September means back-to-school time, which could mean shopping for your student and a portfolio of stock investments.
September may mark the beginning of school for many students, but it’s August when parents are busy buying school supplies.
Back-to-school shopping has historically been a big deal for retailers’ bottom lines. Consumer research firm NDP Group reported that in the United States, back-to-school season represents 34% of annual retail dollar sales and 46% of annual unit sales for office supplies. This makes it the second-largest season of the year for retailers and manufacturers.
Both Deloitte and the National Retail Federation conducted surveys on how much money parents spend on getting their kids ready to head back to the classroom. Both groups show total spending for 2019 is expected to rise for K-12 students.
Deloitte, which surveyed more than 1,200 parents, forecasts they will spend $519 per student, up from $510 in 2018. Total back-to-school spending is expected to reach $27.8 billion this year for K-12 students.
The National Retail Federation, which has conducted its survey since 2003, has slightly larger numbers. The group expects parents to shell out an average of $696.70, up from $684.79 last year—a record.
The top spending category for parents remains clothing and accessories for the K-12 student, with parents expected to drop $239.82 to outfit their progeny. Not far behind in the spending categories are electronics—such as computers, calculators, and phones—at $203.44. Shoes come in third at $135.96, while school supplies such as paper notebooks, pencils, backpacks, and lunch boxes round out the list at $117.49.
Teens are spending money on themselves, too. This year it’s likely they’ll spend $36.71, and pre-teens are forecast to spend $26.40, with both of those numbers up from last year.
Deloitte noted 60% of parents are using their smartphones to research deals, while 42% are using personal computers, down from 49%.
Not surprisingly, Deloitte pointed out where a family shops depends largely on the deals they’re offered. Sixty-nine percent of parents say sales and discounts help them decide, while 57% use competitive pricing.
Deloitte noted parents still hit the mass-merchant stores for back-to-school shopping, with nearly 90% of respondents planning to visit these stores. The NPD Group remarked that in 2018, the average parent made three trips to physical stores to purchase office supplies. These sales accounted for 89% of office supply spending during the season.
That isn’t to say e-commerce doesn’t have a share of parents’ wallets, but it appears to be shrinking. NPD Group expects that for 2019, only 7% of back-to-school sales will be online versus 11% in 2018 and 17% in 2017. Deloitte’s survey showed online-only retailers have replaced dollar stores as the number two destination, however.
NPD Group said Amazon’s (AMZN) Prime Day, which took place in mid-July, seems to have started to take on a bigger role in moving back-to-school sales earlier in the season. Amazon has run Prime Day for the past five years, but 2019 was the first year it lasted two days. The full rundown of Prime Day data hasn’t been released as of writing, but after the close of the event Amazon called it the “largest shopping event in Amazon history.”
Ben Watson, education coach at TD Ameritrade, suggested investors can think about back-to-school shopping and back-to-school stocks in a few different ways. To start, consider the mass-market retailers such as Dollar Tree (DLTR), Walmart (WMT), and Target (TGT), which offer the gamut of supplies in nearly one stop.
A lot of kids’ school supplies include products such as pens, lunchboxes, and mugs. Watson remarked Newell Brands (NWL) makes a number of these items, with brands such as Elmer’s Glue, markers from Mr. Sketch and Sharpie, Paper Mate pens, food storage brands such as Rubbermaid and Sistema, and other consumer-focused goods.
For electronics, parents may go to Best Buy (BBY) to check out the tablets, laptops, and smartphones kids need for class, Watson noted.
Because clothing is a big part of returning to school, individual apparel retailers, particularly in the athletic-wear segment, can be part of investors’ research lists. Upscale brands that appeal to the mass affluent and have significant online presence include Nike (NKE), Lululemon Athletica (LULU), and Under Armour (UAA), Watson pointed out.
There’s been a lot of discussion about the death of malls as part of the demise of physical retail stores, but Watson remarked it might be overblown. Two shopping mall-focused publicly traded companies with Class A property—which represent the newest and highest-quality buildings—include Simon Property Group (SPG) and Macerich (MAC).
“Malls are seeing a bit of a resurgence because they’re part of nostalgia again,” he said.
Late summer—it’s a time of ringing: the alarm clock, the tardy bell, and the cash register. Consider ringing in a little back-to-school research for your portfolio as well.