Another day, another brutal report from the retail sector.
Big names like Macy’s (M) and Walmart (WMT) have struggled too, but the teen retail sector has been especially ugly. American Eagle (AEO) tumbled earlier this week after meeting already lowered earnings expectations but cutting its third-quarter forecast. And while Aeropostale (ARO) doesn’t report Q2 numbers until after the bell today, it has already been battered down in typical guilty-by-association fashion.
For both ANF and AEO, declining traffic was pinpointed as a big problem during the summer months. While that can be tied to weakness in consumer spending across the board, it also could be tied to the headwind of all headwinds for retail stocks: trends and consumers’ tastes changing in the blink of an eye.
Abercrombie & Fitch’s Hollister brand, for example, looked particularly out-of-style in recent months. Sales slid 13% year-over-year in Q2.
My immediate response: It’s about time.
Not only do I find the low lighting, loud music and overall wannabe nightclub feel of all Abercrombie & Fitch’s stores unappealing, but I also find it hard to believe that middle-schoolers and teens these days really want to shop at the same stores my friends did when we were that age. Isn’t it time for the circle of life to continue, and for another brand to become cool?
If ANF’s outlook is any indication, that just might be the case. For the current back-to-school quarter, Abercrombie & Fitch said earnings will likely come to 40 cents to 45 cents per share — less than half the $1.07 per share analysts were hoping for.
That’s despite strong numbers overseas and the fact that ANF is planning sales, inventory and expenses conservatively for the remainder of the year. (And despite the fact that it has littered advertising with not just its usual black-and-white pictures of half-naked models, but of half-naked models with puppies.)
The bottom line: While you might be able to make a quick buck trading ANF, don’t bet on Abercrombie & Fitch longer-term. As teens trade in the moose and seagull logos for cheaper alternatives at Forever 21 and H&M (HNNMY), or cooler alternatives at hipster-loving Urban Outfitters (URBN), investors will continue to trade in the stock as well.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.