Peer Pressure: Who's Left In Teen Retail?

Abercrombie & Fitch Co. (NYSE: ANF) continued its post-earnings slide on Thursday morning, falling another 1.6 percent. The stock is now down 24.1 percent after reporting a loss of $0.25 per share on revenue of $783.1 million, well short of consensus estimates of -$0.02 and $787.7 million.

The weak quarter prompted several firms to downgrade the stock or reduce price targets:

• Stifel downgraded Abercrombie to Hold.
• UBS lowered its price target from $22 to $18.
• KeyBanc lowered its price target from $27 to $25.
• Citigroup cut its price target from $23 to $20.
   

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Abercrombie is certainly not the only teen retailer that is struggling to compete these days. Wet Seal, American Apparel, Pacific Sunwear and Aeropostale Inc (OTC: AROPQ) have all declared bankruptcy in the past year.

Shares of New York & Company, Inc. (NYSE: NWY), Buckle Inc (NYSE: BKE) and Express, Inc. (NYSE: EXPR) are all down in 2016.

The lone exception to the trend is American Eagle Outfitters (NYSE: AEO), which delivered positive year-over-year Q2 sales and earnings growth numbers that topped Wall Street expectations. The stock is up 17.3 percent this year.

Ironically, the growing number of bankruptcies in the teen retail space has been easing some of the pressure on the remaining competitors. Unless these companies can find a way to right the ship in coming quarters, the teen retail space may continue to be a case of survival of the fittest.

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