Teen apparel stores see secondary brands struggle

NEW YORK (AP) — At the Arden B clothing store on Fifth Avenue, dance music is pumping and sale signs are everywhere, but Sara Chidester walks out empty-handed.

“Nothing caught my eye,” said the 28-year-old resident physician, a New Yorker. Chidester said she usually shops at J. Crew and Banana Republic.

Arden B, which targets women in their 20s, is a sister chain to teen-apparel retailer Wet Seal and is suffering from a sales slump. While Wet Seal Inc. is trying to improve results with new management and a better merchandise assortment, other retailers are facing similar problems.

Many teen retailers who rely on the back-to-school season for a huge part of their sales are running into tough times not only at their main stores, but also at the secondary brands — often aimed at a different demographic — that they hoped would cushion them from such swings.

Adding a second or even third store brand can be a way for retailers to reinvest money during boom times, but it may turn into a bigger challenge than many retailers realize — and a money drain if the economy turns south, said Stifel Nicholas analyst Richard Jaffe.

“If you’re good at dressing 7- to 14-year-old girls, it doesn’t necessarily make you good at dressing a teenage girl or a 25-year-old,” he said.

Two casualties so far have been Limited Too stores, which are all being converted to New Albany, Ohio-based owner Tween Brands Inc.’s lower-priced and better-performing Justice brand, and Demo, the urban apparel side of the otherwise beachy Pacific Sunwear of California Inc.

Following one of the weakest back-to-school seasons in years, might other teen retailers’ secondary store brands be gone by the time classes are out? Analysts say it is probable.

“It’s tough to wait it out if you’re not outperforming in this environment,” Jaffe said.

Abercrombie & Fitch, known for its clothing aimed at teens, is struggling to revive its Ruehl chain, which is aimed at older shoppers. The company, also based in New Albany, said that second-quarter sales at established stores fell 4 percent overall as a 3 percent rise at its namesake stores did not offset a 22 percent drop at Ruehl stores. Same-store sales at its surf-inspired third store brand, Hollister Co., fell 9 percent.

“There’s no question Abercrombie has figured out the teen segment pretty darn well,” Jaffe said. “But they’ve clearly missed on young adult segment with Ruehl.”

Abercrombie executives have said the company is taking a wait-and-see approach with the brand, saying even though same-store sales have declined, the loss generated from Ruehl has stabilized.

“It’s fair to say that we’ll be watching the sales trend in Ruehl very closely as we get to the end of the year and beginning of next year,” Mike Nuzzo, Abercrombie & Fitch’s vice president of finance, said in August when the company released its quarterly earnings.

As far as Wet Seal and its Arden B stores, the company reported that second-quarter same-store sales fell 1.8 percent at its namesake stores and sank 13.8 percent at Arden B.

Wet Seal is hoping the return of Sharon Hughes, an executive involved in the creation of Arden B, can resuscitate it. Hughes left the company in 2002 but returned in February as chief merchandising officer for the brand.

“We’re just starting to see product,” said Roth Capital Partners analyst Elizabeth Pierce. “So far I’m greatly encouraged, but I recognize headwinds remain challenging.”