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Back-to-school deals may be coming as sales lag

6:02 AM, Aug 10, 2013   |    comments
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NEW YORK - Shoppers are holding off on back-to-school shopping, and those who delay long enough might be rewarded with some steep discounts.

Revenue at stores open at least a year - an industry measure of a retailer's health- rose 3.5% in July, the slowest pace since March, according to a tally of 11 retailers by the International Council of Shopping Centers. The figure, which excludes drugstores, was down from a 5.5% increase in June.

Costco Wholesale, typically a strong performer, was among the retailers reporting disappointing figures.

Many stores were already offering discounts to get shoppers to spend on the new shipments of fall clothing that started flowing in mid-July. But experts say even more deals are coming this month as stores try to boost sales for the back-to-school season, which runs from mid-July through mid-September.

"It was a lousy start," said retail consultant Walter Loeb. "There will be even more discounts to make up the sales."

Ken Perkins, president of researcher RetailMetrics, agrees.

"A vast number of shoppers are sticking to their shopping lists and are being very deal-driven," he said.

Only a sliver of retail chains now report monthly sales figures, and the list doesn't include Wal-Mart and many other large chains. But Thursday's tally adds to evidence that shoppers are being frugal, particularly about clothing. The back-to-school season is the second-biggest selling period behind the winter holidays.

On Monday, teen retailer American Eagle Outfitters slashed its second-quarter outlook because of weak traffic and sluggish sales of women's merchandise. The teen retailer cited a highly promotional environment that only got tougher in July.

On Thursday, rival Aeropostale warned it would have a wider loss than expected when it reports its second-quarter results later this month. It also blamed weak traffic and lots of discounting.

A clearer picture of how the back-to-school season is faring will emerge next week when Wal-Mart Stores and Macy's report their second-quarter results.

Overall, the back-to-school season faces a big challenge: Shoppers are shifting their spending away from clothing and toward bigger-ticket spending on their homes and cars because they have more credit available, says Stifel Nicolaus analyst Richard Jaffe. That has stores competing hard for dollars.

July is when stores clear out summer merchandise to make room for back to school. Slow sales indicate shoppers are holding off on buying clothing as they face other expenditures. A heat wave helped clear out discounted summer goods but did little to move warmer fall clothing among shoppers who are sticking to what they need immediately.

While jobs are easier to get and the housing market is gaining momentum, the improvements have not been enough to sustain higher levels of consumer spending for most Americans. Most are juggling tepid wage gains with higher costs of living.

Americans are still trying to digest the 2 percentage-point increase in payroll taxes, which took effect Jan. 1. That means that take-home pay for a household earning $50,000 a year has been sliced by $1,000. Gas prices are rising again, and on top of that, shoppers are being increasingly forced to pay for more of their children's school supplies.

That has forced parents to stick to necessities. Major retailers such as Wal-Mart have noticed that buyers are staggering their purchases instead of having one big back-to-school shopping spree.

Amanda Simpson, 38, and the mother of a 6-year-old daughter and a 1-year-old boy, reflects the cautious trend. She is budgeting $150 for clothing and $50 for school supplies for her daughter. She plans to buy some of her daughter's clothes at thrift shops and instead of buying one $35 pair of shoes, she will buy three $15 pairs.

She is staggering these purchases and says she needs to budget in case of surprise expenses.

"I am much more conscious of how I spend," said the Coppell, Texas, resident. "We are not in that position that we are going to get huge raises."

Helen Gym, 45, who has three children, ages 16, 14 and 10, said back-to-school clothing is not a top priority. Gym, whose children go to Philadelphia public schools, said the fiscal crisis there is forcing parents to pay for more supplies, which could mean books.

"We're doing what we can afford and we are trying to be thoughtful," said Gym, who works part-time for a community organization. "I stopped doing the massive back-to-school (shopping) thing."

Against this background, Michael Niemira, chief economist at the International Council of Shopping Centers, expects that total sales for the back-to-school season will rise 3.1% from last year to $42.2 billion. That would be less than the 3.6% gain in 2012, but near the 3.3% average annual increase for the past 10 years.

Families with school-age children are expected to spend an average of $634.78 on clothing, shoes, supplies and electronics, down from $688.62 last year, according to a survey of about 5,600 shoppers from the National Retail Federation that was conducted by Prosper Insights & Analytics.

USA TODAY

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