According to a new study, both teens and their parents are tightening their spending because of the economic downturn. And while teens continue to list the same brand preferences, new ones have been added and several shifts in the rankings have occurred.

The data is from the fourth proprietary research survey on teen spending habits and retail brand perception, released by U.S. Bancorp Piper Jaffray retail analyst Jeff Klinefelter. He conducted mall research tours with 710 teens from 12 high schools in 10 states across the country.

The shift in brand preferences led Klinefelter to upgrade three stocks -- Gap, Aeropostale and American Eagle Outfitters.

Klinefelter surveyed teens on their favorite places to shop as well as their spending habits. Based on their responses, Abercrombie & Fitch was found to be the most frequent overall destination, followed by Pacific Sunwear and American Eagle Outfitters. Abercrombie and Fitch increased its mind share with students, grabbing 18% of the top brand vote, compared with 13% last spring. The same survey last spring found that Abercrombie & Fitch was the most frequent overall destination, followed by the Limited's Express unit and then American Eagle Outfitters. In fall 2001, the students chose Abercrombie and Fitch as their most frequent destination, followed by American Eagle Outfitters and Limited's Express unit.

"We find ourselves encouraged by American Eagle maintaining its No. 3 spot in the all-too-important brand preferences survey," said Klinefelter regarding the upgrade of AEOS. "Having previously been concerned over American Eagle maintaining its market share among the teens, we are certainly encouraged by the company holding its solid position in our survey."

Several other brands shifted rankings in the past six months according to the students. The Gap dropped slightly to fifth from fourth, but its rank improved for the girls from fourth to third. In addition, The Old Navy brand (a division of Gap) moved up to seventh from eighth, jumping from ninth to sixth for guys. Banana Republic (a division of the Gap) slipped four rankings to 11. Limited's Express unit fell from second to fourth and dropped from the first rank last spring with girls to second, resulting in a "mind share" decline of five percentage points.

"Gap's increased visibility coupled with Old Navy's improving monthly same-store sales trend of late causes us to be more positive on the overall Gap story," said Klinefelter.

Aeropostale ranked 15th this year, which is significantly higher than the rank just six months ago. The move up for ARO is particularly encouraging considering that only 50% of the markets included an Aeropostale store. Nike jumped from ninth last spring to fifth and Polo Ralph Lauren also moved up from 19th last spring to seventh. Charlotte Russe maintained its ninth rank (for girls) compared with spring 2002, and its mind share increased from 2%-3%. Guess and Wet Seal both dropped significantly compared with spring 2002.

"We are encouraged by Aeropostale's significantly increased visibility and related preference among teens," said Klinefelter regarding the upgrade of ARO. "We believe that business is poised to improve beyond management's previous guidance, especially in light of much-improved mall traffic data as recent as this past week."

Teen Spending Drops

Yearly spending among teens was $1,154, down from $1,536 in fall 2001. In spring 2002, yearly spending was $1,542. In fall 2002, girls spent $1,342 compared with $1,458 in spring 2002 and $1,716 in fall 2001. Guys spent just $890 in fall 2002 compared with $1,661 in spring 2002 and $1,152 in fall 2001.

"Teens seem to be feeling the brunt of the economic downturn, as spending on the fashion categories declined 25% year-over-year and sequentially," said Klinefelter. "Moreover, according to our survey, fewer teens have after-school jobs and are receiving less money from their parents toward purchases. The move toward value continues to be strong for teens, as a majority indicated that they were inclined to buy products on sale and 10% of those surveyed regularly shopped at outlet stores."

Parents' Contribution Decreases

In addition to surveying the students on spending patterns this fall, Klinefelter also surveyed approximately 200 parents, eliciting a 30% overall response rate. According to the data, parents are contributing $935 yearly to their teens spending, compared with $1,115 in spring 2002. In fall 2001, parents spent $1,015 on their teens.

Parents have a greater preference for purchasing apparel through department stores, rather than major chains and specialty stores. In fall 2002, parents spent 15% of their money at major chains, compared with 26 percent in spring 2002. They also spent 37% at department stores, compared with just 28% in spring 2002. According to the parents, the favorite store to purchase products for their teens is Abercrombie & Fitch, followed by Nordstrom, Express, American Eagle Outfitters and Gap. Ultimately, by a margin of two to one, parents say that the teens have the final word on where to buy clothing.

Total Spending

A key component of the survey asked students to identify what percentage of their disposable income they spend on video games, music/movies, electronic gadgets, clothing, accessories/personal care, shoes, food, concerts/movies and other. This fall, apparel was down from 19.7% of total spending to 18.8%, while accessories and personal care was up from 5.6% to 6.7%. Video games, electronics/gadgets and music/movies were also down, versus the spring 2002 survey. The only category posting an increase was car expenses, which was up from 10.7% of total to 17.8%.