Steamy July temperatures, high gas prices and a slowing U.S. economy are all contributing to create a very different start to this year’s back-to-school shopping season.
While school shopping was once solely a late August and early September boon for retailers, kids go back to school earlier now, and stocks of sweaters and corduroys have been replaced by more warm weather offerings.
“Buy now, wear now” warm weather styles have hit the malls with a bang, but analysts are divided over how much economic pressures will keep young shoppers and their parents away.
On Monday, Target Corp. — currently showcasing its back-to-school dorm room essentials —lowered its July sales forecast.
And recent surveys give a mixed picture of consumer behavior. A National Retail Federation back-to-school report found that families will spend more this season than last, with apparel and electronics driving sales. But an America’s Research Group survey found that nearly half of U.S. parents have convinced their children to wear last year’s clothing this season.
“Everybody is down on the economy,” said retail consultant Kurt Barnard. “Back-to-school is going to be very difficult and is going to be a period where a lot of retailers will look wistfully at what they did last year.”
But Brean Murray, Carret analyst Eric Beder said that after a relatively dull spring and summer, teens will welcome new styles at trendy retailers such as Wet Seal Inc. and Guess Inc. And teens will continue to buy through September once they have seen what their peers are wearing, creating a double-edged sword for retailers.
“If you’re fashion-right, your season will be longer and you’ll take advantage of it,” Beder said. “If you’re not, you’re in purgatory for a lot longer.”
Analyst Marshal Cohen of NPD Group said consumers sense a lack of must-have items and there is a willingness to wait before buying. He expects that, as shoppers cut back on impulse buying, the winners will include J.C. Penney Co. Inc. and Kohl’s Corp., while higher-end mall darlings such as Coach Inc. will suffer.
“The end of the third quarter is where you’ll see the absence of back-to-school. And it’s a clear indication of what’s going to happen for (the) holiday,” Cohen said.
Retailers who focus on the teen market and are usually insulated from economic pressures may get a boost this year with the increased emphasis on apparel that can be worn right away, as opposed to later when the weather turns colder, some analysts say.
“People aren’t willing to fund a wardrobe they don’t wear for three months,” Sanders Morris Harris analyst Liz Pierce said.
Youth retailers who succeed will be those such as American Eagle Outfitters Inc., who create strategies to overcome consumers’ resistance to buying, analysts say. Barnard also cited Federated Department Stores Inc. as creating excitement in its new Macy’s stores.
American Eagle, which introduced a large number of cold-weather styles last year, is giving customers free movie passes in exchange for trying on its new assortment of jeans.
“Kids will go as a destination to American Eagle,” said The Doneger Group market analyst Tim Bess. “I think it will hurt the other guys.”
That includes Abercrombie & Fitch Co., a winner in the last two back-to-school seasons that may now be hitting a snag.
Analysts have cited concerns Abercrombie’s fall assortment includes too many heavy fabrics and distressed denim styles that do not gibe with today’s pared-down look. On Tuesday, A.G. Edwards downgraded the stock, which has dropped 7 percent since the beginning of July, citing consumer spending concerns.
But struggling teen retailer Hot Topic Inc., may get a boost from the skinny jeans trend, analysts say, as the look fits into the company’s rocker sensibility.