This Year, Teen Chic is Cheap
Leannie Lukin, 19, has no trouble pinpointing where she has cut back her spending this summer.
"Shopping," Lukin says, without hesitation. "I have enough clothes. At this point it's definitely more of a want than a need."
Lukin, who has been a longtime fan of brands like J. Crew and Polo Ralph Lauren , has had to become a savvier shopper. Now, when shopping in her hometown near Albany or at school in Poughkeepsie, New York, she heads for the discount racks first, explores cheaper alternatives like American Eagle, or skips the trip to the mall altogether.
Wary of high gas prices, Lukin made the 90-minute drive home from the camp where she worked this summer only twice. But fuel still managed to cut into her cash; to compensate, she has started eating out less.
Lukin is not alone. Teens across the nation have spent their summer vacations battling high gas prices, competing for jobs in a weak part-time employment market, and making do with smaller contributions from cost-conscious parents.
All of which has led teenagers, in the past considered "recession-proof" spenders, to confront the impact of a slowing economy. According to a survey conducted by BIGresearch in July, 60 percent of teenagers said they had become more frugal in the last six months—compared with only 50 percent of adults.
"Unequivocally, teen spending is very weak," says Adrienne Tennant, a senior analyst at Friedman, Billings, Ramsey. "Usually teens are a resilient portion of the economy because all spending is discretionary, but this time around, gas prices are clearly eating up budgets."
As young adults are forced to make spending trade-offs, it's provided a window into their priorities. The takeaway? Clothing, once the sinkhole of teen pocket money, is losing its allure.
In April, Piper Jaffray released a semi-annual survey of teens that said that teen spending on fashion was down a whopping 20 percent from a year earlier.
By August, major teen retailer Abercrombie & Fitch saw its same-store sales fall 11 percent, and American Eagle ended the month down 5 percent. Pacific Sunwear saw a 6 percent drop for the month, while Limited Brands fell 7 percent. Comparable store sales at Gapdecreased by 8 percent.
Retailers tend to count on a big boost in August when high school and college students restock their wardrobes for the fall, but this year, that lift hasn't materialized. Teenagers are trading down to less expensive retailers, buying fewer items, and waiting for sales and bargains.
While teenagers may be having personal issues with their own budgets, they've also been seeing what their parents are going through," says Ellen Davis, a senior vice president at the National Retail Federation. "Teens are cognizant of their parents' financial situations, and follow their example by looking for good deals and bargains before they buy."
While Davis says that wearing the "right brands" will always be important teenagers, a widespread increase in budget consciousness seems to have propelled less expensive brands into the trend spotlight.
Among the "three A's" that dominate teen retailing—Abercrombie & Fitch, American Eagle, and Aéropostale—the only one currently growing sales is Aéropostale, the cheapest of the three.
"At Aéropostale, the one with the least brand equity, logo merchandise is actually driving the business," says Tennant. "That shows that teens are willing not only to wear the least expensive of the three brands, but to advertise that that's what they're wearing."
Jeff Klinefelter, a senior research analyst at Piper Jaffray, also says that in addition to cutting back on apparel purchases, his teens are eating out less often and going to fewer concerts and movies.
One place where spending has held up in the face of budget constraints seems to be cell phones and text-message services, as well as music downloads.
"The teen perspective is that communicating through cell phones and text messaging and having digital music seem to be, in a sense, necessities," says Klinefelter.
Part of this shift in interest from apparel to electronics might be due to a "mature" position in the fashion cycle, Klinefelter says, where trends have changed little enough from last fall to necessitate only minor wardrobe updates. But it also indicates a larger generational shift in priorities; teens care more about connecting and communicating than expanding their wardrobes, and it's the latest and greatest electronics rather than fashion accessories have become the "must-haves."
"Teenagers used to want to spend money on a new pair of jeans, and now they want to spend it on iPods," says Davis.
Looking ahead, no one expects teens to regain their lust for apparel in time for the holidays.
"Back-to-school is very indicative of where these kids shop for holiday and how much they spend," says Tennant. "What we saw was waiting to the last minute, and only coming in with coupons."
That, and holiday season will have one fewer selling weekends than last year—all of which adds up to a blue Christmas in teen retail.