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As retail M&A activity has picked up in recent months, there has been no shortage of speculation around what the next target will be. Many suggest teen retailers Abercombie & Fitch (NYSE:ANF), American Eagle Outfitters (NYSE:AEO) and Aeropostale (NYSE:ARO) are attractive buyout candidates.

These three chains have a lot in common: they compete for the same demographic through roughly the same number of mall-based stores, have very healthy balance sheets, and all stopped reporting monthly sales after January 2011.

However, there are some major differences: Abercrombie enjoys the most pricing power, with gross margins nearly double that of its rivals, as well as generating the highest percentage of sales from International operations (18.6%). American Eagle has been touted as the biggest bargain among the three, as it trades at 10.2 times free cash flow, the cheapest among U.S. retailers that sell clothes to teenagers, and holds the most cash relative to its market value. Aeropostale has been the strongest and most consistent performer over the past decade and significantly outperformed its rivals throughout the recession.

All three recently reported fiscal 2010 results, and below we take a look at their operating performance for last year as well as over the long-term to determine who deserves the crown as the king of teen retail.

(Click chart to expand)

Teen Retailer Comparison: Abercrombie & Fitch, American Eagle Outfitters, Aeropostale



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Teen Retail Throwdown: Battle for the Cool Kids