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NPD Predicts a Wait for B-t-s Sales

NPD Group market research anticipates an extended back-to-school season with the possibility of stock shortfalls in stores.

The NPD Group Tuesday added to the growing body of evidence that this year’s back-to-school season will be late and lean.

This story first appeared in the August 12, 2009 issue of WWD.  Subscribe Today.

The Port Washington, N.Y.-based market research firm reported 44 percent of those surveyed said they would spend less this b-t-s season than they did a year ago, while 32 percent expect to spend the same and 23 percent foresee greater expenditures. Last year, 35 percent expected to spend less, 34 percent the same and 31 percent more.

Although still the second-most critical category behind school supplies, apparel is a lower priority this year than last, with 52 percent of respondents expecting to purchase it versus 60 percent last year. Footwear was down to 39 percent from 48 percent, but held the number-three spot in order of priority. Apparel accessories fell to 16 percent from 20 percent, and beauty products declined to 13 percent from 17 percent.

“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, chief industry analyst at NPD. “Consumers are clearly putting need over desire. They will be more highly influenced by value than by fashion or trendy products.”

Value remained the top reason to purchase b-t-s merchandise, with 79 percent of respondents indicating its importance versus 80 percent a year ago. “Required by school” dropped to 45 percent from 51 percent, and replacement dropped to 28 percent from 30 percent.

Only 6 percent of NPD’s 66,000 online respondents had purchased b-t-s merchandise when the survey was conducted last month, while 17 percent hadn’t yet begun and 77 percent said they won’t shop specifically for b-t-s. A year ago, the respective figures were 8, 13 and 79 percent.

Cohen noted that, while the season is the second most important for retailers behind holiday, many stores, focused on making do with less stock, may wind up being short on inventory when b-t-s shopping winds up extending into mid- and even late September. “When I’m in the South, where schools start earlier, there’s a noticeable absence of the very basic commodity items stores are selling best — things like basic white polo shirts,” Cohen said. “An honest retailer will tell us that they might have cost themselves some sales, but most don’t know or won’t admit that they could have sold 24 of an item if they’d had them.”

Among the commodity basics that have sold best, Cohen noted, were denim and men’s underwear, much of it on a replacement basis.

The worst of the financial crisis hadn’t yet hit a year ago, so stores are facing more difficult comparisons than they will for holiday. Cohen said some parents are using the b-t-s season as a means of previewing fall merchandise.

The NPD report adds to the evidence, advanced by the poor same-store sales results for July, that the b-t-s season will be an exceedingly tough one for stores and the vendors that supply them.

Last month, the National Retail Federation said the average family with children will spend $548.72 on b-t-s purchases, down 7.7 percent from $594.24 in 2008. On Monday, three Citi retail analysts projected a 3 to 4 percent decline in same-store sales for August and September versus a 0.9 percent rise last year and a 4.3 percent average increase over the last decade.

The International Council of Shopping Centers on Tuesday forecast a same-store sales decline of 3.5 to 4 percent for August, “a slight improvement from the underlying trend between December 2008 and July 2009,” according to Michael Niemira, ICSC chief economist.

Perhaps sensing the tough times ahead, retail stocks fell for a second straight day Tuesday as the S&P Retail Index gave back 1.59 points, or 0.4 percent, to end the day at 363.71, performing slightly better than the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, all down more than 1 percent. The S&P 500 slipped back under the 1,000 benchmark, giving up 12.75 points to close at 994.35.

While most retailers saw their shares decline, Target Corp. picked up 22 cents, or 0.5 percent, to close at $42.20 after it was revealed activist investor William Ackman has cut his ownership stake in the company to 4.4 percent from 7.8 percent.