TURNING COOL TO CASH: YOUTH STORES GAMBLE ON FASHION AND WIN
Byline: Jennifer Weitzman
NEW YORK — It’s officially spring and the retail winners among the youth-oriented chains are those that are following the fashion road.
After a dreadful fall and winter hit by unusual weather, a slowing economy and the fallout of terrorism, many of these retailers, most notably Gap and Abercrombie & Fitch, have opted for a safer, more conservative selection for spring. But so far, it’s the stores taking the opposite path — from Anthropologie to Wet Seal — that have been reaping the financial rewards and increased market share by intensifying their focus on fashionable, trend-right merchandise.
These retailers are returning to the feministic look of the Sixties, complete with ruffles, lace and floral prints, and the craze is catching on with today’s young generation. Those stores that commit to the trend are expected to see strong spring sales, which should also be aided by pent-up demand, after consumers abstained from buying clothes for the past six months, executives said.
“People are seeing the floral prints and the feminine soft, pretty silhouettes and, because it has been a tough six months, people want to feel good and move on,” said Steven Strickland, senior vice president of creative and marketing at Wet Seal, which operates the Wet Seal, Arden B., Zutopia and Contempo Casual chains. “Spring by nature is a sign of rebirth and renewal.”
Michael Weiss, president and chief executive officer at Express, said: “The bleaker the winter, the more important the renewal is in spring. There is a life force and people want to grow and have a good time.”
Holly Guthrie, an equity analyst at Investec PMG Capital, said: “Retailers who are benefiting this spring are those that have embraced fashion looks from the Sixties. There definitely seems to be a renewed interest in fashion.”
After going basic in the early Nineties with Gap’s khaki look and Abercrombie & Fitch’s cargo pants, The Limited Inc.’s Express division helped turn the tide by presenting a strong feminine trend. After a few years of youth-trend confusion, Jeff Klinefelter, an analyst with U.S. Bancorp Piper Jaffray, said he hasn’t seen this much fashion in at least four to five years.
Evidence that these looks reached out to consumers and that a higher concentration of fashion is selling rather than basics is found in the latest comparable-store sales: Wet Seal gained 20.5 percent in February, while Anthropologie, which has always sold peasant tops, just reported a 16.8 percent leap in its latest quarterly comps.
“The spring fashion is feminine and embellishment, which bodes well for us,” said Glen Senk, president of Anthropologie.
John Parros, president and chief operating officer of Bebe stores, said spring sell-throughs of gypsy, bohemian and hippie styles are “very powerful.” He attributed the customers’ strong acceptance and their need to make themselves feel good and have new fashion to the emotional impact of Sept. 11.
Another strategy benefiting these teen chains is their early move to spring selling. Many of these same retailers put their new looks on the selling racks as early as December, as opposed to mid-February. Others planned their inventories lean and moved back to basic and classic styling, taking a more defensive view.
“For those retailers that filled their shelves with inventory offering freshness and newness, those should be standouts,” said Steve Richter, an analyst with Tucker Anthony.
Wet Seal’s Strickland said he is “very optimistic” about the chain’s spring outlook. He said its performance in January and February was strong and was “driven by full-price selling of spring goods.” He noted that the firm felt “really passionate about the new trends.”
Wet Seal started testing spring items with new silhouettes and colors in December, such as a new spin on the polo shirt and fashion suede.
“There is a need for fashion this year, especially after the bleak fall-winter season,” Strickland said. “It is being driven by a resurgence of pretty fashion like soft colors, floral, light fabrics, prints and anything girly.”
In addition, he said women are opening up their wallets again because what is selling now adds to her wardrobe instead of just replenishing it.
Another retailer poised to benefit from its trend-right merchandise is Charlotte Russe, which operates store concepts Charlotte Russe and Rampage. Although executives from the firm were unavailable for comment, analysts have pegged the San Diego-based retailer as one to watch. In a research note, UBS Warburg analyst Richard Jaffe said the company “will be particularly successful in the spring, as effective merchandising efforts and consumer demand for fashion grows amid diminished fashion offerings in the retail market place.”
The Limited’s Weiss said he isn’t nervous about the stiff competition these growing chains represent, nor about the increased emphasis on fashion.
“I would rather our competitors have similar looks since it rectifies what is fashion,” he said. “I do not like to be alone because customers don’t believe it is fashion.”
So far, Weiss said spring selling is going “pretty well,” and that “part of our success this spring is our execution in these looks has been good,” noting that Express made heavy investments in ruffled, gypsy and peasant looks.
Weiss said fashion has made a stronger connection with consumers this spring because “the clothing is very pretty looking and that counts to a broader range of women,” as opposed to dealing with the harder edge of fashion.
“Women get tired of not being driven by fashion,” Weiss said. “Women look at the magazines and television and award shows and they need to look new and good.”