Back to schoolAlthough firecracker remnants may still dot the nation's sidewalks, retail forecasters are already talking about back-to-school, the lead-in to -- and often a telling performance indicator of -- the holiday shopping season, when stores generate a disproportionate chunk of their annual sales.

The improved macroeconomic environment -- lifted in part by higher discretionary personal income and a lower unemployment rate -- is setting the stage for retail sales gains in the back-to-school period, according to Customer Growth Partners, the market research and consulting firm, and trade association the International Council of Shopping Centers, in just-released forecasts.

And everything from the latest models of tablet computers to jeans in bold colors will heat up sales, experts predict.

"The back-to-school shopping season is more than just for students, with some 7.2 million teachers and other school employees going back to work and among the pool of potential shoppers," Michael Niemira, vice president, chief economist and director of research for the ICSC, told DailyFinance.

The Macroeconomic Picture

Back to SchoolThe ICSC is forecasting back-to-school sales will rise 3% year-over-year to about $39 billion. That figure includes electronics, family clothing, shoes and book sales for July, August and September.

"Consumer fundamentals have improved relative to the same time last year, which is clearly a positive," according to the ICSC report. For one, the unemployment rate in May 2011 dropped to 9.1% from 9.6% in May 2010. "Not a lot of improvement, but some," the ICSC report says.

What's more, the Consumer Conference Board's Consumer Confidence Index in June was at 58.5, down from 61.7 in May, but "marginally stronger than in June 2010," the report says.
Based on growth in disposable income and pent up shopping demand, Customer Growth Partners is even more bullish on the back-to-school selling season, predicting that retail sales will rise 6.2% from 2010, to a record $467 billion, Craig Johnson, president of the firm, told DailyFinance. (That estimate includes all retail sales except automobile, restaurant, gas and home improvement sales for July, August and September.)
CPG's robust outlook reflects the growth in disposable personal income -- 3% above last year's level -- among the portion of the population that's still employed, Johnson says.

"Year in and year out, growth in disposable income is the single factor most closely associated with holiday sales growth."

What's more, consumers are saving less, which means they're poised to spend more. "Savings rates are normalizing," he says. "They peaked out at 8.2% during the depths of the recession exactly two years ago, and they're getting back in shouting distance of the normal 4%, and are at 5% now."
While consumers are still grappling with high gas prices, those increases peaked about a month ago and began falling, which should also help release pent up spending demand, Johnson says. Shoppers won't be splurging, but "we believe we'll see people buying again."

iPads for Fifth-Graders


Retailers are largely in summer clearance mode now, and will be setting their floors up for back-to-school over the next few weeks. When the selling season gets into full swing by mid-July, expect tablet computers, e-readers and smart phones to be the hot items.

What will be notable about this year is that tablets and smartphones "will be purchased for middle and upper-elementary school kids, such as fifth-, sixth- and seventh-graders," Johnson says. "The advanced technology is penetrating the younger grades."

Last year the Apple (AAPL) iPad was the only tablet game in town, but other tablet computers, such as Samsung's (SSNLF) Galaxy Tab and Toshiba's (TOSBF) new Thrive tablet are now on the market, as well as the iPad 2, Johnson says.

And some retailers are even offering shoppers incentives to upgrade to a new tablet. Target (TGT) is touting its electronics trade-in program, where shoppers can hand in a used iPad, iPod or video game in exchange for credit towards the purchase of an iPad 2.

Faux Fur, Red Jeans

Red JeansThe fall could mark a rebound in apparel sales, which have been tepid. Johnson believes pent up clothing demand will be unleashed in the back-to-school season for women's clothing.

Still, high cotton prices will put a damper on apparel purchases, and shoppers could end up paying 5% to 10% more for their new fall wardrobes, he says.

But shoppers will, for the most part, acquiesce, as cost increases "will likely be accepted by consumers," the ICSC report says.

Expect to see bold looks -- from fur to tribal prints -- as well as minimalist cuts and simple fabrics -- on retailers' shelves, fashion forecasters say.

"Summer days of running wild will turn into wearing wild things for the fall, whether the fur is faux or real," says Susan Scafidi, professor of the Fashion Law Institute of Fordham Law School. "The most on-trend pieces will involve mixed materials, like a faux fur jacket with leather or wool sleeves."

What's more, "lace looked like a popular fall trend even before Kate and William tied the knot, and now it's inevitable for both brides and the rest of us."

In footwear, which CPG predicts will be a strong back-to-school seller, cutout booties will continue to make a splash, which "means that we'll be breaking the old rule about open-toed shoes and tights," Scafidi says. And "wedges and chunky heels abound."

