If Steve & Barry's financial woes are any indication, the back-to-school season will be a difficult one for teen-focused retailers.  The Port Washington, N.Y.-based company filed for Chapter 11 bankruptcy last week, citing $693.5 million in assets and $638 million in debt. Best known for celebrity fashion lines, including Bitten by Sex and the City star Sarah Jessica Parker and Starbury by New York Knicks star Stephon Marbury, Steve & Barry's sells super-cheap clothing for teens and college students. Prices rarely exceed $20.  In an economic downturn in which the Wal-Marts of the world are succeeding (see "Consumers Save Money, Discounters Live Better"), one would presume that a teen retailer like Steve and Barry's, which is also a discounter, would be somewhat immune to hardship.  Instead, the outlook for specialty retailers that rely on high school and college students with disposable income to cushion sales, particularly in the back-to-school season, is dismal.  In 2007, retailers made an estimated $18 billion on back-to-school purchases, according to the National Retail Federation, a Washington, D.C.-based trade group. A whopping 95% was spent on clothing and accessories, with the majority of shoppers heading out to stores two to three weeks before school started.  But this year, these purchases are expected to be made online and at discounters like T.J. Maxx and Ross, says Dr. Robert Passikoff, founder and president of New York-based customer loyalty research company Brand Keys. These alternative outlets are expected to lure customers away from traditional brick-and-mortar hot spots like Abercrombie & Fitch, American Eagle Outfitters and Gap.  On Web aggregators like Shopstyle.com or Shopwiki.com, for example, teens can look at items from hundreds of e-commerce shops. And at discount retailers like TJ Maxx or Marshalls, famous brand names are available for a fraction of the original price.  "There's been a kind of paradigm shift in terms of which retail distribution outlets teens finds acceptable," says Passikoff, who believes that, in general, the teen has ultimate say in where he or she wants to shop, regardless of whether he's spending his own money or his parent's money. "Not only is it a matter of changes in tastes, but it's also the fact that at online and discount retailers, there's more of a choice," says Passikoff.  Growing Pains Retailers set to face the most challenges include JCPenney, which recently announced the launch of six young adult-focused brands for Fall 2008, including Dorm Life--a home goods range for college students--and Fabulosity, a hip hop-inspired girl's line designed by Baby Phat director Kimora Lee Simmons. Brian Sozzi, a retail analyst at Wall Street Strategies, a New York-based independent stock market research company, believes JCPenney "will have a tough time gaining that teen customer." Younger generations still associate the retailer with fuddy-duddy, dated garb of older generations.  Sozzi also sees dark skies ahead for the already-struggling American Eagle. For years, the brand seemed to be an invincible force in the specialty retail sector. However, Sozzi says that the brand's sales numbers in recent months continue to plummet because it's missed key trends in the denim department, kept prices higher than competitors and expanded too quickly, with 135 store openings planned this year for a total of 1,000 since 1977.  Are you spending as usual or saving more? Weigh in. Post your thoughts in the Reader Comments section below.  Gap's prospects don't look good either. Despite restructuring that includes expense reductions and inventory control, sales have been sluggish for more than a year. Not even designer collaborations--including a line of covetable shoes by high-end cobbler Pierre Hardy and a second installment of the Vogue/Council of Fashion Designers of America line of white shirts, created by up-and-comers like Phillip Lim and Michael Bastian--could offer a boost. (Many of those shirts are now available for less than $30 in stores, down from $78.)  Who might fare well next month? Aeropostale. Once considered the nerdy cousin of Abercrombie & Fitch's star quarterback and American Eagle's head cheerleader, Aeropostale has done remarkably well during the downturn. Same-store sales increased by 12% for June 2008, almost double what was estimated by analysts. Sozzi says that within the last year, the company has improved on its designs and quality while keeping its price points lower than competitors.  Looking beyond Fall 2008, Passikoff believes some specialty retailers simply won't make it through. "It's like you're on a crest of a wave and it's moving--it's a tsunami," he says.  However, those that do survive will have something in common with every successful retailer, whether it be specialty, discount or luxury: brand loyalty. "The ones that are going to survive are the ones that recognize customer loyalty means an emotional association with a brand," says Passikoff. "They have to be willing to create a value-added experience around that."  Wardrobe Essentials For The Young Professional  Top Shops In Summer's Travel Hot Spots
They rely on kids with disposable incomes, but this season it looks like very few will be spending.