercrombie declined 20 percent in trading.