August Same-Store Sales Point to Strong Back-to-School Spending

Industry observers worried that this year’s back-to-school predictions might be overly optimistic given the current economic climate. Indeed, with spending expected to increase by 14% and average spending per school-age child predicted to reach $688 from $603 in 2011, such worries seem warranted. Nonetheless, same-store sales numbers for August prove that the back-to-school season may be the boost retailers need to finish the third quarter strong and to position themselves favorably for the holiday season.

The vast majority of retailers exceeded analyst expectations for August. The 17 retailers tracked by Thomson Reuters posted a 3.6% increase in same-store sales for the month, exceeding the analyst forecast of a 2% increase. Teen apparel retailer Wet Seal was the only company to miss sales expectations, posting a sales drop of 18.3% when 17% was expected. Department stores Macy’s Inc. and Nordstrom Inc. performed particularly well this month, along with Gap Inc. and Target Corp. The strong showing by retailers in August indicates that consumers were ready for back-to-school season and willing to spend. Moreover, back-to-school shoppers eagerly sought new and on-trend products this year after holding back in 2011.

August same-store sales offered retailers an encouraging counterpoint to consumer confidence levels for the month, which reached their lowest levels since October 2011. Despite worries over unemployment and the uncertainties of an election year, August sales proved that consumers are resilient. With back-to-school season still an important gauge of holiday sales, retailers can take confidence in renewed momentum as the final quarter of the year draws near.

Retailers can also take heart in a strong finish to the third quarter as the trajectory for back-to-school spending continues to change. Back-to-school shopping is no longer an event lasting a single day or weekend.  Rather, it is increasingly a protracted process that starts earlier, ends later, and involves careful planning in between. Even with many kids back in school, the Labor Day holiday is now one of the busiest shopping weekends of the year, with many promotions and sales geared towards back-to-school shoppers. The year’s warm weather is further encouraging this pattern. Many parents will be waiting until well into September and even October before purchasing the latest cold weather styles for their kids.