Retailers, consumers and prices
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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U.S. chicken industry still hurting – Sanderson farms
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