Retailers Get Ready for Back-to-School

Discussion
Jun 10, 2009
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By George
Anderson

Classes have
yet to let out for the summer but quite a few people in and around retailing
are already looking toward the back-to-school season as the next test of
just how well the business is coming along.

"I’m
not arguing that business is going to be positive,"
Jeff Van Sinderen, a retail analyst with B. Riley,
told Reuters. "I’m arguing the declines will start to moderate,
that’s what we’d like to see happen. If business is up, I’d be surprised."

"The
question to me is the amount of the decline, and probably low single digits
would be our guess," said Sandra Reese, principal at Grant Thornton
Corporate Advisory and Restructuring Services, who also spoke with Reuters.

An
emphasis on trimming inventory has some hopeful that while retailers may
see a slight dip in year-over-year sales, they might be able to squeeze
more profits from dollars spent. Recent reports have suggested that merchants
are engaging in much less discounting than they had toward the end of last
year and the beginning of ’09.

Doug
Hart, partner in the Retail and Consumer Product Practice at BDO Seidman,
believes that short of serious financial problems, parents are going to
spend on their kids for back-to-school. "It’s discretionary spending,
certainly, but it’s not considered to be a luxury," he told Reuters.

Discussion Questions:
What are you looking for in the upcoming back-to-school season? Do you
think there will be any surprises? Will we see retailers doing things
a bit differently to find the right emphasis on top and bottom line growth?

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9 Comments on "Retailers Get Ready for Back-to-School"


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Dick Seesel
Guest
11 years 10 months ago

The biggest question heading into BTS season is whether consumers will start to spend on discretionary purchases, not just necessities. The stores reporting comp sales for the past couple of months are showing “less bad” conditions, but that’s a long way from good. Back-to-school necessities may include new jeans and shoes for the kids, not just school supplies and so on…will customers be tempted to “trade up” on the denim or sneaker brands that they buy, or will they continue to cut corners? And–more importantly–will customers be in a self-purchase frame of mind like a couple of months ago, if the signs of economic recovery continue to be mixed? One thing is for sure: Retailers will head into BTS with very lean inventories, since they probably put their plans in place at the very depths of the recession six months ago.

David Biernbaum
Guest
11 years 10 months ago

The true impact of the economy didn’t happen until most of the Back-To-School event was over in 2008. However, the first sign of an economic recovery will be that the event in 2009 will hold pace with 2008. I also believe retailers will have a good summer overall; at least it will exceed the dismal expectations.

Lee Peterson
Guest
11 years 10 months ago

This is the first time we’ll see “corrected” inventories at retail in a year so, you’ll see far fewer incredible deals (70% Off!) and more realistic–albeit lower–prices as well. We still feel numbers will be slightly down though as the full impact of the recession didn’t hit until September.

Fourth quarter is when things will level off, especially for apparel and other ‘disaster’ categories. Keep in mind though, that those numbers will be what we used to call “junk on junk” (use your imagination for what term we really used vs junk)–in other words, poor numbers two years in a row.

In our view, it’s still going to be a discounter’s paradise for some time to come, especially this Holiday season.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 10 months ago

Both the run-up in retail stocks and the recent Consumer Confidence Index are signaling that a turnaround is in the works. Investors, in particular, have been signaling that the retail sector will be among the leaders, not the followers.

I think business will turn before long, but not before back-to-school. It isn’t until we get into mid-September, and on into October before the comps turn favorable. That corresponds to when things went off a cliff last year.

That may not feel like much of a turnaround, but we are working in a new world, with a new normal. We’re putting in a base now, so the upturn in the fall, no matter how modest, will still represent improvement, and have just as importance psychologically as it has financially.

Gene Detroyer
Guest
11 years 10 months ago

Store inventories will be leaner for the better managed retailers. Much of the discounting that we have seen at retail in the last 15 years has been driven by poor inventory management and the desire for retailers to make comp sales a key measure rather than retail profitability. With leaner inventories, there will be less discounting. With less discounting, comp sales could drop as much as 15% and despite that the retailer could end not just more profitable but with better profitability metrics.

Fortunately for retailers, BTS is a time when customers must make some purchases. Kids grow, so a pair of new sneakers and jeans is certainly necessary. But, customers will continue to be restrained in their purchases. On the school supplies side, look for a surge in internet purchases. School supplies are commodities and the internet will provide the best pricing.

The only surprise will be if sales are up at any retailer other than Walmart.

Carol Spieckerman
Guest
11 years 10 months ago

I’m optimistic about BTS now that retailers have corrected inventory levels, rationalized SKUs like there’s no tomorrow and on top of it, the consumer mood is lighter. These factors alone could make BTS the first success season of the year. I’m betting on it.

Steven Collinsworth
Guest
11 years 10 months ago

My take on the BTS season is that it will be way down vs. last year. (Recall last year began just prior to the “bad news” parade on the economy.) This year will be a back to basics inferno with few splurges on the high-end merchandise and gadgets retailers have used to offset the thin margins on the basic but necessary SKUs.

My basis is few (very few) people will be at the point of recovery in their household financial situations by August, for which many economists are now beginning to hedge their original forecasts of recovery and place it more into mid 2010.

Tim Henderson
Guest
Tim Henderson
11 years 10 months ago
The BTS shopping season is definitely the next big shopping occasion to watch. I’m interested in gauging the shopping/spending behaviors of three key consumer groups – the all-important Mom shopper; younger consumers, in general, especially in the apparel and home/dorm furnishings categories, and lastly, grandparents and other relatives who may be contributing to BTS spending, especially given the tough summer job market that teens had to navigate. I can’t even begin to guess whether sales will be up or down, but the post-BTS numbers should be a good gauge for how consumers are feeling about spending overall as they enter the very important fall and winter holidays. That said, let’s not forget that BTS shopping is much different now than in year’s past. For example, consumers are just as likely to be shopping right now for BTS items as they are to shop during the more traditional July/August time frame. In years past, students have also started waiting until after returning to school to do some shopping so they can gauge what’s hot and what’s… Read more »
Mike Osorio
Guest
Mike Osorio
11 years 10 months ago

I do think we’ll see signs of life this back-to-school season. The students themselves will drive some of it, because their spending power has not taken a hit from stock or housing losses. The best of the retailers out there will continue to innovate and offer cool must-have apparel. My concern is that with so many retailers still unable to get solid financing, most will play it safe, get too basic and alienate the core customer. The winners are likely to be the H&Ms of the world, who have shown the ability to continuously source and deliver great looks at terrific prices.

I predict a reasonably decent BTS, leading into a reasonably decent fall and holiday. But only because last year was so dismal. The weaker players will file Chapter 11 in growing numbers and the strong will significantly grow market share. Watch for newer niche players with no debt and interesting products/concepts to rise up.

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