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Wake Up Retailers! Fashionistas Are Back

Friday, 22 Jan 2010 | 11:06 AM ET

Fashion-savvy consumers have shopped their closets bare and are slowly heading back to the mall to revamp their wardrobe with the latest trends — but they're not spending on just anything.

Grove shopping center in Los Angeles
Grove shopping center in Los Angeles

Instead, fashion shoppers are abandoning basics and looking for unique, stylish items, and stores that break the recessionary trend of playing it safe will reap the rewards, analysts said.

"While it may seem counterintuitive, taking calculated fashion risks by offering new styles that [the consumer] doesn't already own will in the end be the more successful strategy," said Christine Chen, retail analyst at Needham & Co., in a research note.

This was evidenced in the most recent round of retail sales reports. Stores such as Urban Outfitters and Aeropostale , which analysts have commended for taking small style risks, posted same-store sales gains of 9 percent and 10 percent respectively.

Guess , which is among Needham's top sector picks, has also shown initiative in new fashions. Paired with lean inventories — which Citigroup analyst Deborah Weinswig said help to create a frenzy for products — the retailer should also outpace its competitors, Chen said.

On the flipside, companies that have failed to produce innovative inventory, such as Abercrombie and Fitch and Bebe , will continue to lag behind the retail recovery, analysts said. Missing out on trends is especially detrimental for teen retailers like Abercrombie, as its target demographic shops more frequently, adapts trends quicker and is more recession-resistant, Chen said.

"Bebe is shell-shocked," said Eric Beder, retail analyst at Brean Murray, Carret & Co. "[Abercrombie has] just lost their way in the economy, and they have to really go back to what's core for them and what worked when the fashion-driven customer came to them."

Consumers will likely continue to gravitate toward jewelry and shoes, as they can update an outfit for less, Beder said. He predicts dresses will be big sellers again in spring, while denim will continue to evolve and perform well.

And as shoppers move away from minimalism and start to feel better about themselves and the economy, Weinswig predicts items with vibrant colors and sequins, along with chunky jewelry, to be big trends.

Shopping for a Retail Rally
Retail sales were up this holiday season, with Robert Taubman, Taubman Centers chairman, president & CEO.

"It's becoming much more product specific as opposed to price tag," she said.

Although fashion-driven shoppers are less influenced by price tags, Bill Taubman, chief operating officer for premium mall operator Taubman Centers , said shoppers have responded well to luxury brands like Tiffany and Coach offering products at lower opening price points.

Coach's Poppy line, which retails for about 10 to 15 percent less than a typical handbag, helped the retailer post positive North American same-store sales for the first time in more than a year on Wednesday.

"She's looking to maintain the image and exclusivity she's used to, she just wants to find a way to make it more affordable at times," Taubman said.

Similarly, membership at online luxury discounter Beyond The Rack increased by 120,000 in the month of December, which accounts for nearly 25 percent of its total members. The company's revenue is also growing at a rate of about 50 percent a month, CEO Yona Shtern said.

Fashion consumers tend to lead traditional shoppers, and are often seen as an early sign of an economic turnaround, Beder said. He expects fashion to start making its comeback in the spring, but said the true test will be when new inventory is introduced in the fall.

Taubman sounded a similar note, saying that although "there's no question" that shoppers are carrying more bags at the company's malls, the picture becomes fuzzier as holiday sales taper off.

Many are looking to New York's Fashion Week in February for signs of innovative fall trends, which are needed to excite consumers and persuade them to spend.

"No one's declaring victory, [but] business clearly is improving versus where we were in the middle of 2009," he said.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

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COH
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GES
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TIF
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