Teen shopping buoys same-store sales

By Alexandria Sage

LOS ANGELES (Reuters) - Teen retailers in the United States proved a bright spot in April, as young men and women bucked the recent consumer saving trend affecting the apparel industry to shop and spend as the weather warmed up.

"The numbers for the most part exceeded expectations, and that was helped in part by better traffic as the weather got better, the calendar shift, and for a lot of the retailers, heightened promotional activity," said Needham & Co analyst Christine Chen.

Teens are largely sheltered from macroeconomic issues that crimp spending, such as falling home prices or higher gasoline prices. Still, some chains that cater to this group have struggled in recent months, with March same-store sales showing disappointments from popular stores for young people such as Abercrombie & Fitch Co <ANF.N> and American Eagle Outfitters Inc <AEO.N>.

But the sector fared better in April, as stores offered more warm-weather looks just in time for spring break.

Aeropostale Inc <ARO.N>, which Oppenheimer & Co analyst Roxanne Meyer labeled a "standout in retail," was the obvious winner.

The chain, which sells casual, colorful clothing to young men and women, posted a whopping 25 percent rise in April same-store sales, well above average expectations for a 7.1 percent gain.

Moreover, the chain raised its first-quarter profit forecast, saying it now expects net earnings of 25 cents per share, up from an earlier view of 20 to 22 cents per share.

Other retailers whose April results beat the Street included Abercrombie & Fitch, whose 6 percent same-store sales gain exceeded the view of 2.3 percent, and American Eagle Outfitters, which posted a rise of 2 percent compared with analysts' expectations of a same-store sales decline of 0.6 percent.

Same-store sales measure sales at stores open at least a year. They are a key gauge of financial performance for retailers and are closely watched by Wall Street.

Last year, Easter Sunday fell in April, meaning one less potential shopping day during the month. The calendar shift with Easter falling in March this year played to retailers' advantage, together with warmer weather.

March was a dismal month at retail, with cold weather and budget-conscious consumers reining in spending.

But rosy results at some retailers during April were a product not necessarily of shopper enthusiasm, but rather of deep discounts, said Chen, citing American Eagle.

Meyer, too, wrote in a note that "a decent April comp certainly doesn't reflect a change in trends nor is it a guarantee for making 1Q expectations."

American consumers have been cutting back on spending amid the weakening U.S. economy. Moreover, high gasoline prices have reduced mall traffic and a slump in the housing market and tighter credit have hurt spending overall.

In April, discounters such as Wal-Mart Stores Inc <WMT.N> and Costco Wholesale Corp <COST.O> fared the best, while some department stores like Dillard's Inc <DDS.N> and Bon-Ton Stores Inc <BONT.O> posted same-store sales declines.

Disappointments at the teen level included Pacific Sunwear of California Inc <PSUN.O>, the surf-inspired retailer that posted a 4 percent rise in same-store sales, below the 5.6 percent expected by Wall Street. The company, which is closing its urban-influenced chain, said it now expects a wider loss in the first quarter.

A same-store sales decline of 2.5 percent at Hot Topic Inc <HOTT.O> also surprised investors, who had been expecting a fall of only 0.4 percent.

As for Aeropostale, shares were up only 2.7 percent in early afternoon trade to $33.06, a tepid rally that puzzled analyst Chen.

"That one deserves a bit more credit than they're being given. They posted a 25 percent comp and they raised guidance? They didn't buy their comp -- that was clearly more than a calendar shift," Chen said.

(Reporting by Alexandria Sage, editing by Gerald E. McCormick)