Shop Talk
Retailers, consumers and prices
Frugal the fashion for back-to-school
By Nivedita Bhattacharjee
Once upon a time, back-to-school shopping lists included splurges like cool new mobile phones, the latest laptop computers and even PlayStation video game consoles. Not anymore.
September’s sales results were somewhat better than expected but showed that frugal is still in fashion in U.S. school yards. Not only were back-to-school purchases made a bit later, many were necessities plucked from discount racks.
So what IS selling? Woven shirts, fleece and knit pants drove sales at Abercrombie & Fitch. Zumiez saw good demand for its bundled promotions, while denims and sweaters drove sales at American Eagle Outfitters.
Abercrombie and Wet Seal both saw sales weaken after opening school bells rang – suggesting that this month’s numbers could be a one-off show of strength.
“Business became more challenging at Wet Seal after the second week of the month, once peak back-to-school business had passed,” Wet Seal CEO Ed Thomas said.
Check Out Line: Madonna goes back-to-school
Check out the big M’s: Madonna and Macy’s.
What could possibly say “back-to-school” more in 2010 than a fashion line named after song released in 1985.
That’s what licensing and marketing firm Iconix is developing for Macy’s, in collaboration with rock icon Madonna and her daughter, Lourdes.
The “Material Girl” fast-fashion line will be sold in about 200 Macy’s stores in August for the key back-to-school season. The clothes will sell for $12-$40 and the companies also plan expansion into fragrance and other areas in 2011.
Okay, Madonna is still a huge name and packs them in on tour. But our serious question for readers is: how much does she resonate with teens in 2010? (Our not-so-serious question: Which “Twilight” movie was she in again?)
Of course, the cast from the “Breakfast Club” — also released in 1985 — looked great during the Oscars this year. Maybe the Judd Nelson grooming line from Axe will be next.
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Check Out Line: How will September sales look?
Check out one analyst’s view on September sales for some retailers.
Sales for the month of September may have gotten off to a strong start for some retailers thanks to the Labor Day holiday and schools opening in the beginning of the month, but likely lost some steam after that, according to a note from Barclays Capital analyst Jeff Black.
Black’s coverage includes teen retailers and off-price store operators such as Abercrombie & Fitch, Aeropostale, American Eagle Outfitters, Gap Inc, TJX Cos and Ross Stores.
Teen retailers likely benefited the most last month after a tough couple of months, he said.
Retailers selling clothes and catering to teens have been among the most challenged in the down economy, but easier comparisons to last year’s dismal results alongside the Labor Day boost and back-to-school sales may provide a bit of a cushion.
Many retailers are expected to report same-store sales, or sales at stores open at least a year, on Wednesday and Thursday. Such sales are a key measure of performance of retailers and should provide some insight into how holiday sales may shape up this year.
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Consumers learning frugal back-to-school lesson
Could Americans really be getting the hang of life without excess? According to two recent consumer studies, they just might be.
NPD Group Inc, a market research firm, said on Tuesday that it found consumers are starting their back-to-school shopping later, spending less, and shifting away from discretionary items like shoes, clothes, and beauty items. Instead, they are focusing on necessities like school supplies and calculators.
“Back-to-school will be a big indicator of the consumer’s psyche with regard to overall spending this year compared to last year,” said Marshal Cohen, NPD’s chief industry analyst. “Consumers are clearly putting need over desire. They are more highly influenced by value than by fashionable or trendy products.”
According to NPD’s survey, the number of people who said they either ‘haven’t started’ or ‘don’t plan to shop for back to school’ by the end of July dropped 5 percent from last year .
About 44 percent of respondents said they planned to spend less for back to school, compared to 35 percent last year. The study also found that the percent of back-to-school dollars people plan to spend on footwear and apparel fell 9 points to 39 percent and 8 points to 52 percent, respectively.
Meanwhile BrandKeys, a marketing consulting firm, surveyed 10,000 households across the United States in July and found that the plans for back-to-school spending were down 10 percent this year. Spending fell across all categories, except for clothing.
“Clothing is unchanged because children grow,” said Robert Passikoff, president of BrandKeys. Even though spending fell in categories like computers, school supplies and study aids, Passikoff said kids will be going back to school pretty well kitted out in the classroom.
