Wrapping Up Teen Retail: 3 Stocks Going Out Of Style?

American Eagle Outfitters AEO wrapped up the teen apparel sector, reporting Q3 results Wednesday morning.

Overall, Morgan Stanley’s cautious industry view appears to be justified, as three of the key players fell short. Analyst Kimberly C. Greenberger cited three key concerns contributing to her view:

1. Apparel price deflation.
2. Online competition.
3. Margin headwinds from an e-commerce shift and increasing waging.

Another possible headwind for the teen retail space could have been slower mall traffic, according to American Eagle executives.

Rundown Of Teen Retailers

• Abercrombie & Fitch Co. ANF reported on Friday, November 18, missing both top- and bottom-line estimates (EPS $0.02 vs. est. $0.21; rev. $821.73 million vs. est. $830.60). Shares dropped more than 12 percent over the course of the trading day.
• American Eagle reported Q3 results on Wednesday before market open (EPS $0.41 vs. $0.41 estimate, revenue $941 million vs. $940 million estimate). Although earnings and revenue were mostly in line, comp sales were unimpressive and Q4 outlook of $0.37–$0.39 (compared to the Street estimate of $0.45) sent the share price down. At time of writing, shares were down 14.20 percent.
• Urban Outfitters, Inc. URBN reported on Wednesday, November 23, with Q3 results and Q4 outlook below estimates. Since then, shares are trading now close to 19 percent.