Innovative foreign-based apparel retailers are ringing up brisk sales in the United States and turning inventories faster than a fashion model strutting down the catwalk. And they are poised to displace American icons on their home turf.

Sweden's Hennes & Mauritz (H&M) and Spain's Zara have set the tone by establishing firm beachheads in the U.S. and each now operates dozens of stores. Now, other overseas retailers like Mango, Top Shop and UNIQLO are looking to emulate the success and grab a lion's share of the fashion category within the $9 billion specialty apparel market.

For decades, U.S. apparel retailers such as the Gap, Guess and Levi's have dictated the fashion market stateside, with consumers chasing their must-have jeans, skirts and trend-setting accessories. But, that's rapidly changing with industry insiders saying that U.S. retailers have gotten too predictable and boring to excite shoppers.

That's not good news for American apparel retailers, who have struggled most of the year. Year-to-date the U.S. apparel sector has posted a same-store sales decline of 1.8 percent, according to ICSC, compared to 1.1 percent growth in 2006. The sector really took a beating in the months of September and October when same-store sales falling 4.0 percent and 5.2 percent, respectively. And, overall net sales aren't expected to get any better until 2009, when the market bottoms out, says Kelly Tackett, senior consultant with TNS Retail Forward, a Columbus, Ohio-based consulting and market research firm.

"The apparel retailers are facing extremely tough prior year comparisons and a lot of them have maturing store concepts and are facing cannibalization," says Tackett. "So we've got another tough year still ahead of us."

While the deepening housing slump, tightening credit and rising energy prices are hampering retail sales, they are not entirely to blame. The real problem is that many of the American chains' offerings are tired, forever revolving around different combinations of jeans and a tee shirt, says Craig Johnson, president of Customer Growth Partners, LLC, a New Canaan, Conn.-based research firm.

As a result, most of the fashion apparel store growth in 2008 will come from internationals, especially chains that focus on affordable prices and rapidly turning their inventories. H&M delivers new items to its stores on a daily basis. The firm operates about 130 U.S. locations after opening 15 this year. Meanwhile, Zara claims it needs just two weeks to produce and deliver new product to its 25 U.S. stores, compared with the U.S. industry average of nine months.

There are some U.S. retailers doing a good job of breaking out of that "boring" mold. Tackett and Johnson both cite Zumiez, an Everett, Wash.-based company that specializes in apparel for skateboarders and snowboarders, and operates 266 stores nationwide. So far in 2007, Zumiez has opened 31 stores and is scheduled to open another 19 by years end. Eventually it plans to have 800 U.S. locations.

In the second quarter of 2007, Zumiez posted same-store sales growth of 11.6 percent and net sales growth of 47 percent, to $82 million. In addition to targeting a very unique customer--teens interested in extreme sports--the chain makes its stores feel exciting with sports-themed décor and frequent events, notes Tackett.

Another U.S.-based chain, Forever 21, seems to be outperforming its peers. The Los Angeles-based, privately held retailer brings in crowds of teens and young women with its rapidly changing fashions sold at affordable prices--almost everything in the store has a price tag of less than $50. The chain, which already operates more than 400 locations around the country, continues to look for new expansion opportunities, says Roger D. Burghdorf, senior vice president with RCS Real Estate Advisors and Forever 21's broker. The retailer wants to target larger stores--with footprints ranging from 25,000 square feet to 50,000 square feet, compared to its typical 10,000 square feet.

"They won't say whether it will open 50 stores or 100 stores this year," says Burghdorf. "It all depends on what makes good economic sense. They are a private company, so their real estate decisions are made rather quickly."

Further competition for retail space will come next year with the U.S. arrival of Top Shop, a high-fashion, low-price London-based chain in the mold of H&M and Zara. Top Shop is said to be under contract for a 90,000-square-foot New York store, according to Robin Sande, of New York-based retail brokerage firm Robert K. Futterman & Associates.

"Mango is expanding, H&M is doing a big expansion and I see Zara expanding," says Alan Napack, senior director with the brokerage firm Cushman & Wakefield. "The fashion tenants seem to be doing more of the expanding, particularly on the women's side."

Napack represents an expanding international fashion retailer as well--the upscale, U.K.-based Karen Millen, which already operates 10 stores in the U.S. and would eventually like to open another 40. They are scouting class-A regional malls and looking for 2,000 square-feet to 2,500-square-feet locations.

--Elaine Misonzhnik