Well, are clothing retailers doing well or aren't they? It depends on whom you ask.
Teen retailer Abercrombie & Fitch
Abercrombie was able to beat estimates by significantly discounting merchandise to drive sales. While this certainly helped increase sales, it also cut into the companies margins, which likely had investors selling the stock aggressively yesterday. Abercrombie's average unit revenue for its goods dropped 15% in the second quarter to compensate for less consumer spending power.
Abercrombie competitor Urban Outfitters
However, the biggest difference between the earnings growth of these two retailers has been a story of effective inventory management. While Urban Outfitters has been effective, increasing inventory by only 12% in the second quarter, Abercrombie saw an increase of 47%. This should add further pressure to Abercrombie's margins as more discounting will be necessary to effectively reduce this inventory overhang.
Let us know your thoughts on the best teen retail operator in the comment box below.
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