By MIRIAM GOTTFRIED
Aug. 17, 2016 3:03 p.m. ET
“Fashion changes, but style endures,” or so the clothing designer Coco Chanel once said. As American Eagle Outfitters and Urban Outfitters reaffirm their place in the former category, investors should reconsider the value they assign to the teen retailers.
American Eagle beat analyst expectations for its second-quarter earnings Wednesday as same-store sales climbed 3%. Yet its shares fell. Meanwhile, shares of Urban Outfitters, which reported better-than-expected earnings and 1% same-store sales growth Tuesday, surged.
The contrast illustrates an essential principle of how teen retail stocks trade: A company can hit the right fashion trend and ride it for a while, but fickle customers and fast-fashion competition mean nothing lasts forever. Investors will quickly change horses if it looks like someone might pass the leader in the next quarter’s race.
“Mall-based retailers are allowed to have a one-to-two-year strong product run. You have to catch it at the beginning,” said Nomura analyst Simeon Siegel.
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