Specialty rules - Cover Sory - stores for teens - Statistical Data Included

DSN Retailing Today, Feb 11, 2002 by Emily Scardio

The so-called teenage wasteland has never been so fertile.

Visit your local mall, and you'll see a slew of specialty stores, established and new, catering to those who frequent it so devotedly--teens.

Pegging each store's niche is as simple as checking out the high school cafeteria, Mall stores personified are stereotypical teens--jocks, skaters, even pierced rebels smoking outside.

These narrowly focused chains, from American Eagle to Wet Seal, are quickly encroaching on territory traditionally held by more broad-based specialty shops.

As a group, young men's and juniors apparel store sales rose a whopping 24.3 percent, with units up 10 percent, in the first half of 2001--faster growth than in any channel researched--according to The NPD Group.

Meanwhile, former watershed Gap Inc.'s chains had negative comps almost every month of 2001, with December comp sales down 11 percent and overall sales falling resoundingly flat. U.S. Bancorp Piper Jaffray saw Gap Inc.'s stores drop to No. 4 from No. 1 in popularity when it surveyed about 600 students nationwide-- Abercrombie & Fitch and American Eagle were No. 1 and No. 2, respectively.

The Gap and other establishments that haven't followed this trend of differentiation have suffered. Limited Inc. is phasing out Structure, with negative 6 percent December comps, changing stores to Express Men's. The merchandise will move to a more specialized high-fashion look, mirroring Express.

Here's a "yearbook roster" of some specialty standouts:

THE JOCKS: Playing to the junior varsity set, American Eagle Outfitters captures the high school demographic with price points often $10 to $20 lower than rival Abercrombie & Fitch, whose winning streak slowed in 2001. American Eagle's domestic comps rose 2.1 percent during the 48 weeks ended Jan. 5. Total sales increased to $1.3 billion, up 27.6 percent over the 48-week period ended Dec. 30, 2000, including $96.5 million from its Canadian acquisition, Bluenotes/Thriftys.

American Eagle's image is more homecoming than hot tub party, and national advertising promotes its crunchy granola image. "Our first national TV campaign ran on ESPN, Comedy Central and MTV, about 400 to 600 times, reaching up to 80 percent of our customers," according to Laura Well executive vice president and chief financial officer. National visibility will aid in this year's big push west of the Rockies. American Eagle currently operates 633 stores in 47 states.

American Eagle plans to continue capturing a segment of Abercrombie & Fitch's customers with its similar assortment of cargoes, tech pants, T-shirts and sweaters. Aside from price, another point of differentiation is its footwear collection.

Abercrombie & Fitch earned its team letter by providing athletic-inspired sportswear to All-American golden boys--or girls, catering to the 18 to 22-year-old collegiate set. But its winning record was tarnished last year when camp sales at the 309-unit operation dropped 8 percent. Top line was up 12 percent as of Jan. 5 to $1.3 billion for its fiscal year that started Feb. 4, 2001.

Abercrombie & Fitch executives blame its negative comps on lowered inventory promotional pricing and markdowns. Customers were willing to pay a premium for the Abercrombie brand, but the recession has clearly impacted the chain. This year, the company hopes to make a comeback by pumping up units to combat lower margins.

But the brand is still popular and aspirational to teens. Its young and sexy image is enhanced by signage featuring scantily-clad, chiseled lacrosse players and sylph-like beachgoers. Abercrombie & Fitch played into this by introducing intimates in 2001, which has grown into one of its strongest categories.

The chain's marketing has historically been controversial, particularly when it printed (not sports) drink recipes in its direct marketing powerhouse, The A&F Quarterly magalog. Some industry observers thought the pieces promoted binge drinking, but in reality they helped establish Abercrombie & Fitch in the hearts and minds of modem day "Animal House" fans.

Yet the store is not without a conscience. "We thought the tone of the quarterly right after 9/11 was out of place. Instead, our associates contributed $1.7 million to the Firefighters' 911 Fund and NYPD," notes Tom Lennox, senior manager of investor relations at Abercrombie & Fitch. "We are going forward with this core marketing strategy [the magalog] in 2002, though."

THE SKATERS: Snowboarders, surfers or all of the above are, way totally, Pacific Sunwear. It's now officially renamed PacSun, a hipper tag coined by devotees.

Hard-to-find skate brands highlighted in signage--more than 40 percent of the assortment--separate PacSun from the pack. The mix includes Hurley, Billabong, Quicksilver, Roxy and Ecko.

PacSun, with 550 stores and 68 outlets, is considered one of the "big three" teen specialty chains, along with American Eagle and Abercrombie & Fitch. Total sales for the first 11 months of fiscal 2001 were $653.2 million, an increase of 18.2 percent over 2000. Comps were down 2.6 percent for the period.