Competitor Comparison: Which Teen Retailers Are a Buy?

Teenagers can be the ideal consumers. They aren't yet burdened by the financial obligations adults face, they're drawn to self-expression, and their impulse-control, well, often leaves something to be desired. All of those help explain how teenagers spend $200 billion a year -- and why retailers love them.

Although teen spending dropped during the recession, teens are spending between 6% and 8% more this year than they did last year. Retailers are also reporting that teens, who were focusing more on staples than premium items last year, are less price-conscious this year.

All of that may mean it's time to check out the industry.

Getting into the numbers
Who are the major teen retailers and how do they stack up to one another?

Company

Market Cap (in millions)

Revenue, LTM (in millions)

Comparable Store Sales (Q1 year over year)

Free Cash Flow, LTM (in millions)

CAPS Rating (out of 5)

dELiA*s
(Nasdaq: DLIA  )

$48

$222

(8.6%)

($1.1)

*****

Abercrombie & Fitch
(NYSE: ANF  )

$3,068

$3,015

1%

$200.4*

*

Hot Topic
(Nasdaq: HOTT  )

$235

$724

(8.7%)

$22.6

**

American Eagle Outfitters
(NYSE: AEO  )

$2,541

$3,038

5%

$264.1

***

The Buckle
(NYSE: BKE  )

$1,538

$913

2.8%

$107.4*

****

Aeropostale
(NYSE: ARO  )

$2,692

$2,286

8%

$280.1*

***

The Gap
(NYSE: GPS  )

$13,989

$14,399

4%

$1677.0

**

Data from CapIQ, a division of Standard & Poor's, and the Motley Fool CAPS database.
*Free cash for the fiscal year ended 2009.

It's important to keep track of revenue, but free cash flow gives us a better sense of what the company is doing with that revenue -- and whether it'll have the funds to invest in the business later. Comparable store sales track demand across existing storefronts, backing out any expansion or contraction in the number of stores.

Our CAPS community of investors likes dELiA*s, despite the screwy name, poor comparable store sales, and lackluster free cash flow. Why? Zero debt, decent gross margins, increasing revenue, and an underdog position that gives it room to grow.

Which teen retailer do you like and why? Let us know in the comments below.

Fool editor Julie Clarenbach doesn't own any of the companies mentioned here. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 08, 2010, at 9:39 AM, jhr8974 wrote:

    Aero is the play, they are consistent in product and pricing.

    Delia's is a non play, they have been around for a quite sometime with little traction. Delia's has lost its identity, when first stated by daughter and her friends were fanatical about Delia's but they strayed from they core customer (10-14 year olds). Their catalog models are look to sexy and old for the original core customer and the moms. As for csh they are burning through money from the sale of large division a couple of years ago.

    I like Aero,

  • Report this Comment On June 09, 2010, at 11:50 AM, KerrisdaleCap wrote:

    At Kerrisdale Capital, we looked at some of the teen retailers. Our analysis can be found here: http://kerrisdalecap.com/commentary/?page_id=107&pid=151

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