U.S. retailers appear on track for a steady but unspectacular back-to-school season.
This story first appeared in the July 11, 2013 issue of WWD. Subscribe Today.
The stores that still report comparable-store sales results on a monthly basis today are expected to report a mean increase of 3.6 percent for June, according to Thomson Reuters. Research and tracking organizations expect the increase for b-t-s to fall within a point of that mark for the period, with last year’s strong showing of a 5.9 percent increase in GAFO (general merchandise, apparel, furniture and related merchandise) and only marginally stronger job data holding increases for the school year in check. Improved consumer confidence and some pent-up demand, however, should work in retailers’ favor.
“The economy and consumer spending are like a car stuck between first and second gear,” said Craig Johnson, president of Customer Growth Partners in New Canaan, Conn. “They’re not in neutral and they’re certainly not in reverse, but they’re in the midst of anemic, mediocre growth.”
Johnson expects b-t-s sales to increase 3.4 percent next month as growth in consumers’ real disposable income has languished at about 0.7 percent. Last year, he noted, b-t-s sales grew 4.2 percent with disposable income up a slightly better 1.6 percent. His projection excludes categories not directly affected by b-t-s purchases such as automobiles, restaurants, food and home improvement.
Apparel is expected to rise 3.8 percent and e-commerce to add another 11.2 percent, “slightly lower than last year but still very robust.” Lower-income consumers remain “very stressed,” he said, making for difficult growth prospects for many mass and discount retailers.
The NPD Group in Port Washington, N.Y., tallied responses from about 2,500 consumers, more than one-third of whom will be involved in b-t-s buying. Among the buyers, those planning to buy online or in department stores rose 4 points from the 2012 survey, to 20.6 and 30.3 percent, respectively, while those intending to shop at apparel specialty stores rose 3 points to 18.4 percent. Mass merchants and national chains remained dominant, attracting 78.4 and 33.7 percent of the sample, respectively, but were down 8 and 4 points in share of expected shoppers from a year ago.
Overall, 32 percent expect to spend more on b-t-s than they did last year, versus 44 percent who expect to spend about the same amount and 24 percent who expect to spend less.
The share of those intending to purchase apparel rose 11 points from a year ago to 30.2 percent, as those intending to buy footwear picked up 9 points to move to 20.2 percent of shoppers.
To Marshal Cohen, NPD’s chief industry analyst, the swings in both channels and categories suggest that consumers are ready to become less constrained in their shopping. “B-t-s is already an emotionally charged category because your kids’ education and their futures are the last place people will cut back,” he said. “Now that consumers have been back to buy some of the essentials, it frees up money on the discretionary side.
“But for the last few years, kids have been more concerned about what they’re holding, in the way of a smartphone, than about what they’re wearing,” he continued, “more aware of what they’re putting into their bodies than about what they’re wearing on them.”
For that to change, retailers and brands will need to take more risks with style and innovation. “We lost a lot of that coming out of the recession, and we’ve got to get it back,” Cohen concluded.
ShopperTrak, the Chicago-based counter and analyzer of retail foot traffic, expects sales next month to grow 4.3 percent, greater than the 0.6 percent increase expected in foot traffic.
“I think there’s a bit of pent-up demand from the last few years and even early this year, and I think some of it will be released for back-to-school,” said Bill Martin, founder of ShopperTrak. “The unemployment number is down, although not dramatically, and there’s less political and economic uncertainty than there was a year ago. I think the season will be relatively strong.”
Capital Business Credit’s quarterly survey of wholesalers suggests that retailers agree with Martin’s assessment. Forty-six percent of the importers and manufacturers it surveyed reported their b-t-s orders from major retailers were up, well above the one-third who felt that way a year ago. Of those experiencing growth this year, one-third said it was in a range of 3 to 5 percent, and a quarter put the range at 6 to 8 percent.
Andrew Tananbaum, chairman of CBC, a nonbank lender, told WWD, “Wholesalers have been looking for reasons to be a bit more optimistic about the trends in the industry, and there’s no question that, in the last 60 to 90 days, they’ve had it. Their greater optimism right now isn’t based on forecasts or last year’s performance but on the orders and reorders they’re getting from the stores.”
The National Retail Federation is scheduled to release its b-t-s forecast on July 18.