Back-to-school season starts slowly

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NEW YORK — Shoppers are holding off on back-to-school shopping, and those who delay long enough might be rewarded with steep discounts from desperate retailers.

School uniforms by Izod are displayed at JC Penney.  Shoppers worried about finances showed more interest in buying discounted summer merchandise in July than in picking up brand new fall clothing.   MARK LENNIHAN/ASSOCIATED PRESS
MARK LENNIHAN/ASSOCIATED PRESS
School uniforms by Izod are displayed at JC Penney. Shoppers worried about finances showed more interest in buying discounted summer merchandise in July than in picking up brand new fall clothing.

Revenue at stores open at least a year – an industry measure of a retailer’s health – rose 3.5 percent in July, the slowest pace since March, according to a tally of 11 retailers by the International Council of Shopping Centers. The figure, which excludes drug stores, declined from a 5.5 percent increase in June.

Costco Wholesale Corp., typically a strong performer, was among retailers reporting disappointing figures.

Many stores were already offering discounts and other come-ons to get shoppers to spend on the new shipments of fall clothing that started flowing in mid-July. Experts say even more deals are coming this month as stores try to boost sales for the back-to-school season.

“It was a lousy start,” said Walter Loeb, an independent retail consultant.

Only a sliver of retail chains now report monthly sales figures, and the list doesn’t include Wal-Mart and many other large chains. But Thursday’s tally adds to evidence that shoppers are being frugal about their purchases, particularly clothing. The back-to-school season is the second-biggest selling period behind the winter holidays.

A clearer picture of how the back-to-school season is faring will emerge next week when major retailers including Wal-Mart Stores Inc. and Macy’s Inc. report second-quarter financial results.

Overall, the back-to-school season faces a big challenge: Shoppers are shifting spending away from clothing and toward bigger-ticket spending on their homes and cars because they have more credit available, said Stifel Ni­colaus analyst Richard Jaffe.

He says they’re using this “fiscal freedom” to spend on the more expensive items, cutting into lower-priced impulse buys like clothing. That has stores competing hard for dollars.

July is when stores clear out summer merchandise to make room for goods for back to school. Slow sales indicate that shoppers are holding off on buying as they face other expenditures. While jobs are easier to get and the turnaround is gaining momentum, most are juggling tepid wage gains with higher costs of living.

Americans are still trying to digest the 2 percentage-point increase in payroll taxes, which took effect Jan. 1. That means that take-home pay for a household earning $50,000 a year has been sliced by $1,000. Gas prices are rising again, and on top of that, shoppers are being increasingly forced to pay for more of their children’s school supplies, sometimes including books.

That has forced parents to stick to necessities. Major retailers like Wal-Mart Stores Inc. have noticed that they’re staggering their purchases instead of having one big back-to-school shopping spree.

Amanda Simpson, 38, and the mother of a 6-year-old daughter and a 1-year-old boy, reflects the cautious trend.

Simpson said she is budgeting $150 for clothing and $50 for school supplies for her daughter. She plans to buy some of her daughter’s clothes at local thrift shops and instead of buying one $35 pair of shoes, she will buy three $15 pairs.

She is staggering these purchases and says she needs to budget in case of surprise expenses.

“I am much more conscious of how I spend,” said the Coppell, Texas, resident. “We are not in that position that we are going to get huge raises.”

Helen Gym, 45, who has three children, ages 16, 14 and 10, said back-to-school clothing is not a top priority. Gym, whose children go to Philadelphia public schools, said the fiscal crisis there is forcing parents to pay for more supplies, which could mean books.

“We’re doing what we can afford and we are trying to be thoughtful,” said Gym, who works part-time for a community organization. “I stopped doing the massive back-to-school (shopping) thing.”

Against this background, Michael P. Niemira, chief economist at the International Council of Shopping Centers, expects that total sales for the back-to-school season will rise 3.1 percent from last year to $42.2 billion. That would be less than the 3.6 percent gain in 2012, but near the 3.3 percent average annual increase for the past 10 years.

Families with school-age children are expected to spend an average of $634.78 on clothing, shoes, supplies and electronics, down from $688.62 last year, according to a survey of about 5,600 shoppers from the National Retail Federation that was conducted by Prosper Insights & Analytics.

Costco said Thursday its U.S. and international revenue each rose 4 percent in the four-week period that ended Aug. 4, a performance that fell short of Wall Street estimates. Analysts surveyed by Thomson Reuters expected, on average, revenue growth of 5.1 percent for the total company and 4.5 percent and 5 percent, respectively, from the U.S. and international portions.

Gap, which operates its namesake stores, Banana Republic and Old Navy, reported late Thursday that revenue at stores open at least a year rose one percent in July. Analysts had expected an increase of 1.6 percent. By division, the company’s namesake global business was up 7 percent, while Banana Republic’s worldwide sales were down 1 percent and Old Navy’s down 5 percent.

Among the bright spots in the reports was L Brands, which owns Victoria’s Secret and Bath and Body Works. The retailer said that revenue at stores open at least a year rose 3 percent in July, better than expected, and the company raised its second-quarter earnings outlook. Analysts expected a 1.5 percent increase for the four weeks ended Aug 3.

GEORGIA SALES TAX HOLIDAY

School supplies, computers, clothing and footwear will be exempt from taxes today and Saturday.

NEW YORK — Shoppers are holding off on back-to-school shopping, and those who delay long enough might be rewarded with steep discounts from desperate retailers.


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