Aug. 10 (Bloomberg) -- With Abercrombie & Fitch Co. giving away 1,000 iPads and J.C. Penney Co. offering $10 million of free haircuts, U.S. retailers are pulling out the stops to make sure they get a share of what may be the best back-to-school shopping season in a decade.
Back-to-school sales, second only to the end-of-year holiday shopping season, may rise 2.5 percent to a record $40.4 billion this year, as consumers replenish wardrobes with more disposable income and the number of students increases, according to the International Council of Shopping Centers.
Retailers, stinging from lackluster sales in the first half of the year, are tempting shoppers with promotions to distract them from anxiety tied to the U.S. economy, where the unemployment rate has been above 8 percent for more than three years. Kmart is providing free flu shots to loyalty members who spend at least $100, and Gap Inc.’s Old Navy gave out backpacks and OfficeMax Inc. coupons to shoppers who spent $50 or more.
“The retailers are very aggressively going after foot traffic this year,” Penny McIntyre, president of Newell Rubbermaid Inc.’s consumer group, said in a telephone interview. “With all of the nervousness around the economy, the retailers have very much focused on the back-to-school season and doing very innovative programs.”
Retailers could use a boost. While the Standard & Poor’s 500 Retailing Index is trading at about a 41 percent premium to the broader S&P 500, that’s down from a 51 percent premium in April after retailers posted their fourth straight month of same-store sales that topped analysts’ estimates.
It’s an important period for retailers, as the season is highly correlated to sales in the holiday period, Jennifer Davis, an analyst at Lazard Capital Markets in New York, wrote in a July 23 note.
The number of students enrolled in preschool through 12th grade will probably rise to a record 54.9 million this fall, up 159,000 from last year, and is projected to increase annually through 2020, according to the National Center for Education Statistics. This year’s figure includes 240,000 more public-school students in preschool to eighth grade, a group that tends to be a major driver of back-to-school sales.
The U.S. population has grown to an estimated 312.8 million as of Jan. 1, mainly from more births and fewer deaths, a 4 million increase from April 1, 2010, according to the Census Bureau.
Sales will increase at a slower pace than last year’s 3.5 percent gain, according to the ICSC.
U.S. students typically start school in August or at the beginning of September after two to three months of summer vacation. Most back-to-school sales fall in August and September.
Many parents who held back on spending last year will be more apt to restock wardrobes this season, the National Retail Federation said in a report last month. The Washington-based group estimates a 22 percent increase in back-to-school shopping to $83.8 billion, the most in the survey’s 10-year history. The NRF’s data includes all retail channels, while the ICSC tracks family clothing, shoes, electronics and books.
The NRF’s forecast may exaggerate potential spending because it measures consumer intentions, which can differ from actual sales, Deborah Weinswig, an analyst at Citigroup Inc. in New York, said in an Aug. 5 note.
“We expect consumers to focus on finding the basics for the best price and potentially foregoing discretionary back-to-school purchases,” Weinswig said in the note.
J.C. Penney, based in Plano, Texas, has more than 703,000 appointments booked for the typically $14 haircuts, available to children in kindergarten through sixth grade this month, said Ann Marie Bishop, a spokeswoman. Its salons performed almost 104,000 of the cuts on Aug. 1, she said.
The fourth-biggest U.S. department-store company, led by former Apple Inc. retail chief Ron Johnson, is looking to boost store traffic after sales fell 20 percent in the first quarter and as analysts project a similar decline in the three months ended July 31. It’s also a chance for the chain to showcase its locations’ new stores-within-a-store layout.
“Parents have been thrilled with the offer,” Bishop said in an e-mail. “It has been popular with current customers, and it has also brought new customers in to our salons.”
Abercrombie, the teen retailer that reported a second quarterly drop in same-store sales last week, is running a back-to-school sweepstakes with prizes including 1,000 Apple iPads, promotional gift cards and trips to flagship stores in Paris and Milan. From July 14 through Labor Day, weekend shoppers who visit the Columbus, Ohio-based company’s stores will receive entry cards with codes that they can text immediately to see if they won.
Retailers are using smartphones and social media more often and more creatively as customers increasingly preview merchandise online, Alison Paul, who leads the retail group at Deloitte LLP in Chicago, said in a telephone interview.
Kohl’s Corp., the third-biggest U.S. department-store company, will introduce a multichannel “Shop it to Win it” sweepstakes this month, in which shoppers who spend $25 or more in-store, online, at kiosks or on mobile devices will get game codes for giveaways, Vicki Shamion, a spokeswoman for the Menomonee Falls, Wisconsin-based retailer, said in an e-mail.
Newell Rubbermaid has found a “tremendous amount of success” by interacting with the more than 3 million fans of Sharpie pens on Facebook with coupons and contests, McIntyre said. While it’s early in the season, initial reads at retailers have been “very positive,” she said.
Old Navy, with about 1,000 locations, planned to give the free backpacks and OfficeMax coupons to the first 70,000 customers that spent $50 or more in stores on Aug. 5, according to an Aug. 1 statement.
Back-to-school sales this year may include $53.5 billion from college spending, according to a survey of 8,509 consumers conducted by BIGinsight from July 2 to July 9 for the Washington-based NRF. Parents of children in kindergarten through 12th grade may spend an average of $689 from $604, driven by clothing and accessories, while college families may spend about $907 on everything from dorm furniture to school supplies.
Last week, more than 20 U.S. chain stores from Gap Inc. to Macy’s Inc. posted July same-store sales that rose an average of 3.3 percent, beating analysts’ estimates for a 1.4 percent increase.
“It’s going to be a very strong back-to-school this year,” Deloitte’s Paul said. “One, there’s some pent up demand. Two, I think retailers have really come off the sidelines and done some very creative merchandising and advertising, and so the all-important parent is really being encouraged to get out there.”
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