In addition, "denim no longer has the blues," Scafidi says. "Jeans are available in every color of the rainbow and then some. Traditionalists can ease the transition with cobalt, which complements any wardrobe, while the adventuresome reach for brighter hues."

H&M's head of design Ann-Sofie Johansson offered her take on the looks that will be hot for fall on the fast-fashion chain's web site.

These include "frontier fashions," such as ponchos, blanket wraps and tribal prints; "minimalism," in the form of simple coats and straight, wide trousers in smooth, flat fabrics with a thin belt; shrunken cardigans and wide skirts in silhouettes reminiscent of the 1940s and 1950s; and 1960s-inspired "fun and spirited" short, straight shift dresses, polo shirts and cropped skinny trousers in bold colors.

E-Commerce Hot, Teen Retailers Not

NordstromE-commerce will continue to be the fastest-growing retail channel this back-to-school season, Johnson says. While the sector includes brick-and-mortar retailers' online stores, it also includes "pure play" merchants like Amazon.com and the fast-growing, private sale sites, such as Gilt Groupe and Rue La La, Johnson says.

Department stores ranging from Macy's (M) and Kohl's (KSS) to Nordstrom (JWN) and Saks Fifth Avenue (SKS) are expected to have "their best back to school season in years [due in part to] better execution by their leaders."

At the same time, warehouse clubs Costco (COST) and Sam's Club (WMT) are also poised to enjoy a healthy back to school selling season if recent performance at those chains is any indication, he says.

By contrast, teen retailers' back to school performance "will be a mixed bag" as merchants such as, American Eagle (AEO) and Aeropostale (ARO) will continue to "lose business to the fast-fashion players, particularly Forever 21," Johnson predicts.



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7 Comments

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Lorn

I agree with the previous posters here...my kids are dealing with hand me downs too, and as for elementary school kids getting smartphones...you gotta be kidding me! Can parents out there really afford to be getting their kids smartphones and paying for the 2 year service that inevitably comes with it? My kids will have Tracfones with a small allowance, costing me maybe $15/month, which IMO is more than enough for making pick-up arrangements and the like, and is contract free, so if things get worse, can easily be terminated. I hope we are not all turning our kids into believing everything will come to them served on a silver platter, or that they have to have what everyone else has, regardless of situation or need!

July 12 2011 at 5:36 AM Report abuse rate up rate down Reply
maa2626

I think I understand, for the health of our economy we shold go school shopping and purchase imported goods with cheaper dollars going overseas to pay workers working for less (china) so they can lend us money (china) so we
(the usa) can pay people unemployment. hmmm maybe I do not understand.

July 08 2011 at 1:02 PM Report abuse +1 rate up rate down Reply
l07hye

Parents are not purchasing new clothes or any other items for this new school year. They are learning to do the hand me downs, and swaping with neighbors or any other sources that is available to clothe their children. Whoever writes these silly articles, need to get out there in the real world and talk to the real people.

July 08 2011 at 11:50 AM Report abuse +1 rate up rate down Reply
lynn

your comment of an upbeat economy is a joke and you should not be allowed to write any more articles

July 08 2011 at 10:41 AM Report abuse +2 rate up rate down Reply
modularsales

You have to be kidding - upbeat? I have two high school kids and one in college and they have know from last year that there is no new clothes in the budget for the year!!!!!!! we ar dieing out here under the $ pressure of fuel and food - the retailers are F%^$ing upbeat? you got to be kidding

July 08 2011 at 10:38 AM Report abuse +2 rate up rate down Reply
tj1108

While taking a shower 3 hrs ago I hear (ABC news radio) that the job numbers are expected to be well over 100,000 for the month. Then the actual numbers come out and their the lowest since last september.
The wall street street number is info that has been leaked before the actual report. The street number typically becomes the report number. Not anymore. Now the street number is a bogus number meant to raise the market numbers. The other way they manipulate is to revise down the week after the report. We have entered a period ofproaganda like never before. Almost all economic data is negative and has been for over 3yrs. Bright spots can be found but overall is bad and by not turning around we are going in to a hole that we will never get out of. Our current state of mind of preffering to be lied to will result in a collapse that no one expects. If we keep lying to ourselves the dollar will collapse under the massive debt that is growing. If the dolllar collapses it will go medevil in the major cities pretty quickly.

July 08 2011 at 10:07 AM Report abuse +1 rate up rate down Reply
ultraz2

Unemployment is up, and the doubble dip recession is here. 30 year mortgage rates need to go to 2.5% to 3.5 percent to revive the economy.

July 08 2011 at 9:02 AM Report abuse rate up rate down Reply