Back-To-School Losers: 4 Retail Stocks in Danger of Flunking

Consumer spending remains rocky, which may mean back-to-school blues for some retailers. These are the retail stocks with the most to lose.
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) -- Back-to-school is poised to make or break the retail sector.

Back-To-School Gude

Click here for a preview of the coming back-to-school season


expectations for the season are high

, it's best to resist the bullish hype. With retailers up against what were some of the worst fall numbers on record, there is, in truth, no place to go but up.

Here's a look at which retailers are most likely to fall to the bottom of the class...

Abercrombie & Fitch

Abercrombie & Fitch

(ANF) - Get Report

was one of the few standouts in June, but at what cost? While its 9% surge in same-store sales during the month indicates teens will still buy the brand when it's on sale, this doesn't mean they will be so eager when it comes to purchasing items at full-price.

There's no doubt Abercrombie & Fitch has lost its must-have status among teens, which is why price cutting will likely continue into the start of back-to-school selling, as the company offers shoppers a 20% off card for all purchases in the last two week of July.

Still, it's too soon to gauge teens' reaction to the merchandise, since the fall collection just began rolling out over the weekend.

The next important period for Abercrombie & Fitch investors will be the September and October period, when the company begins to anniversary price cuts from last year, Brean Murray analyst Eric Beder wrote in a note. At this time, if management can hold or raise prices, a powerful turnaround could be on the horizon.


Shoppers fell back into


(GPS) - Get Report

for a brief period of time, but it looks like they are now falling back out.

Old Navy, which has been driving Gap's recovery, is losing momentum, as the company cited "lighter than expected" traffic across all of its brands in June.

Gap will start seeing comparisons get tougher in August, and more inventory at both Old Navy and namesake stores will not help the situation, Phoenix Partners Group analyst Robert Samuels wrote in a note. This could result in margin pressure this month.

The company is banking on reinventing the black pant for back-to-school, but it is questionable if it will have as much success with this trend as it did with the revamp of its 1969 jean last year.


On the apparel side, which is generally the biggest focus of parents' budgets for back-to-school,


(WMT) - Get Report

is still struggling.

The discount behemoth reported four consecutive months of same-store sales declines in the U.S., making note of softness in discretionary merchandise, specifically apparel and accessories.

While consumers are still looking for the best deal, which no doubt Wal-Mart offers, it is unclear how successful its aggressive price rollbacks have been in boosting traffic.

But Wal-Mart may be able to offset apparel weakness with electronic sales. Next to clothing, electronics are expected to be the second biggest spending category for back-to-school, according to NRF.

Wal-Mart has been ramping up its consumer electronics offerings. This spring the company said it plans on stocking more Internet-connected flat-panel televisions, Blu-ray players, mobile phones and routers. It also sells the highly-coveted


(AAPL) - Get Report


American Eagle Outfitters

American Eagle Outfitters

(AEO) - Get Report

still has middle-child syndrome, struggling to compete effectively on either cost or product differentiation.

"Given the fiercely competitive environment for teen retailers, as well as the 25.7% unemployment rate for 16-to-19 year olds, American Eagle may continue to experience challenges enticing teens to open their wallets for non-basic items at price points that are higher than those of the value-oriented retailers," Sterne Agee analyst Margaret Whitfield wrote in a note.

As a result, American Eagle still had trouble posting positive same-store sales in June and cut its second-quarter guidance. The teen retailer is now expecting earnings to come in at the low-end of its previous guidance in the range of 12 cents to 16 cents a share.

In an effort to boost traffic, American Eagle is offering a free smartphone to anyone who tries on a pair of jeans in stores until Aug. 3. The catch: in order to receive a smartphone shoppers must sign up for a two-year contract with one of the participating service providers.


(AAPL) - Get Report

iPhone will not be offered.

-- Reported by Jeanine Poggi in New York.


>>Back-To-School Winners: Which Stocks Will Make The Grade?

>>Back-To-School: All About Discount

>>Which Retail Stock Will Win Back-To-School?

>>Aeropostale CEO Aims For Back-To-School Win

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