Over the past few years, consumers' frugal spending habits and a desire for ever-changing styles plucked shoppers away from the traditional teen retailers, whose fashions were viewed as outdated, unstylish and too pricey. As Abercrombie and its competitors whittled down their store bases, H&M's footprint swelled to more than 4,000 locations globally.
But trends at H&M have slowed lately. Despite its rapid store expansion, the mega-retailer's sales grew just 9 percent in the first quarter, and trends got off to a shaky start in the current three-month period. The same headwinds that have dented revenues at other players in the apparel space — including a strong dollar, unfavorable weather and excess inventory — have contributed to the brand's softness.
Yet Martinez said recent results at H&M and Forever 21 add credibility to the theory that consumers are tiring of cheap fashion.
"The rocket ship that they both were on for a period of time now seems to have run out of fuel," he said.
Privately held Forever 21 doesn't publicly release its earnings, but the retailer has recently been closing stores. A spokesperson from the company wasn't immediately available.
Betty Chen, managing director of Mizuho Securities, said she too has noticed certain consumers' preference for quality product, better in-store service and pricier custom pieces. However, she said this has more been the case for shoppers in their late 20s and older.
Chen also cautioned that few brands have been able to reposition themselves as higher-end players. One of those brands was J.Crew, yet it, too, has struggled recently.
"It's going to be a very long road given the historical brand context for Abercrombie & Fitch," she said.