I am 31 years old and I still wear some clothes form my teens so I think my kids can still wear any clothes that still fit from last year. I love my kids so I will try to give them the things they want as well as those they need. I just try to get those things at discount prices like my son wants a new cell phone so I bought him a Motorola W376 from Tracfone with DMFL, Blue tooth, FM Radio, web access and camera plus built in games all for less than $30 so he gets what he wants and I can still afford all the other stuff.
Check Out Line: July pain for retailers
Check out the continuing struggle in the retail world.
U.S. retailers reported disappointing sales declines for July, suggesting shoppers are still searching for bargains and basics in the downturn.
July’s results mark the 11th consecutive month of falling sales at stores open for at least one year, a measure known as same-store sales.
Rising unemployment, cool weather and a lack of tax-free holidays like those held last year disheartened shoppers, who bought just daily essentials last month.
Still, some companies like Gap and Macy’s managed to forecast better-than-expected earnings for the quarter, as they managed their expenses better.
But retailers’ true test? September, according to one analyst.
“The true month to watch will be September because it will mark the first month that started the streak of negative same-store sales in 2008,” said Jharonne Martis, senior research analyst with Thomson Reuters.
Check Out Line: More bad news for U.S. retailers in July
Check out the expected drop in July same-store sales for U.S. retailers.
July typically offers retailers a chance to bolster second-quarter profits by selling new autumn merchandise, but they likely got little boost this year from back-to-school sales as cool weather, a weak job market and a lack of tax-free holidays has analysts expecting an 11th consecutive drop in monthly same-store sales.
Consumers have shown a penchant for skipping full-price items to stretch their budgets amid the recession.
The industry will be looking for signs of stabilization in the results as consumer confidence may be bottoming out, but the messages have been mixed. On Tuesday, U.S. consumer spending rose slightly more than expected in June, but personal incomes saw their biggest drop in four-and-a-half years.
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Check Out Line: Back to last year’s fashion for back-to-school season
Check out the expected weak back-to-school shopping season predicted by America’s Research Group and UBS.
U.S. consumers will spend 8.5 percent to 12 percent less this year on back-to-school items than they did last year as cash-strapped parents try to get their kids to don last year’s fashions again, according to a survey by America’s Research and UBS. Back-to-school sales fell 5 percent last year.
A total of 34.4 percent of parents surveyed this month plan to spend even less this year as they worry about job security, higher debt and dwindling income.
The back-to-school season is typically one of the busiest shopping seasons of the year and is seen as a precursor for spending during the key Christmas holiday season.
Retailers hope consumer confidence improves as the recession appears to be easing. However, the moribund U.S. jobs market is likely to lag any recovery.
Also in the basket:
Back-to-school spending “not as bad” but job fears weigh – survey
Retail experts don’t expect this back-to-school season to be anything to write home about, as consumers continue to pare back expenses. But a recent survey cited fewer people cutting back on back-to-school items than last year – 64 percent compared with 71 percent. “It’s going to be bad but it’s not going to be as bad,” said Stacy Janiak, vice chairman and U.S. retail leader for Deloitte LLP, which conducted the survey, speaking of spending during the season. She pointed to data showing that 1 in 7 consumers — 14 percent — believe the economy is starting to recover. “It was only 14 percent but it was 2 percent last year,” she said. “It’s not a lot for anyone to get optimistic about, by any stretch, but it’s a ray (of hope).” “People have a sense that we’ve been through the worst of it,” Janiak said, noting that people seem to believe another big drop in the economy unlikely. Still, the gloom this year is driven more by a desire to save, as well as worries over job losses. “Last year what was driving people’s concern was these things that would eat into their wallet — higher gas and higher food prices, energy costs,” said Janiak. “This year it’s about what’s in the wallet to begin with — the loss of a job, or fear of that, or intensity on savings to keep what’s in your wallet.”
