(Teen retail report card updated with Pacific Sunwear of California and American Eagle Outfitters earnings results.)
NEW YORK (
) -- Teen retailers were in the spotlight this week, as investors looked to second-quarter earnings reports to shed light on the all-important back-to-school season.
The market, however, was disappointed with the sector, as outlooks for the second-half of the year were muted -- with deep discounting across the board and rising sourcing and labor costs expected to weigh on teen retailers' margins for the remainder of the year.
"It is becoming glaringly obvious to us that the short-sighted inventory buying binge and subsequent 'planned' deep discounting of
Abercrombie & Fitch
American Eagle Outfitters
(AEO - Get Report)
, in the face of one of the most economically affected sectors in the economy, has managed to destroy any potential for even the better-run teen players, who maintained inventory and expense discipline, to register strong results," Brean Murray analyst Eric Beder, wrote in a note.
For back-to-school we have already seen a high level of promotional activity. Denim, which most teen retailers put a big bet out, isn't moving, Wall Street Strategies analyst Brian Sozzi, noted. As a result, it has become a price-driven item whose margins have most likely been hampered.
Still, it's not all bad news. While the second-quarter warnings were definitely frightening, much of the back-to-school season is still ahead, Sozzi noted. No one is immune to the current lackluster consumer environment, but there are several retailers that stand a better chance of winning the back-to-school season.
Here's how the teen retailers stacked up in the second quarter...