"Aeropostale is the value player in the teen retail space," Lemos says. "Customers are trading down, and Aeropostale is taking sales from its competitors."
But being cheap isn't enough to draw in fashion-conscious teens. You have to maintain the right mix of clothing.
"Their merchandising has been on target," says Lemos. "You need some newness to get customers into the stores, but once they're there, you also need the basic jeans and T-shirts."
Parents pay for the majority of teen clothing, so a retailer needs to factor in their needs as well. Go too trendy, and you risk turning off the parents. Err on the conservative side, and kids stay away.
"Teens are very fickle consumers, and what's cool will change in a few years," Lemos says. "When family budgets loosen up, it's likely teens will again clamor for Abercrombie jeans--and parents will be more likely to hand over their credit cards.
Aeropostale is hedging its bets by expanding its market to younger children. The company has launched a new kid's concept, P.S., but it's too soon to say whether that move will pay off. Despite the popular belief that parents will scrimp for themselves while continuing to spend on their children, kids' retailers have seen the same sales slump as everyone else. The Children's Place Retail Stores (Stock Quote: PLCE) and Gymboree (Stock Quote: GYMB) recently reported same-store sales declines of 9% and 1%, respectively, in the second quarter.
On thing is clear: Aeropostale will need to keep innovating to maintain momentum after the economy recovers. Otherwise, the company risks becoming "so last year" to its teen customers.
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