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Cash-Strapped Teens Bad News for Retail

Teen shoppers have become key target demographic for retailers, bad news since they have been disproportionately affected by general economic malaise. Experts are worried that sluggish back-to-school sales augur poor performance not just by the retail sector, but the global economy at large.

Despite some promising economic signs–housing prices, sales and stocks are rebounding–consumer confidence continues to drag. And teen retailers like Abercrombie & Fitch, American Eagle Outfitters Inc. and Aeropostale Inc. have struggled in particular. For each same stores sales have suffered considerably.

Howard Tubin, an analyst with RBC Capital Markets, said, “Teen retail is a very competitive and difficult sub-sector to begin with – you’re dealing with a fickle customer base, fashion trends are always changing. But in the second quarter, things took a turn for the worse and business fell off. It’s doing very badly.”

Competition for so-called “millennials”, or shoppers aged thirteen to thirty.  The millennial consumer group is increasingly targeted by retailers worldwide since the demographic spends more than $65 billion a year. More than other age groups, they are keenly interested in new trends but also sensitive to value as well.

Apparel retailers have struggled with this consumer group for a variety of reasons. First, they are increasingly directing their discretionary income to electronics instead of clothing. Also, they simply have less money to part with since their parents are besieged by higher payroll taxes, an anemic job recovery that has disproportionately impacted millennials and the increasing price of transportation.

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Teens have been stymied more than most by the persistent economic downturn. Unemployment for people between the ages sixteen to nineteen was a staggering 22.7% in August, compared to 7.4% for the population as a whole. More and more, seasonal jobs historically slated for teens are being filled by out-of-work adults, recent college graduates coming up empty in their search for a first position and retirees who have seen their savings decimated.

And their parents aren’t well-heeled enough to subsidize their shopping. Parents are often out of work, straitened by stagnant wages and a rising payroll tax and hurt by increases gas prices.

There is also the issue of teens’ evolving taste and fickleness. Young shoppers are progressively becoming more attuned to value and more fashion forward, driving the new emphasis in retail on fast fashion. Some retailers, like Macy’s, have firmly committed to capturing the demographic despite the many challenges.

Macy’s, however, is continuing its emphasis on millennial shoppers, consumers aged thirteen to thirty. The millennial consumer group is increasingly targeted by retailers worldwide since the demographic spends more than $65 billion a year. More than other age groups, they are keenly interested in new trends but also sensitive to value as well.

Molly Langenstein, executive vice president of millennial and new business development, said, “Throughout 2013, Macy’s has continued to invest in exclusive brands to engage millennial shoppers who are looking for diverse, current and trend-forward fashion.”

To this end, Macy’s is launching two new brands. One brand, “Maison Jules,” is aesthetically inspired by Parisian street fashion and will distinguish itself with “unique patterns and modern prints” that feature colors like peach and yellow paired with more subdued tones like navy and burgundy.The other brand, “QMack,” takes its stylistic bearings by youthful American fashion trends, and will include preppier items like cardigans, blazers and roll-sleeve blouses.

Relying upon an elusive and beleaguered crop of teen shoppers is both daunting, and given the group’s growing influence, unavoidable. But for many experts, the tepid back-to-school sales are a distressing portent of the immediate future of retail. “This is not good news for retail buying this autumn, and there might be no change in these conditions right into the holiday season – a projection likely to dampen spirits in the retail sector,” said Kathy Bostjancic, director of macroeconomic analysis at the Conference Board.