When adults lose their jobs, their teenage kids lose their allowances.
And when teenage kids lose their allowances, they stop shopping at places like teen fashion retailer Aeropostale – which had its initial public offering earlier this year at $18 per share and got as high as $28.46 before smashing to the ground yesterday.
“The retail environment has become increasingly challenging due to weak mall traffic and increased promotional activity,” said Merrill Lynch analyst Mark Friedman. “While Aeropostale offers a lower price point vs. its competitors, the turn in consumer spending has impacted teen spending greater than we had anticipated.”
After the company cut its sales and profits forecast late Monday, Aeropostale plunged $8.90 to $6.50 yesterday.
Five different brokerages downgraded the stock on the lowered earnings forecast. Only one brokerage, Piper Jaffray, still has a “buy” rating on the stock. All the others, including those that underwrote Aeropostale’s IPO, have downgraded the stock to “neutral.”
While Aeropostale was the hardest hit, other retailers catering to teens also fell.
If retail sales slump in September – still part of the back-to-school season – investors will take it as a bad sign that the end-of-year holiday shopping season will also be poor.