Changing teen tastes send retailers reeling

Last Updated Aug 29, 2014 1:00 PM EDT

Teens are getting much pickier about the brands they display on their clothes. While past generations were more than happy to wear the names of their favorite retailer emblazoned across their chests, kids now don't want to be seen as walking billboards.

Instead, teens are seeking cheaper clothes with no logos that they can use to assemble their own unique outfits, The Wall Street Journal reports. That's causing an identity crisis of sorts for teen retailers, many of which for years could reliably count on teens to buy anything with a snappy logo on it.

Perhaps no chain has reeled more from changing teen tastes than Abercrombie & Fitch (ANF), which built an empire on clothes that proudly boasted its flagship and Hollister brands. That era is coming to an end, however. Abercrombie said Thursday it's going to dump its logos in North America by spring. The company has been in a prolonged sales slide as teens have moved on to other brands.

Abercrombie isn't the only retailer caught by surprise. The two other "A" chains catering to teens -- Aeropostale (ARO) and American Eagle Outfitters (AEO) -- have also stumbled. In Piper Jaffray's most recent survey of teens, Aeropostale was No. 1 on the "Brands no longer worn" list among teenage girls, Forbes reports. The company fired its chief executive this month and brought back the CEO who ran the chain from 1996 to 2010.

American Eagle has also reported disappointing results recently and had to roll out more promotions and discounts to bring traffic to its stores. Teen shoppers are avoiding the brand, which is seen as no longer cool, analysts at Trefis report.

Several reasons account for why the "A" retailers no longer have their "A" game. It isn't that teens have stopped shopping. Instead, they're seeking out cheaper clothes from stores with a faster inventory churn, including Zara, H&M and Forever 21. You can get a pair of jeans at those stores for less than $15, while Abercrombie has its jeans on sale for $39.

Abercrombie has also fallen out of favor after inflammatory comments made by CEO Mike Jeffries. The company didn't offer sizes larger than a women's 10 for years, and Jeffries said in a 2006 interview that the store's clothes were more for "cool" and "good-looking" people. He apologized for his comments, but some teens and their parents vowed to stop shopping at his stores.

Teen retailers have also found it harder to attract parents as the economy continues to recover. Parents are often the ones making the final spending decisions, and they're more likely to visit Walmart (WMT) and Target (TGT) to clothe their families.

YouGov earlier this year polled 6,000 women with children under age 18 about their retail preferences, and found that Walmart topped the list for purchase consideration, CNBC reports. Some 65 percent of the parents said they would consider going to Walmart the next time they shopped for shoes or clothing. Target was next on the list, followed by Old Navy, Kohl's (KSS) and JC Penney (JCP). The more traditional teen retailers didn't score nearly as high.

Finally, analysts say there hasn't been a must-have teen clothing trend recently. As a result, teens are shifting their spending to electronics and away from pricey retail chains. As CNBC reported, Jefferies analyst Rendal Konik said in a note to investors earlier this year: "In the absence of a compelling fashion cycle, tech items and accessories like smartphones, tablets and headphones have eaten away at share of wallet for T-shirts and polos."

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.

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