(Teen retailers article updated from May 20 with further analyst commentary and second-day stock price movements.)

NEW YORK (TheStreet) -- Teen retailers tumbled along with the rest of the market Thursday, but after several earnings releases after-market, investors are starting to be able to weed out the winners from the losers.

As the spring selling period comes to a close, the next few months will be a non-event for teen retailers, as investors anxiously await the all-important back-to-school season.

For the most part, trends are improving, but of course there continues to be some laggards around the sector.

Over the past month stocks within the sector have taken a beating, with Aeropostale ( ARO) down 9.3%, American Eagle Outfitters ( AEO) off 13% and Abercrombie & Fitch ( ANF) down more than 20%. This could present a buying opportunity for investors.


Aeropostale ( ARO) reported yet another record quarter after the close on Thursday, with profit spiking 43%, helped by double-digit growth in sales.

The teen retailer, which has been luring teens and parents amid the recession with wallet-friendly prices, earned $45.4 million, or 48 cents a share, in the first quarter, two cents higher than analysts' estimates. This compares with earnings of $31.7 million, or 31 cents, in last year's period.

Sales at Aeropostale shot up 13.6% to $463.6 million from $408 million, while same-store sales climbed 8%.

While credit should be given to Aeropostale for its ability to post the strongest comparable sales figures in the teen space -- not to mention expand its margins through a strong merchandise assortment -- it also speaks to the lack of differentiation among retailers that target teenaged customers, said UBS analyst Roxanne Meyer.

Looking ahead, Aeropostale's management said it expects second-quarter earnings in the range of 45 cents to 48 cents a share, which is an 18% to 26% jump from 38 cents in the prior year and in-line with consensus forecasts.

Investors appeared to like the news. Shares of Aeropostale were spiking 5% Friday morning to $28.69.


Premium denim retailer Buckle ( BKE - Get Report), which was one of the strongest retailers amid the recession, continues to buck the trend.

The Kearney, Nebraska-based company reported a 12% jump in first-quarter earnings, reaching $30.1 million, or 65 cents a share, higher than analysts' estimates. This compares with a profit of $26.9 million, or 59 cents, in the year-ago period.

Revenue at Buckle grew 8% to $214.8 million, edging past Wall Street's forecast of $212.4 million. Same-store sales increased 2.8%, while online sales surged 24% to $14.4 million.

**Looking ahead, the company faces easier comparisons over the next several months, which could result in same-store sales in the low-single digit range in the second quarter, Roth Capital Partners analyst Elizabeth Pierce said.

"Although the company maintains its rather modest annual square footage growth plans and although margins are close to peak levels, we believe there are still some opportunities to drive earnings growth," she wrote in a note.**

Hot Topic

Hot Topic ( HOTT) is spilling blood. The company reported after the close Wednesday that it had swung to a loss in its first-quarter, due in large part to the absence of merchandise from the vampire series Twilight. Hot Topic chose not to carry the second film in its stores.

After closing on Thursday down 10%, Hot Topic shares continued to lose value during Friday's session, giving up another 3% to $5.70 in morning trading.

For its first quarter, Hot Topic said it lost $1.8 million, or 4 cents a share, compared with a profit of $1.2 million, or 3 cents, in the year-ago period.

Sales at Hot Topic dropped 7% to $162.6 million, missing analysts' estimates of $163.3 million. Comparable sales sank 12.3%.

Excluding last year's Twilight products, however, Hot Topic said its same-store sales would have dropped just 4%.

The declines all came from the company's namesake stores. Torrid, its plus-size business, saw sales jump 7% to $42.9 million.

"While Twilight was a great license for Hot Topic last year, as seen by first-quarter results, there can be a downside to such a powerful property," Roth Capital Partners analyst Elizabeth Pierce wrote in a note. "Although the comparisons from Twilight become less challenging in the second quarter and although Eclipse, the third piece of the Twilight saga, will be out in June, we believe its contribution will be minimal."

Looking ahead, Hot Topic predicts a second-quarter loss between 7 cents and 10 cents a share. Analysts are calling for a loss of 7 cents.

While Hot Topic is in the process of beefing up its accessories business, Pierce said it will take until the end of the second quarter to see any form of improvement in that segment.


Skate and surf retailer Zumiez ( ZUMZ - Get Report) widened its loss in the first-quarter and predicted a loss for its second-quarter.

Still, shares of the company were gaining 1.6% in Friday morning trading to $16.71. Analyst Jennifer Black, of the firm bearing her name, said the teen retailer is well positioned to gain market share in the long-term. Black rates Zumiez stock a buy.

