Can a recession actually cause teenage daughters and their moms to shop peacefully together at the mall? Believe it or not, yes. At a New York City shopping center one recent June evening, Adina Armstrong, 13, and her mother Tracy sauntered out of teen retailer Aéropostale, Adina cheerily chirping away on her cell phone, Tracy happily holding a bag full of T shirts. Mom just got Adina two stylish shirts through a buy-one, get-one-free promotion. "What I like about Aéropostale is that when they have a sale, they have a sale," says Tracy. Even better, Adina actually approves of the inexpensive clothes "They're popular, hip, and fit really well," she says and she accepts that her mother won't splurge on more-costly threads in this economy. After Adina explains all this, she goes back to talking on her phone.
Teen retailers, once thought recession-proof, have suffered in this downturn. For example, Abercrombie & Fitch, which has maintained its premium price points, saw same-store sales dip an incredible 28% in May. But amid such carnage, two stores stand out. Buckle, a Nebraska-based retailer that offers a wide range of brand-name selections at its 393 stores across the country, saw first-quarter profits jump 43.5%. Then there's Aéropostale, which targets 14-to-17-year-old boys and girls and operates more than 900 locations in 47 states. Same-stores sales increased 11% in the first quarter, and the company's first-quarter profits rose an eye-popping 81%, to $31.5 million, as it continues to steal share from Abercrombie & Fitch, American Eagle Outfitters and other more upscale chains. In fact, in 9 of the past 11 quarters, the company's profits grew by better than 30%.
Buckle benefits from geography (many of its stores are located in small Midwestern locations with little competition), and the company is relatively underexposed to crashing economies like Florida's and Southern California's. Aéropostale has won because of price. So if teens are shopping at cheaper places or permitting their parents to buy clothes from these outlets, does that mean teens, like, get it? Are they fully aware that their summer-job prospects are dim, that their parents' employment prospects may be dimmer and that it's unfair to guilt Mom and Dad into spending money on expensive clothes? Are kids these days actually acting responsibly? "More than ever, we're seeing that teens are responding to value," says Jeffrey Klinefelter, an equity-research analyst at Piper Jaffray who has written a semiannual research report, "Taking Stock in Teens," for the past eight years. "They seem to be taking on some personal responsibility and discipline in spending money."
According to Klinefelter's research, teens are making fewer trips to the store; teen spending on fashion products fell 13% this spring. Only 35% of the teens Piper Jaffray surveyed had part-time work this spring, compared with 50% four years ago. "Teens definitely have much greater awareness of what's going on around them now than they did eight years ago," says Klinefelter. "They're seeing the news on their computers and cell phones, and are very aware that we're in a recession."
If today's teenagers are indeed spending more responsibly, how long can this attitude last? While retail analysts repeatedly claim that adults will never again consume like they did in prior years, they don't make the same claim about kids. Klinefelter says there's plenty of pent-up demand in the teen sector. Yes, teens aren't spending because of the recession, but that's also because retailers have failed to create a hot new trend. Denim has been the default teen look for the past few years, and nothing has knocked it off its perch. "Once the dominant new fashion trend emerges, teens will rush back out to the stores," says Klinefelter. "The resurgences will require some economic relief, but the segment will make a comeback."
Klinefelter predicts that teens will start spending at high levels again in six months to a year. So before then, enjoy the sight of young shoppers scouring for discounts. Teens won't stay thrifty forever. Down economy or not, they're still teens.