Teen Sector Stocks Facing Tough Times

Shares of several teen retailers continue to decline as fourth-quarter earnings results leave much to be desired.

Shares of several teen retailers continue to decline as fourth-quarter earnings results leave much to be desired.

This story first appeared in the March 13, 2014 issue of WWD.  Subscribe Today.

Moreover, first-quarter guidance at two chains this week suggests that the sector won’t be out of the doldrums anytime soon.

One example is Express Inc., which on Wednesday said net income for the fourth quarter ended Feb. 1 dropped 25 percent to $47.9 million, or 57 cents a diluted share, from $63.9 million, or 75 cents, a year ago. Net sales for the period slipped 2.2 percent to $715.9 million, from $731.7 million. Same-store sales, including e-commerce, inched up 1 percent, while the e-commerce segment saw a 14 percent gain to $138.8 million.

For the year, net income decreased 16.3 percent to $116.5 million, or $1.37 a diluted share, from $139.3 million, or $1.60, a year ago. Net sales were up 2.9 percent to $2.22 billion from $2.16 billion.

Express targets young adults who are at the older age range in the teen sector.

The company provided first-quarter guidance of diluted earnings per share at 12 cents to 18 cents, with net income of $10 million to $15 million, compared with actual diluted EPS of 38 cents on income of $32.4 million in the year-ago quarter.

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Chief executive officer Michael Weiss said in a conference call to Wall Street analysts, “First-quarter guidance we issued this morning reflects the fact that we have seen a significant decline in our business since the quarter began. I want to stress that we expect a sequential pickup in our business during the subsequent three quarters. However, our outlook for the first quarter has a material impact on our full-year guidance.”

Similarly, Urban Outfitters Inc. ceo Richard Hayne on Monday said the company remains “very cautious” about its prospects for the first quarter due to concerns over continued weakness at its flagship division. He made those comments in a call to Wall Street analysts after the teen chain posted fourth-quarter results.

Shares of Express on Wednesday fell 12 percent to close at $16.05, while those of Urban slipped 1.7 percent to $35.29. Among the other teen retailers, American Eagle Outfitters Inc. was down 2.7 percent to $12.75, while Abercrombie & Fitch Co. dipped 1.4 percent to $39.56. Both American Eagle and Abercrombie have reported their fourth-quarter results. Aéropostale Inc., which reports today, bucked the trend, gaining 1.4 percent to $7.25.