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Industry Places Bets on Back-to-School

Stores ranging from Macy’s to J.C. Penney to Wal-Mart by mid-July will begin to bombard families with b-t-s campaigns.

The back-to-school blitz is around the corner — and the stakes are higher than ever.

The season comes as there are growing fears among executives and analysts of “a double dip” recession. On top of that, weak consumer demand in May and June has created rising inventories and the potential of steeper markdowns in a reminder of the nightmare days of late 2008.

Stores ranging from Macy’s to J.C. Penney to Wal-Mart by mid-July will begin to bombard families with b-t-s campaigns, and the agenda is robust, built around digital initiatives, celebrity tie-ins, price promotions and new merchandise they can call exclusive, as retailers scramble for market share amid consumer lethargy. For these retailers, b-t-s represents the second-biggest volume period of the year, behind only Christmas.

“There seems to be a frantic quality out there,” said a chief executive officer of a major specialty chain, who requested anonymity. “Everyone is concerned about second-half comparisons. Everyone must battle for someone else’s business.”

Store executives are seeking low-single-digit gains for the season and are prepared to face the worst, having kept inventories and expenses down. According to Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, current spending trends suggest flat to moderate growth. “Until consumer confidence recovers, consumers will be cautious with discretionary spending,” Berry said, explaining that kids are waiting until school is in session to shop for apparel, and that retailers probably won’t see a bump in sales until September or October. But he added: “I don’t want to paint a bleak picture….Kids grow, even in a recession.”

More hopeful was Betty Chen, an analyst at Wedbush Morgan Securities. She expects the bulk of b-t-s shopping to occur in August, as consumers look to take advantage of tax-free apparel periods in various states, such as in Florida from Aug. 13 to 15 on books, clothing and footwear under $50 and school supplies under $10. There may be some residual shopping in September and October, she added. “Consumers are very event driven this year. Back-to-school will be a catalyst for them to spend.”

Among the retailers she cited as potentially faring well were Aéropostale and Gymboree, for the values they offer based on their prices and level of quality, but other sources see fast-fashion retailers Forever 21, H&M and Zara eating into such businesses as Abercrombie & Fitch and Aéropostale.

At The Children’s Place, “We will have a much, much greater focus on marketing and our fashion-value equation for this back-to-school period,” said Jane Elfers, president and ceo of Children’s Place Retail Stores Inc. “We really want to get across to the consumer the value we have in our products. That’s our space.”

On Wednesday, Macy’s characterized its b-t-s initiatives as “aggressive” and geared to make the store more appealing to tweens, teens and college coeds. “Macy’s will be extremely competitive….,” said Martine Reardon, Macy’s Inc. executive vice president of marketing.

Macy’s initiatives include the launch of Material Girl by Madonna and her daughter Lourdes Leon, as well as a new young men’s fashion brand, line extensions for three current juniors brands, exclusive “Glee”- branded product, a new Mstylelab sitelet for teens, and a partnership with Microsoft for an exclusive preview of the Kinect for Xbox 360.

J.C. Penney will battle back by launching exclusive MNG by Mango fast-fashion shops next month. Penney’s is also using “hauls” for the first time, which entail Webcams with b-t-s consumers critiquing the retailer’s merchandise. They’re not censored at all except if the language gets salty, Penney’s said.

Generally, pricing will be competitive, Chen said, though she doesn’t see price wars as part of the scenario, with retailers preplanning promotions, unless something “catastrophic” occurs or if there’s a cold snap.

Wal-Mart, the biggest b-t-s destination, is another wild card. The company could unleash an early round of price rollbacks to preempt price promotions at competitors, as it did last Christmas. While a Wal-Mart Stores Inc. spokeswoman said the retailer “doesn’t have any big b-t-s plans to announce right now,” the apparel departments of its newest stores will be easier to shop. In juniors, for example, all of Wal-Mart’s own brands will be merchandised as shop-in-shops in a brand alley, with Faded Glory in front. Wal-Mart will carry a new Hannah Montana collection from Disney Consumer Products featuring sequin-embellished T-shirts, vests, jeans and hoodies, priced under $17. There’s also a Hannah Montana beauty line, including a lip balm concealed in a toy microphone.

“Wal-Mart is the acknowledged price leader and can be expected to drive traffic to their stores via price. It’s the kind of thing that happens at the beginning of every important promotional season,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates.

At Target, “the big news is that our Shawn White apparel line is moving into shoes, bowing July 11. Mossimo is the big go-to for boys and girls. A lot of the trends you’re seeing in magazines for celebrities are hitting the floor pad for girls — the trends that we’re seeing for adults, such as embellishment on Ts, is going into girls’ in a cute, fun way,” said a Target Corp. spokeswoman.

Target will sell for tweens a line called D-Signed, based on wardrobes of Disney Channel characters. Described as a Garanimals for tweens, each character’s group of 12 pieces can be worn 40 ways and will be priced around $20. Disney’s product rollout also involves trendy princess-themed apparel to be sold at Macy’s, while Forever 21 is getting an updated, leggy take on what Minnie Mouse would wear.

For the student body, Macy’s cited layering in varying fabrications and textures, rich colorations such as burnt ocher, chestnut brown, deep purple and midnight blue, a vintage mood in contemporary sportswear, and soft fleece fabrications as taking center stage. Among Macy’s exclusives: “Glee”-branded Ts and hoodies, retailing from $19.99 to $34.99, and a Slade Wilder collection for young men, priced from $19.50 to $39.50, that will be launched with sky banners, floor decals, digital kiosks advertising in more than 20 malls and mobile marketing offering a free T-shirt while supplies last.

Macy’s American Rag private brand is adding plus sizes, and the juniors floor is adding Jenni Intimates for activewear and fashion pieces. Macy’s Jessica Simpson brand is extending from shoes, handbags and jewelry, to ready-to-wear for juniors.

“There is uncertainty, but retailers are in a much better position to withstand less-than-stellar increases,” Aronson said. “Right now, there’s less clearance clogging the system. So retailers will look fresh for back-to-school.”