Free-spending teens lead retailers’ recovery

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

By most accounts, teenagers 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 industry 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.

But now teen shoppers are making a comeback. For two months in a row, teen retailers have soared past sales expectations. Notably, Abercrombie & Fitch Co., known for its sexy advertising and casual-but-pricey fashions, snapped its 20-month streak of negative sales with an 8 percent increase in January.

Teens are hanging out at the mall after school 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 industrywide.

“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 and continue to hunt for bargains. Yet teens today are spending about 6 percent to 8 percent more in general compared with a year ago, Cohen said. “Clearly the teen is leading the charge when it comes to the return.”

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

“Last year I didn’t shop as much,” said the eighth-grader from Calabasas, Calif. But now, “the urge has come.”

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 Inc., Aeropostale Inc. and Wet Seal Inc. – posted a 6.5 percent year-over-year increase, making it the month’s biggest outperformer.

Last month teen retailers again beat expectations with a 5 percent sales increase, far better than the 2.3 percent decline analysts had forecast, Thomson Reuters said. At the top of the pack was action sports retail chain Zumiez Inc. of Everett. Results are based on sales at stores open at least a year, known as same-store sales, and considered a reliable measure of retail health.

Part of the 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.