Shopping for a retail winner? Here's what to look for

Teens challenge retailers

Ladies, it's time to put away the tights and break out the sundresses.

Spring has finally sprung, giving shoppers a reason to spend on the warm-weather fashions that have so far felt premature on the shelves.

As consumers look to freshen up their wardrobes with the latest styles—all while keeping their budgets in check, of course—it's the stores with on-trend merchandise that will emerge as the season's winners, according to analysts.

"Those retailers suffering from fashion missteps must compete on price instead of product," said Stifel Nicolaus analyst Richard Jaffe. "It appears the consumer is willing to buy if the merchandise is attractive and the value is compelling."

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Although ShopperTrak data showed mall traffic grew about 10 percent in the week ended April 5, the mall is 25 percent more promotional than last year, according to Morgan Stanley research. This includes sales that are both broader and deeper compared with 2013.

In order to stand out, retailers such as Perry Ellis and Saks—which last week said it will shift its focus toward more unique items—are trying to fine-tune their assortments to encourage shoppers to spend.

Shoppers at a Loft store.
Source: LOFT | Facebook

According to trend forecasting firm WGSN, among the hot items retailers are betting on for spring are crop tops, spring biker jackets and high-waisted bottoms. Whites, pastels and vivid oranges are the hot color palettes for the season.

"We are also seeing overtly feminine looks and a modern romantic feel," said Sheila Aimette, vice president of North American content for WGSN.

For evidence that a strong product assortment can be a difference maker, look no further than Urban Outfitters. Analysts for months have lauded the assortments at the company's Anthropologie and Free People labels, which posted fourth-quarter comparable-store sales gains of 10 percent and 20 percent, respectively.

The eponymous Urban Outfitters label, which caters more to the fickle teenage audience, posted a 9 percent same-store sales decline for the same period. Analysts have been quick to call out the label's fashion misses—and relatively high prices, compared with fast-fashion competitors such as H&M—for the sluggish sales.

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But Jaffe said the product is beginning to improve, as the retailer is offering on-trend items for spring, such as high-waisted shorts and skirts and crop tops.

"We are hopeful that this brand can be back on track by the important back-to-school selling season in July," he said.

BMO Capital Markets analyst John Morris said he's encouraged by the fashions at specialty apparel chain Express, which he called "differentiated yet trend-right." He also noted an improved assortment at teen retailer Abercrombie & Fitch, which he said is "soft and feminine, marking a departure from the company's historical aesthetic."

Abercrombie has struggled alongside the other two major teen retailers, American Eagle and Aeropostale, which have lost out to fast-fashion retailers such as Zara. Teenage shoppers have abandoned their previous wardrobe staples of hoodies and T-shirts, leaving the three "A" retailers behind.

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Jaffe was less positive on the looks at Abercrombie, saying the stores "lacked several key fashion trends"—in particular, color. He said the fashions at Hollister were more on-cue, but were still missing newness. On the flip side, he said the assortment at Aeropostale has improved, naming the Bethany Mota and Pretty Little Liars labels as standouts.

"However, given the company's consistently poor merchandise offerings over the past several years, we believe it will take time for Aeropostale to win back its customers, despite an improved fashion assortment," he said.

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Brean Capital analyst Eric Beder agreed that the teen segment is still off-trend, as it continues to focus too heavily on basics.

"What we're seeing now is that basics have been devalued to the point where people just go for the cheapest price ... that split has become wider," he said. "The light at the end of the tunnel in the teen segment really isn't there right now."

According to Jaffe, the list of brands that have picked up on the big trends—and therefore stand to gain market share during the spring selling season—also include Gap, H&M, Kohl's, Loft, Nordstrom and TJX. He listed misses at Ann Taylor, Express and teen retailer Zumiez.

Beder listed Lilly Pulitzer parent Oxford Industries and G-III, which licenses Calvin Klein, as on-trend, saying the popular dress business has been performing extremely well.

But despite the emergence of a few trends and warmer weather, analysts remain on the sidelines as to how long retailers will benefit from a boost in pent-up demand.

"We do not see this as ultimately sustainable, particularly in light of an ongoing lack of fashion consensus and incoming trends that are not democratic to all age groups and body types," BMO's Morris said.

—By CNBC's Krystina Gustafson