During the most-recent period, the company lost $1.9 million, or 6 cents a share, including a 3 cent charge related to the relocation of its distribution center.

Analysts were calling for a loss of 4 cents a share. These estimates typically do not include charges.

Sales at Zumiez rose 16% to $89.1 million from $76.8 million, while same-store sales increased 9.1%.

For the second-quarter the company foresees a loss between 7 cents and 10 cents a share, which includes charges related to the relocation of its distribution center. Wall Street is estimating a loss of 1 cent, excluding these charges.

Wet Seal

Shares of Wet Seal ( WTSLA) are continuing to spiral, after it issued weak second-quarter guidance after market on Thursday.

In early trading Friday, the stock was slipping 1% to $3.99.

During the first quarter Wet Seal earned $3.1 million, or 3 cents a share, compared with a profit of $5 million, or 5 cents, last year.

Excluding interest-related charges, Wet Seal's adjusted earnings came to 6 cents a share, a penny more than expectations.

Sales edged up to $137.8 from $132 million, while same-store sales gained 2%. By division, namesake stores grew 1.5%, while Arden B. stores were up 4.8%. This is the first positive comparable sales result at both divisions since the third quarter of 2007.

"We note that, in May, business has been soft month-to-date at both Wet Seal and Arden B. We believe this has largely been due to weakness in mall traffic resulting from unfavorable weather patterns in much of the country, a shift in buying due to a later Memorial Day weekend this year, and, possibly, a pause by consumers after relatively strong buying in February and March," The company's CEO said in a statement. "With little visibility into expected near-term sales trends, we are cautious about our outlook for the second quarter."

Wet Seals said it expects second-quarter earnings in the range of 2 cents to 4 cents a share, falling short of analysts' outlook of 5 cents a share.

Still, some sell-side stock analysts continue to rate Wet Seal stock a buy. "We believe the unit growth and margin story for the company remains fully intact," Brean Murray analyst Eric Beder wrote in a note. He advised clients to use any weakness in the stock "to become even more aggressive in the name."

Wet Seal is one of the few retailers committed to catering to younger teens, Pierce said. Many of its peers have shifted their focus to an older demographic. Pierce also has a buy rating on the stock and a price target of $7.

Pacific Sunwear of California

Shares of Pacific Sunwear of California ( PSUN) were wiping out after the company said its losses severely in the first quarter on weakening sales.

During the quarter the surf-inspired retailer lost $31 million, or 47 cents a share, significantly more than the 36 cents Wall Street predicted. This compares with a loss of $8.7 million, or 13 cents, in the year-prior.

Excluding one-time items, the retailer lost 30 cents, better than the 36 cent loss analysts estimates.

Sales dropped 15% to $190.3 million from $223.5 million, as same-store sales tumbled by the same percentage.

While both the store environment and merchandise assortment has improved at PacSun, Needham analyst Christine Chen said its junior's business continues to struggle. "We would like to see more evidence that a margin recovery is underway or stronger sales momentum, before we become more positive on the stock," she wrote in a note.

Looking ahead, PacSun predicted a loss between 22 cents and 28 cents a share on an adjusted basis in the second quarter, more than the 17-cent loss estimated by analysts.

Shares of the company were falling 3.2% to $4.35 Friday morning.

Abercrombie & Fitch

Abercrombie & Fitch ( ANF) said last week that it narrowed its loss in its first quarter and posted an uptick in sales. But analysts say its true test will come with the start of the back-to-school shopping season.

For the most part, the first-quarter was a non-event, as Abercrombie & Fitch recorded a loss of $11.8 million, or 13 cents a share -- matching analysts' estimates. That compares with a loss of $59.2 million, or 68 cents, in the year-ago period.

Revenue jumped 14% to $687.8 million, while same-store sales inched up 1%. The company saw comparable sales increases at both its flagship stores and abercrombie, but Hollister dropped 2%.

Domestic sales rose 5% to $568.8 million, while international sales more than doubled to $119 million

Though Abercrombie's international business remains its clear growth engine, currently accounting for 17% of total sales, improvement in its domestic business is its most important needle mover, UBS analyst Roxanne Meyer wrote in a note. "We will look for traction in merchandise and better stickiness of prices with the back-to-school floorset, the first under the direction of CEO Michael Jeffries," Meyer said.

Abercrombie has also refrained from providing any guidance, allowing some skeptics to ask: How bad is it? Most retailers have begun issuing some form of guidance for the second-half of the year.

Reported by Jeanine Poggi in New York.

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