- Teens cited improvements in both current fashion spending and intention to spend, across income levels and genders. Of teen budgets, the fashion category accounted for 39%, up from 38% in the fall of 2011 and 37% a year ago. Upper-income teens indicated that spending on fashion increased 17% on a sequential basis and 21% year-over-year. Average-income teens indicated their spending on fashion increased 18% on a sequential basis and 15% year-over-year. These double-digit increases in fashion spending represent the first recorded since the 2003/2004 surveys, when teens across income levels indicated a similar meaningful propensity to spend on the fashion category. While strength in spending was broad-based across categories, spending by male teens in fashion was the highest, a trend which has historically been indicative of a multi-year, dual-gender fashion spending recovery.
- Beauty spending by upper-income teens increased 8% sequentially and 6% year-over-year. For average-income teens, beauty spending increased 21% sequentially and 18% year-over-year. Skin care and cosmetics represented a larger share of overall beauty spending, and the beauty spending gap between upper- and average-income teens continues to narrow. Teens are demanding greater diversity of cosmetics offerings, evidenced by a notable reduction in brand preference concentration. This trend supports our view that young and emerging cosmetics brands, many of which are coming to the market with new or superior innovations, are gaining traction with teen consumers. We believe this bodes well for specialty retailers of beauty products, such as Ulta and Sephora. MAC remained the No. 1 cosmetics brand for upper-income teens while Cover Girl was once again the No. 1 brand for average-income teens. Victoria's Secret remains the preferred fragrance for teens across both income segments, consistent with the past eight surveys.
- Teen spending on food and restaurants is at or near the highest level since early-2000. Upper-income and average-income survey respondents increased their weekly restaurant spending by approximately 10% and 3%, respectively, compared to the fall of last year. Taste remained the strongest influence on food and restaurant dining decisions. Value also continued to be an important influence on dining decisions and has gained in importance over time, ranking number two in the current survey compared to number five in the spring of 2007. As it relates to individual brand preferences, survey results appear to support our Fine-Tuned Dog Bone Thesis, whereby a strong connection exists between a company’s value proposition and its relative position as a most-preferred brand.
- Teen spending on portable devices continues to accelerate with 86% of teens reporting that they are likely to purchase a smartphone for their next device, up from 83% last fall and 81% one year ago. Apple’s iOS gained market share as the most desired operating system, with 51% of teens reporting that they are likely to buy an iOS device (compared to 22% for Android). Approximately 34% of teen respondants owned an iPhone, up from 17% last spring, driven by the availability of a $49 iPhone 3GS at the launch of the iPhone 4S. Also, 40% of teens expect to purchase an iPhone in the next six months, up from 37% last year. In tablet market, 34% of teens owned a tablet computer, up from 22% last spring. Of those teen tablet owners, 70% owned an iPad, 19% owned an Android-based tablet, and 11% owned a Kindle Fire. Furthermore, 19% of teens expected to purchase a tablet in the next six months, with 80% of those teens intending to purchase an iPad, which we believe should help Apple sustain its lead in the tablet space.
- Teens represent 33% of video game players, with games representing 7% of teen spending. Teens are increasingly receptive to downloading games, accessing social networks and playing games on smartphones and tablets. Pre-owned games remain popular among teens, but digital rights management (DRM) risks with next generation consoles represent an overhang for game retailers. Social networks, tablets and smartphones are taking increasing eyeball share away from console-based video games. We favor interactive media companies including Zynga and Electronic Arts (EA) with exposure to these growing platforms.
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