In large ways or small, teenagers often horrify us because they just don't do what we expect them to. Right now, these juvenile delinquents may be doing the last thing investors ever expected: not spending much money at the mall.
Gasp! How could it be possible? What's with these kids today? Do they hate America that much?
My Foolish colleague Todd Wenning and I took a trip to a local mall last Tuesday for a little recon. We figured that since school's out, surely we'd find some teens there, hanging out and maybe even buying stuff.
Honestly, I was downright relieved to see a couple of warm-blooded, bona fide teenagers in American Eagle Outfitters (NYSE: AEO ) . Todd also spotted a few genuine young people there, as well as in Aeropostale (NYSE: ARO ) , and he was pleasantly surprised by foot traffic in long-struggling Gap (NYSE: GPS ) and its Banana Republic unit.
However, with the exception of a few outliers, including a packed GameStop (NYSE: GME ) , the mall wasn't exactly teeming with spendthrift teens.
I intend to do a weekend check of a different local mall soon, to see whether teens are simply saving their mad shopping skills for Saturdays and Sundays. (I'd like to see how some of Urban Outfitters' (Nasdaq: URBN ) stores seem to be doing, too, since I own a few shares of that stock.) However, I have a hunch a weekend trip might look strikingly similar.
The kids are all right ... aren't they?
In recent years, teen retail spending has been fairly well-insulated against macroeconomic factors. Kids don't pay mortgages or rents, worry about feeding the entire family, or fret about the phone, cable, and electric bills. Most of their spending is blissfully discretionary and often motivated by the desire to impress and outdo their peers.
Unfortunately, our current economic climate may be pinching the wallets of young and old alike. It stands to reason that with the high cost of living (food and energy) and the housing market's pains, many parents don't have as much discretionary income to give their kids.
Are babysitting and lawnmowing the lucrative options they used to be? With consumers pinched by rising prices on everything from gas to food, "nesting" and do-it-yourself may be summertime themes this year. Mom and Dad's generosity is likely reaching some limits, too. I wonder how many window-washings, tree prunings, and dishwashings make up an iPhone or an Xbox 360 in this day and age.
Meanwhile, the summer job market this year doesn't look good for teens who want to pad their wallets. Only 34.2% of teens aged 16 and older seeking summer jobs are expected to land one. This makes sense. Retailers and restaurants don't need to be so staffed up when fewer consumers are willing to spend on luxuries.
And of course, increasing unemployment and second-job seekers will put more contenders into the pool -- older applicants are likely snapping up the types of jobs teens usually take for granted during the summer months.
Maybe the kids aren't all right.
This awkward phase will pass
We'll have to keep our eyes on those scary teens -- and teen retailers -- to see whether this is an ongoing trend, at least for the near term. It may be a long, hot summer indeed.
Even if teens are the unthinkable and ratcheting down their spending, things won't always be this tough. Teens may end up learning to save for what they want -- an excellent lesson in the long run. Meanwhile, the current pressures will make some formerly pricey stocks very affordable for long-term investors.
As crazy as it sounds, the kids may be choosing carefully when they shop these days. Investors should choose carefully, too, shopping around for high-quality retail stocks worth holding for the long term. For now, though, I'm sure many investors wish our biggest worry about teenagers was more conventional, like whether those darn kids are huffing something from under the sink. Maybe those were somehow simpler scary times.
Further fearful Foolishness: