Back-to-School Sales May Be Little Changed as Economy Slows

Back-to-school spending in the U.S. may be little changed from a year earlier as customers reject higher clothing prices and the slowing economy restrains electronics purchases.

Families with students in kindergarten through 12th grade plan to spend an average of about $603.63 on apparel and supplies, down less than 1 percent from $606.40 a year earlier, the National Retail Federation said, citing a survey of 8,684 consumers conducted by BIGresearch from July 1 to July 6.

Slowing U.S. economic growth and the 9.2 percent unemployment rate may weigh on shopping in the season, which trails only the holidays as retailers’ second-largest sales period of the year. About 44 percent of shoppers said the economy was forcing them to spend less, the group said.

“Families aren’t opposed to spending on what they need, but parents want their children to take a good look around at what they already have before deciding what to buy for back to school this year,” said Matthew Shay, president of the Washington-based NRF, said in a statement.

Total spending for all students, including those in college, will rise to $68.8 billion from an estimated $55.1 billion a year earlier as the number of students increases, the report said. College spending will likely fall 3.2 percent to $808.71 per student from $835.73 a year earlier.

The Standard & Poor’s 500 Retailing Index fell 3.55 points, or 0.7 percent, to 545.61 yesterday. The 31-company index rose 7.3 percent this year before today after surging 24 percent in 2010.

Sales at U.S. retailers, led by Target Corp. (TGT) and Limited Brands Inc., surpassed analysts’ estimates in June as discounted merchandise lured shoppers. Stores will charge more for back-to- school items, especially apparel, because of rising fuel and commodity prices, said Michael Niemira, chief economist for the International Council of Shopping Centers in New York.

Retailers are trying to be the first to get shoppers’ attention. Staples Inc. (SPLS), the largest U.S. office-supply retailer, on July 3 began promoting a “Back-to-School-Savings Pass” that offers 15 percent off of items such as calculators, backpacks and colored pencils.

In early July, Target posted a college checklist on its website, recommending items such as dormitory bedding, futons and desk lamps.

Macy’s Inc. (M) said in a statement July 18 it will promote flared denim jeans, plaid polo tops and vintage t-shirts. The chain also has begun promoting an upcoming Web series called “Wendy,” a drama that will feature “Camp Rock” actress Meaghan Martin as a Macy’s-attire-clad teen choosing between romantic partners.

“More promotion is necessary because consumers are going to reject higher prices on the apparel side of things,” Niemira said in a telephone interview.

Soaring Prices

Crude oil prices in the U.S. have soared 27 percent in the past year, making production and delivery more expensive for retailers. The price of cotton has gained 38 percent, reaching a record high in March and raising the cost of apparel.

Because of increases in apparel spending, parents will cut back on buying electronics such as tablets, music players and laptops for their children, Niemira said. Only half of families surveyed by the NRF said they would be buying electronics this year, a 17 percent decline from a year earlier.

Consumer spending in recent months has been strong and isn’t likely to drop off, even with the current economic challenges, Dan Popowics, a fund manager at Fifth Third Asset Management in Cincinnati, said in a telephone interview.

“There is a lot of poor economic news with unemployment, but back-to-school is a season where people shop for needs,” said Popowics, whose firm has $18 billion in assets under management, including Target shares. “So I expect we will have a modestly positive season.”

To contact the reporter on this story: Ashley Lutz in New York at alutz8@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.

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