The beginning of the year hasn’t been pretty for many apparel retailers. The effects of a long winter have meant that customers held off on making spring purchases, leaving companies with excess inventory and low comparable sales. Of four major teen retailers, one stands out as leading the pack through the thick of winter.
Lagging behind it, other retailers are still figuring out what they can do with all their leftover goods. Some didn’t even make it that far and got stuck with falling sales because of a lack of inventory. Here’s a rundown of four big names in teen apparel, and my choice for the pick of the litter.
Starting at the bottom of the pile
The two companies that didn’t even make it out of the starting blocks are Aeropostale, Inc. (NYSE:ARO) and Abercrombie & Fitch Co. (NYSE:ANF). Both companies saw comparable sales fall more than 10%, with Abercrombie racking up a 15% decrease while Aeropostale fell 14%. Aeropostale said sales were extra sluggish through March but that there was a pickup in April, once the weather started to turn warmer.
Abercrombie & Fitch Co. (NYSE:ANF) was also hit by bad weather, but more important, it had inventory problems. The company estimated that 10 of 15 points of its comparable-sales decline were attributable to a lack of inventory. Abercrombie got its spring lineup late in the season, because of delays with the product, and as a result lost out on valuable sales time.
Looking toward the bottom line, Abercrombie & Fitch Co. (NYSE:ANF) at least managed to eke out a higher gross margin, with a spring shortage resulting in less need for promotion to clear excess inventory. The company was also comparing against high cotton costs in 2012, which affected the price of products. Aeropostale, Inc. (NYSE:ARO) had significant gross margin compression, because of promotional activity, which management sees stretching into the next quarter as well.
Fighting for relevance
Leaving the laggards behind, American Eagle Outfitters (NYSE:AEO) tried to have a good quarter but was let down. The company had a 5% decline in comparable sales and managed to keep margins healthy. While management did point its finger at weather, overall, American Eagle was able to keep its head above water.
The problem for the retailer is that this is becoming standard operating procedure. American Eagle had a 17% increase in comparable sales last year, but it lost momentum somewhere along the way. The management team at American Eagle Outfitters (NYSE:AEO) seems unwilling to push the envelope and really embrace fashion. Instead, the company continues to rely on basics and core products to drive the business. As a result, other retailers are walking away with sales to the fashion-forward.
Sitting pretty at the top — for now
The winner of 2013’s first quarter has to be Urban Outfitters, Inc. (NASDAQ:URBN). The company has been on a tear over the past 12 months, with the stock more than doubling the return of the S&P 500. This last quarter was no exception. Comparable sales were up 9%, and gross margin improved because of strength at its Anthropologie brand.