Retailers on Track for Solid Gain in Back-to-School Sales

Retail

Published: August 29, 2017 1:30 pm

Last Updated: January 12, 2020 8:40 am

The back-to-school shopping season has been more upbeat across the retail industry than the analysts at Retail Metrics have seen for a few years. Same-store sales for the month of August are expected to rise 4.2% year over year, a healthy gain by recent standards.

There are a couple of caveats, however. First is that same-store sales last August rose just 0.3% compared with 2015 sales, so the comparison is a relative slam dunk.

Second, the bulk of the gain is expected to be made by Costco Wholesale Corp. (NASDAQ: COST). Retail Metrics is projecting a same-store sales gain of 5.3% in August, including fuel and foreign exchange effects.

Among retailers not having much success during the back-to-school season are Cato Corp. (NYSE: CATO) and L Brands Inc. (NYSE: LB), projected to see same-store sales declines of 8.0% and 4.4%, respectively. Buckle Inc. (NYSE: BKE) is tabbed for a 5.8% year-over-year decline, and Stein Mart Inc. (NASDAQ: SMRT) is forecast to see a year-over-year drop of 3.0% in same-store sales.

Retail Metrics noted:

August weather has generally been favorable for Back-to-School selling across the country with temperatures running below normal, particularly in the Northeast and Midwest. Hurricane Harvey hammered the Texas coast at the end of the August selling month, likely limiting the impact on August sales results. Wide-spread damage across the Houston metropolitan area, which is the fourth largest in the United States, will likely have a noticeable negative impact on September sales. Promotional levels remain somewhat elevated in apparel but in check throughout much of retail. The grocery segment is in the midst of a significant price war with relatively new entrants Aldi and Lidl putting downward pressure on prices in markets they have entered. Additionally, Amazon took ownership of Whole Foods yesterday and introduced widespread prices cuts across the store. Inventories appear to be in decent shape across the mall, which should limit markdowns and margin pressure as [back-to-school] winds down and fall selling proceeds. Our store checks over the past weekend found decent foot traffic at Costco, Walmart, Target, Kohl’s, TJ Maxx, and Marshalls, all of which are off mall.

The National Retail Federation (NRF) has forecast that K-12 spending will total $29.5 billion this year, up 8.3% compared to 2016 spending. Back-to-college expenditures are expected to reach $54.1 billion, representing a gain of 11.5% year over year.

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