Tween Looks for Justice in Mid-Market Retail Squeeze

These days, times are tough in the middle market of the retail business. Luxury companies like Louis Vuitton (LVMUY.PK) are doing just fine, as the rich keep spending regardless of the economic climate. And discount retailers like Wal-Mart (WMT) are benefiting big-time from tight budgets in the lower and middle classes as consumers look to cut costs on discretionary items as their gas and food bills soar. But the middle men - companies like American Eagle Outfitters (AEO), The Gap (GPS), and Tween Brands (TWB) - are suffering as their customers choose low-cost alternatives, or make do with last year’s wardrobe.

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On Tuesday, Tween Brands announced that it will shift its focus from its more established Limited Too stores to its newer, cheaper Justice Brand. In response, investors crushed Tween’s stock price - it fell 17% in that day’s trading. Tween, which is focused on selling to the 7-14 year old girls that are its namesake, will shift 560 of its Limited Too stores to the Justice brand name by first quarter 2009. The company says that it will take a charge of $18 million in the second half of the year after making this move. But it hopes that the conversion will lead to annual savings of $20 to $25 million in 2009 and beyond, after laying off Limited Too staff and shaving marketing and store expenses.