Through the end of August, go back to school with The Motley Fool. You'll find more educational book reviews, stock analysis, and financial advice here.
Back in my day, back-to-school shopping meant notebooks (paper ones, not computers), pencils, a binder, and if you were really lucky, maybe one of those newfangled solar calculators. These days, the changing definition of "school supplies" might cause many parents' wallets to have a panic attack. But that same astronomical back-to-school spending spells good news for the companies that lure back-to-school shoppers in droves.
The rising cost of education?
The National Retail Federation (NRF) has a very optimistic view estimate for this year's average back-to-school spending. The trade association's annual survey claims that the average American family will spend $527.08, up from $443.77 last year. (Another research firm, NPD, is a little bit less enthusiastic; its survey respondents said that their spending will be about the same as last year.)
Not surprisingly, some of the financial constraints facing many American families might push shoppers to the one-stop shopping of big-box discounters. After all, you can find everything you're looking for, and with gas prices so high, who wants to drive all over town? NRF says three-quarters of shoppers will hit discounters for items on their lists, although department stores and specialty stores will also experience increased foot traffic.
So what's hot as kids head back to class? Consumer electronics are big, sometimes in surprising ways, and new clothes are also in vogue, as '80s fashions creep back into current trends.
Sure beats a slide rule
Forrester Research says that PCs are the No. 1 back-to-school item. Although it's no stretch to believe that college freshmen need a computer these days, younger students are increasingly shopping for PCs as well, leaving investors wondering how the back-to-school push will benefit computer makers.
Will student sales help Dell (NASDAQ:DELL) get back in the saddle, or will its arch-rival Hewlett-Packard (NYSE:HPQ) steal the show? (Laptop sales have been on fire recently, though in Dell's case, a massive battery recall has made that phrase a bit too literal.)
And what about Apple (NASDAQ:AAPL)? Its Macs were traditionally marketed toward the education market, and BusinessWeek recently suggested students are better off buying a Mac. Strange as it may seem, many kids also consider iPods must-have items. Most iPods' hard drives and flash chips may be filled up with tunes and TV shows, but some colleges have begun making educational video and audio content available for iPod playback as well.
To stretch the definition of back-to-school shopping still further, I found a Washington Post article where one teen interviewee said video games are on his end-of-summer shopping list. Game publishers like Electronic Arts (NASDAQ:ERTS) will hardly complain if lots of kids have the same idea, viewing games as a legitimate part of the back-to-school shopping tradition (as sketchy as that logic may be to us older folks).
The return of the material girl
Fashion retailers, of course, hope that kids will fill their fall wardrobes with items from their shops. They also hope that parents will fork over decent back-to-school allowances for the trendiest new gear, even though people have been sweating the slowing real estate market, inflation, and the high price of gas.
For those of us who remember the eighties -- and, er, actually wore leggings, big shirts, drop-waisted dresses, and asymmetrical collars the first time around -- the time that has filled us with dread ever since the '70s came back has arrived. Yes, it's the second coming of '80s fashions, which many of us contend didn't look so hot the first time around.
We'll just have to see how the 80s-inspired looks will go over, "skinny jeans" and all. Fashionistas claim the look's definitely hot, but teens have yet to confirm that opinion. Although many retailers had a heyday with denim over the last couple years, they might have to stay on their toes, seeding their stores with the right balance of trendy goods and more conventional duds, since the retro-'80s trend is still pretty new on the scene. This year has been a bloodbath for many retail stocks, so investors will be watching teens' shopping trends closely.
Judging by recent solid earnings reports, some of the "most likely to succeed" retailers for back-to-school wardrobes include American Eagle Outfitters (NASDAQ:AEOS) and Abercrombie & Fitch (NYSE:ANF). Plenty of other retailers hope for teens' and college students' dollars as well, including J. Crew (NYSE:JCG) and Urban Outfitters.
Shop till you drop?
Although August is traditionally known as back-to-school shopping month, the season has likely only just begun: some say it's starting a bit late this year (right about now, in fact) and will bleed into September. The National Retail Federation forecasts that back-to-school spending will hit $17.6 billion this year, up 31% from last year's levels. Although that spending is expected to be dominated by electronics and apparel, many retailers hope to score by peddling furniture, decor, and gadgets that not only make dorm rooms feel like home, but help young adults express their newfound independence.
Retail investors like me, whose chosen companies might benefit from a back-to-school buying frenzy, are surely hoping that kids and parents alike consider the stores behind our holdings "too cool for school."
American Eagle Outfitters, Dell, and Electronic Arts are Motley Fool Stock Advisor recommendations. Dell is also an Inside Value selection. To find out how our advisors are schooling the market, click on the newsletter links and take a free trial.
Alyce Lomax owns shares of Urban Outfitters, but of none of the other companies mentioned.
