American Eagle denim on sale for back-to-school.

Shopping patterns have changed among today’s youth culture of 13-25-year-olds across the United States, and never has it been more apparent than with the recent segment of financial reports over the last several weeks for youth retailers on Q2 and gloomy forecasts for Q3.

At Label Networks, we’ve also been tracking changes in spending patterns, shopping preferences, changes in online shopping patterns, and fashion trends with fresh data and analysis from the youth consumers themselves from our Summer Youth Culture Study 2011 -Back-to-School. It’s important to realize that for the past 4 years now, starting actually before 2008, an entire demographic segment of teens has grown up in a recession situation. This means that their thinking about what’s most important to them in fashion and shopping patterns and why they buy what they buy, has changed. For example, being the first to buy a trendy apparel item, footwear, or accessory is not as important as being able to purchase things that allow for originality in one’s DIY style. (We went into detail during last week’s MAGIC Fashion trade show and our presentation on Youth Culture Fashion.)

Taking a look at large retail chains like PacSun and their recent financial reports, it’s clear that the marketplace has shifted. Their net sales for the second quarter of 2011 were $214.9 million versus net sales of $218.3 million for the second quarter of fiscal 2010. Total Company same-store sales increased only 1% during the period. For the second quarter of 2011, PacSun reported a net loss of $19.3 million, compared to a net loss of $23.5 million.

Third quarter outlooks, which includes Back-to-School season look grim. “We continued to make progress in the second quarter as evidenced by our results, which included our second consecutive quarter of positive comps, better than expected merchandise margins, reduced inventories, and further reductions in operating expenses,” said Gary H. Schoenfeld, President and Chief Executive Officer. “Until recently we had expected this positive momentum to continue, yet we are now more cautious in our near term outlook due to a combination of factors including macroeconomic pressure, along with a highly promotional start to the back to school season.”

Take a look at American Eagle, another popular youth culture brand and retailer. While its position in terms of consumer preferences have changed, as indicated in our Summer and upcoming Fall Youth Culture Studies, what happens with this brand/retailer is another indicator for youth culture fashion trends.

Last week, American Eagle announced earnings for the second quarter of $0.10 per diluted share, compared to income from continuing operations of $0.13 per diluted share last year. There was a slight increase as total sales for the quarter increased 4% to $676 million, compared to $652 million last year. But second quarter comparable store sales were flat, compared to a 1% decrease last year. So, “flat” in this case is the new “increase” compared with a negative last year.
American Eagle also said that although the company has tempered sales expectations for the second half of the year, sales are planned to strengthen from the first half of the year, driven by investments in key items.

According to American Eagle, “The back-to-school trend is positive and promotional activity is on plan.” Which, as many retailers have done, means that back-to-school started with promotions and discounts to start the season, not necessarily as a cap after the normally high-volume season took place. American Eagle also said that higher cotton costs are expected to pressure their second half merchandise margin.

While looking at changes in spending patterns is important from a retailer perspective, it’s important to note that by the time financial reports come out, it’s already too late because it’s a picture of the past. That’s why taking a look at the reasons why changes are taking place, and where they are headed next from the consumers’ point of view, is vital towards getting a handle on where the economy is re-shaping itself, especially among today’s savvy and influential youth culture.

For more information on youth culture fashion preferences, changes in shopping patterns, digital lifestyle trends, online retailing, and new media, contact us regarding our Summer and Fall Youth Culture Studies 2011.