Some 22 percent of survey respondents cited “loss of job in household” for their frugality, compared with 12 percent last year, and 17 percent cited “fear of loss of job” compared with 9 percent a year earlier. In June, Deloitte found that the pace of decline in consumer spending appeared to be abating. Its consumer spending index, which tries to track consumer cash flow to point to future consumer spending, rose in June after falling four consecutive months. The U.S. jobless rate hit 9.5 percent last month, the highest in 26 years, and many economists expect it to hit 10 percent this year. Last week, the National Retail Federation predicted the average U.S. family with kids in school through 12 grade would spend 7.7 percent less than last year, but college students and their families would spend 3 percent more. Nevertheless, overall college spending is expected to decline 4 percent to $30.08 billion due to fewer people planning on attending college this fall.
One surprising note in the Deloitte survey was consumers’ consistent interest in sustainability, Janiak said. Some 41 percent of respondents said they would likely search for green products this season, with nearly a third saying they’d seek out green retailers. The data points were steady from the year-ago survey. “The assumption is the consumer isn’t going to pay attention to that in a down economy. It’s clear they’re still paying attention to it,” said Janiak, acknowledging that the survey does not ask shoppers how much they’re willing to spend on green products.
The survey, conducted between July 6 and July 9, polled a sample of 1,044 consumers online. The study has a margin of error of plus or minus three percentage points.
Wish I could agree with the findings in this article. As owner of a small fashion related business, back-to-school is usually our biggest season. June was OK sales wise, but this July has been absolutely awful, and after speaking to fellow business owners and our manufacturers, we are finding that everyone else seems to be experiencing the same decline. We have plenty of foot traffic, and we are slashing prices to try to stimulate spending, but it doesn’t seem to have any effect. People just aren’t buying! After stretching our budget and cutting expenses for a year and a half, and losing 80% of our financing due to the possible bankruptcy of CIT, this comes at a particularly bad time 
I wish more focus would be put on the struggling small businesses. It really feels like we are hanging off a cliff by a thread right now!
Check Out Line: Less money for pencils and school books
Check out the expected lower spending on back-to-school items.
Parents plan to spend less money on back-to-school gear for their children this year in another worrisome sign for retailers heading into what is normally their second biggest selling period behind Christmas.
The average family with children in kindergarten through 12th grade is expected to spend $548.72 on back-to-school merchandise this year, down 7.7 percent from 2008, according to the National Retail Federation.
Retailers can take some heart, however, as college students and their parents are expected to boost spending 3 percent to buy the latest pricey electronics and dorm-room decor. Of course, total college spending is expected to fall 4 percent as fewer attend college.
Retailers are taking action to deal with such pressures as department store operator J.C. Penney is launching a website for teens to drive back-to-school sales.
And there are some positive signs of a modest recovery.
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I for one have been cutting back on some extras for my kids but I promised to give my son a cell phone if he did well last year so I can’t go back on my word now. I bought a prepaid Tracfone Motorola W376, I think I found a good deal. It comes with DMFL and a camera, FM radio, web access and blue tooth. It also has games like Suduko and Tetras built in which I think are good for math and co-ordination. Anyway, I got it on promotion for less than $30 which means that I only really paid something like $6 for the phone considering what the DMFL costs. I would rather cut back on my luxuries than deprive my kids.
Check Out Line: August sales offer same old look
Check out the same old sales story. Wal-Mart and other discounters: good. Saks and other high-priced retailers: bad. The pattern seen over the past several months held again for August as cash-strapped consumers sought back-to-school bargains. Generally speaking, it’s bad form for little Johnny to show up for school naked and without notebooks and pens and pencils. So parents have to shop at least a little bit when school starts. But as expected, they shopped where they could save money. Back-to-school season can also set the trend for the key holiday shopping season. So the question becomes whether this will be a discount Christmas. Employers are cutting back as much as they can, in order to be more profitable. That has led to a huge jump in productivity, but at the expense of jobs. The August jobs report on Friday is expected to show that employers continued their job cutting in August. Not a great sign for holiday cheer. Also in the basket: U.S. chicken industry still hurting – Sanderson farms Polman a surprise pick to revive Unilever fortunes
The Jobs report was out and it was bad. Retail is in big trouble with Walmart looking like the only one with a real shot of making any money this year. In regards to jobs, it’s scary when none of the fed governers predicted unemployment to go so high. What else is in store I ask? In this review ( http://www.savingtoinvest.com/2008/09/jo bs-and-housing-one-two-punch-start.html ) perhaps it is time to building up that emergency funds and find shelter in the economic storm coming.
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