A Sea Change in Teenagers’ Spending Habits

Breaking news: Teenagers have stopped caring (as much) about brands and labels and are starting to shop based on savings and sales.

Who ever thought we’d see this day?

This week’s New York Times contained the story of how the recession has turned teenage shoppers, one of the most powerful spending groups, into penny pinchers. This, of course, has hurt some of the higher-priced teen shops, like Abercrombie & Fitch, while others, like A&F’s lower-priced sister Hollister, are benefiting from this change.

(Full disclosure: I worked at Abercrombie & Fitch in college for about a year. Yes, it’s dark in the store. Yes, the music is loud. And yes, the perfume smell stays on your clothes for days. But the discount was excellent.)

According to the New York Times: “This spring, spending by teenagers, a closely studied but rarely understood segment of the population, is off by 14%, a direct reflection of the economy, according to a report this month by the investment bank Piper Jaffray.”

And the evidence is more than statistical, “ ‘Labels are becoming less and less of a priority for people throughout my school,’ said Chelsea Orcutt, a high school senior.”

For years, teenagers seemed to be concerned with nothing by labels and brands, not even batting an eye at the cost of the $80 pair of ripped jeans they were sporting or the $30 graphic T-shirts they just had to have. But now, in the face of the worst recession in decades, the younger demographic is venturing beyond their favorite brands and shopping at stores promoting sales and savings.

Many stores have capitalized on this trend and are showcasing special discounts, savings and sales, but some have tried to protect their higher-end image … and they have suffered.

Abercrombie is one such store and Wall Street analysts have blamed its strategy of not touting sales for the store’s current decline. According to the Times, “The company reported a 34% drop in sales for March at stores open at least a year, the worst performance of mall retailers that month. … In the past, the chain has said it doesn’t want to tarnish its image with big discounts, but the risk is that consumers may retain the habit of thriftiness even after the recession ends.”

However, other stores have heard the message, loud and clear. One such store is Buckle (BKE), which was featured in Cabot Top Ten Report on April 6 when Editor Michael Cintolo wrote:

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“Buckle, which was founded in the fashion capital of Kearney, Nebraska, in 1948, has turned into a real contender in the iffy business of selling clothes, shoes and accessories to young people. The product mix is the usual array of denims, pants, shirts and outerwear, but the company’s management has a knack for keeping its 390 stores in 40 states profitable. Attention to personal service, free alterations, layaways and a frequent shopper program are nice to see, but ultimately, good management is the real story. The company’s Q4 earnings report on March 11 was headlined by a 25% gain in earnings on a 21% rise in revenues, and the after-tax profit margin of 14.6% (huge for a retailer) was a new high. A 2.3% dividend is an added attraction. Good product mix, good execution, good company–that’s the kind of combination that put Buckle into Cabot Top Ten Report. … BKE had been a steady long-term performer, climbing along with earnings and paying a steady dividend.”