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The Honolulu Advertiser
Posted on: Sunday, April 18, 2010

Teen spending bounces back, leading the retail recovery

By Andrea Chang
Los Angeles Times

The most coveted shopper these days isn't a wealthy housewife toting a Chanel handbag. It's more likely her daughter.

By most accounts, teens are ideal consumers: Typically unhampered by debt, bills and mortgages, they spend freely and impulsively. Unlike their time-strapped parents, they hit the malls frequently and stay longer. And peer pressure at school makes it easy to justify dropping all of last week's allowance on the latest Lady Gaga album, Xbox 360 video game or premium jeans.

So retail watchers were alarmed when teen spending plunged during the recession. "Bank of Mom and Dad on pretty much all income levels basically shut down in the back end of '08 and the beginning of '09," said Christine Chen, a retail analyst at Needham & Co.

Now teen shoppers are making a comeback. For two months in a row, teen retailers have soared past sales expectations. Notably, Abercrombie & Fitch Co. snapped its 20-month streak of negative sales with an 8 percent increase in January.

Teens are hanging out at the mall again, goofing around with friends in dressing rooms, snacking on junk food at the food court and giving retailers hope that they'll help kick-start a greater wave of spending.

"Whether it be sports equipment, whether it be athletic footwear, whether it be fashion, whether it be electronics, the teen market is showing signs of life and positive growth," said Marshal Cohen, chief industry analyst at market research firm NPD Group.

To be sure, not everyone is joining the spending party, and many teens say they are more cautious than before. Yet teens today are spending about 6 percent to 8 percent more than a year ago, Cohen said. "Clearly the teen is leading the charge when it comes to the return."

At a shopping center in Canoga Park, Calif., Sabrina Sigal, 14, was browsing recently through racks of brightly colored dresses and striped shirts at trendy retailer XXI Forever.

"Last year I didn't shop as much," the eighth-grader said. But now, "the urge has come."

Sabrina, who was shopping for spring clothing and a friend's birthday present, said she visits the mall about once a week. Her favorite trends include high-waisted skirts, cardigans, florals and small details such as lace, zippers and studs.

"I don't really set a budget for myself," she said. "I just buy what I love."

Nearby, her 14-year-old friend Makenna Spiegel was checking the price tag on a bright red jacket with silver shoulder embellishments.

"The deals are great, and it makes us want to shop," Makenna said. "So we may as well get more."

That has retailers breathing a sigh of relief.

Macy's is working on expanding its juniors' assortment and increasing its social media and digital marketing. Los Angeles retailer Forever 21 recently launched HTG81, a kids' line, and Love & Beauty, a cosmetics line. It also added swimwear and active wear, expanded its plus-size Faith 21 line and relaunched its men's line.

JCPenney is upping its social media efforts and recently launched a celebrity fashion line for teens, with Mary-Kate and Ashley Olsen, called Olsenboye. Meanwhile, H&M, which sells lines for men, women, teens and kids, is aggressively opening new stores. "We're inspired by how teens dress they're influencers, they're not afraid to take fashion risks," spokeswoman Nicole Christie said. "When we do trend forecasting for seasons ahead, we definitely look to them on new takes on existing trends. They are key to our design process, but they're also key to our business, saleswise."

In January, Billabong launched its Runway swim collection, which features higher-ticket pieces that focus on novelty trims, prints and silhouettes.

"This could have been a tougher sell in 2009 but is enjoying some great success this season," Harris said.

Alexander Keto, 19, an Ohio State University freshman, said he usually spends nearly $250 a week on eating out, entertainment and shopping, which he charges to two credit cards bankrolled by his dad.

The resurgence in spending has led to two straight months of year-over-year sales increases for teen retailers after 18 months of declines, according to Thomson Reuters.

In January, the sector which includes American Eagle Outfitters, Aeropostale and Wet Seal posted a 6.5 percent year-over-year increase, the month's biggest outperformer. Last month teen retailers again beat expectations with a 5 percent sales increase. At the top of the pack was action sports retail chain Zumiez Inc.

"You've seen teens come back pretty aggressively in terms of spending," retail analyst Chen said. "Teenagers are not a savings-oriented bunch. They spend every dollar they get."

Part of the retail strength comes from easy-to-beat 2009 sales figures, but it's also due to pent-up demand among an age group that derives a lot of enjoyment and a sense of identity from material purchases, analysts said. Also, as parents slowly recover from the downturn, money tends to get funneled to their children first, industry analyst Cohen said.