Top teen clothiers try on new business models

If Japanese retailer Uniqlo is looking for more space in American malls, there may be sites opening up soon. Same for U.K. clothing chain Topshop and Swedish retailer H&M, both of which have been expanding in North America.

Hundreds of spaces that for years have been clubs for teens looking for preppy clothes, maybe with a flashy logo, could be available for lease as clothing retailers such as American Eagle Outfitters, Abercrombie & Fitch and Aeropostale reconsider what kind of square footage they need.

The mall-based chains that for years ruled the nation's high school wardrobes are trying to overhaul their merchandise delivery systems to serve a smartphone-enabled generation that wanders easily between digital and mall shopping. That means not just helping them shop by phone but also delivering new styles faster and at prices teens are willing to pay.

"We continue to research this customer," Abercrombie CEO Michael S. Jeffries said in a recent conference call with analysts. "I continue to believe we are taking the brands to a place that is more relevant."

No one could accuse the chains of not taking the issue seriously, even if they might have been a little slower than some would like.

JPMorgan analyst Brian Tunick calculated that between 2007 and 2013, off-price chains and fast-fashion retailers — a category that includes names such as Forever 21, H&M, Uniqlo and Zara that offer inexpensive and frequently changing fashion — made significant gains.

Meanwhile, the American teen retailing chains were following the example of some of those international players by opening stores aggressively around the world. They've done well enough that most plan to continue to add stores abroad.

Now their answer to the real estate question seems clear: More stores aren't always the way to add sales.

In mid-May, American Eagle said it had identified 150 stores to close in North America in the next three years and is closely watching 300 more that have leases coming due.

Roger S. Markfield, chief creative officer, said during a conference call to discuss first-quarter earnings that foot traffic has been down for all retailers in the malls.

Tunick's mid-May report to investors noted even before American Eagle's store closure program was revealed that Abercrombie had closed 260 locations since 2011 and Pacific Sun had closed 230 stores in that period. Aeropostale is expected to close up to 300 locations in the next few years, he said.

The pullback isn't done. Abercrombie recently said it is on track to close 60 to 70 stores this fiscal year through lease expirations. Susquehanna Financial Group analyst Thomas A. Filandro pointed out in a report that more than 500 of Abercrombie's store leases are up for renewal through 2016.

The industry's new focus on "omnichannel" retailing — a term that refers to seamlessly integrating online and offline stores — may bring store closures, but Tron noted there are other retailers, like Uniqlo and H&M, adding locations while some online-only merchants want physical spaces to raise their profile and give customers a different shopping experience.