American Eagle, Abercrombie and Aeropostale Hurt By Fast-Fashion Retailers

Published: April 15th, 2014

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The shares of teen retailers have not been performing well enough for the previous twelve months.

Investors should consider moving on as the group’s situation may deteriorate further.

The past year has seen Abercrombie shares decline by 24%, American Eagle by 40%, and Aeropostale by 63%, and that is not considering dividends.

The decline may be because of a decrease in mall traffic and market saturation, but the biggest culprit is called fast-fashion. Traditionally, retailers have maintained low costs with high margins. This was achieved by placing large orders for a small range of garments by season. This often resulted in excess stock which prompted clearance sales.

Fast-fashion works differently. Large amounts of fabric are ordered and factories contracted prior to designing. Garments are ordered on an as-needed basis, which allows for receipt of new items in short periods of time.

This shift in consumer buying may force traditional retailers to reduce their store numbers, as fast-retailers are looking to increase store numbers by 10% per annum over the next few years.

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