Dressed to Kill (Your Portfolio)

Even teen retailers get the blues, if recent quarterly tidings are any judge. Urban Outfitters (Nasdaq: URBN  ) and Abercrombie & Fitch (NYSE: ANF  ) posted earnings last week, and one of these stocks looks like a very dangerous proposition for investors.

Urban Outfitters' second-quarter net income fell 14%, to $49 million, or $0.29 per share. Total revenue increased a mere 1%, to $459 million, while same-store sales fell 6%.

It was not a tremendously impressive quarter by most measures, though any increase in a retailer's top line is no mean feat these days. While many retailers have juiced their profits by cutting costs -- witness Starbucks' (Nasdaq: SBUX  ) latest quarter -- Urban Outfitters' margins actually decreased. Since slashing costs isn't the best way to sustainably raise earnings, that may be for the best in the long run.

While Urban Outfitters' silver lining shone through the clouds, copious cost-cutting couldn't make Abercrombie & Fitch's recent quarterly results any less scary for investors. The teen-centric retailer reported a second-quarter loss of $26.7 million, or $0.30 per share. Total sales fell 23%, to $648.5 million, and same-store sales plunged a nauseating 30%.

These figures are nothing new for Abercrombie, and the ongoing ugliness of its fundamentals should give investors serious pause. The brand's overemphasis on physical perfection has left Abercrombie cruising for a bruising. Its former success now looks more like the faded fad of Crocs (Nasdaq: CROX  ) .

Urban Outfitters seems a lot more compelling than Abercrombie, although it's priced a bit steeply, currently at 26 times earnings. Retailers Aeropostale (NYSE: ARO  ) and Buckle (NYSE: BKE  ) are both sporting far cheaper multiples (14 and 11, respectively) and have been doing incredibly well operationally. And while I may have recently busted on J. Crew (NYSE: JCG  ) for being too overpriced for its own lackluster business, I would argue it's still a higher-quality, better-run retailer than Abercrombie.

Abercrombie & Fitch is one of the market's riskiest retail stocks at the moment, especially in a difficult consumer spending environment. There are plenty of cheaper (or at least better-run) retailers with more promising futures.

What do you think? Use the comment boxes below to let us know which retail stocks deserve investors' attention at the moment.