Dive Brief:

• Investors pulled back on their vote of confidence for American Eagle Outfitters, sending stock lower after the teen-apparel company reported disappointing holiday sales on Friday.

• Same-store sales rose 4% in November and December, against analyst estimates of 5%.

• Shares fell 17% to $13.24 on Friday, the biggest decline since May 2010, after gaining 12% in 2015.

Dive Insight:

The recession has made its mark on today’s young consumers, making them keen to find discounts or forgo purchases altogether. They’d rather spend money on the smartphones in their pockets, which keep them in touch with friends and family and help them suss out bargains to boot, and on experiences, research shows.

And styles change, so the teen-apparel retailers that once emblazoned their clothing with their names and logos have had to wipe those away and retool their merchandise to appeal to a more sophisticated customer. American Eagle Outfitters, American Apparel, Abercrombie & Fitch, and Aeropostale have all struggled and are in the midst of some sort of turnaround.

While Abercrombie & Fitch has posted some surprising success, with its Q3 profits more than doubling as it successfully moved away from heavy discounts, American Eagle has emerged as especially promising. The retailer this past summer made a splash to improve its jeans line and moved to scale back promotions. It’s also seen success with its Aerie lingerie line, with a marketing approach for that brand that eschews photoshopping its models. 

CEO Jay Schottenstein was returned to the top spot (he also served as CEO from 1992 through 2002) last year after the retailer began to show signs of a turn-around under his guidance in the interim. The retailer this past summer made a splash to improve its jeans line and moved to scale back promotions. It’s also seen success with its Aerie lingerie line, with a marketing approach that eschews photoshopping its models. 

While investors seem to be pulling away again after that initial success, the retailer requires a bit more more time, and perhaps more realistic expectations, says Cowen & Co. analyst Oliver Chen.

“Merchandise margins were solid based on our checks, but we do believe weekly traffic was likely volatile,” Chen said in a report.