Teens are traditionally very hard to please when it comes to clothing styles. What's "Cool" to wear is constantly changing every new season and wanting to look "Cool" among their peers is most important. Their utmost concern is wearing this season's newest trends in order not to be treated as a social outcast. Therefore, they carefully spend their money at retail stores such as Abercrombie & Fitch Co. (ANF -3.86%), Urban Outfitters (URBN -0.43%), and American Eagle Outfitters(AEO -2.20%) to get the best clothing items. Abercrombie & Fitch was actually the "it" retailer less than ten years ago with teens and pre-teens all clamoring for the stores' merchandise. Unfortunately, that's all changing.

An inside look into the stores
It doesn't take a trip to your local mall to see this change, although it would provide the best visual picture. Urban Outfitters' stores are usually crowded with teenagers of all ages shopping for clothes and standing in long lines to purchase their items while Abercrombie(ANF -3.86%) stores are relatively scarce. You can also see this difference in the sales revenue for the last three years. It's also obvious when observing what teenagers are wearing the most of as you walk through a mall or in a school classroom.

Let the numbers speak for themselves
When looking at the annual revenue for all three retailers – Abercrombie & Fitch Co(ANF -3.86%), Urban Outfitters(URBN -0.43%), and American Eagle (AEO -2.20%) – it is shocking to see the growth rates of Abercrombie & Fitch over the last three years when compared to its competitors in the teen clothing retail space. Between 2010, 2011, and 2012, Abercrombie(ANF -3.86%) grew at 18.44%, 19.36%, and 8.49% , respectively. On the other hand, for these same years, Urban Outfitters' sales grew at 17.35%, 8.8%, and 12.98%, respectively. In a similar fashion, American Eagle Outfitters sales grew at 0.17%, 5.93%, and 11.4% during the same fiscal years. The trend is obvious, over the last three years a major shift has occurred in favor of Abercrombie & Fitch's competitors. These figures also tell you that sales growth for American Eagle(AEO -2.20%) has increased most steadily throughout the past three years.

Changes in clothing trends
Abercrombie & Fitch(ANF -3.86%) features clothing that is "preppy" in style. This fashion trend used to be the "in thing." Over the years, however, this trend has gone out of style as teens have become less preppy and more urban/unique. These retailers also make it easier to mix and match various clothing styles to form casual, chic, trendy, or vintage looks whereas Abercrombie & Fitch Co.'s clothing is all one style – preppy.

Predicting what's to come – looking ahead
Analysts agree that this trend is going to continue going forward. Analysts covering American Eagle on average project 5.5% revenue growth next year to $3.51 billion, 11.2% sales growth for Urban Outfitters in its next fiscal year to $3.47 billion , while Abercrombie & Fitch is projected to grow less than 5% in its next fiscal year, which will bring its revenues to approximately $4.46 billion The recent success of companies like Urban Outfitters and American Eagle is clearly set to continue for the foreseeable future. 

Foolish Takeaway
Getting in front of consumer trends is just about the hardest thing a Foolish investor can do. That being said, it's obvious that the modern teens and pre-teens are moving toward styles exhibited at their local Urban Outfitters and American Eagle and this has important investment ramifications. These trends should be carefully weighed by any investor looking to invest with these or any fashion retailer. As always, Foolish investors should do their own research when making their investment decisions. This can start with something as simple and going to your local mall and seeing what's garnering the attention of adolescents.