September means it’s time for students to go back to school, and often this means shopping for new school supplies. These supplies might include anything from backpacks and pencils to new clothes.
The NPD Group said the back-to-school season represents 35% of the $11.8 billion in yearly sales and nearly half the unit sales in the U.S. for the traditional supplies industry. And how consumers shop for school supplies is changing, just as with everything in retail. The National Retail Federation’s annual survey on back-to-school shopping showed that for 2016, they expect total spending for K-12 and college to reach $75.8 billion, up from last year’s $68 billion.
On average, the federation said families with children in grades kindergarten to 12 plan to spend $673.57 on apparel and accessories, electronics, shoes, and school supplies, up 9.6% from last year’s $630.36 for a total of $27.3 billion. That compares with a total growth of 54.8% over the past 10 years.
Where Parents Shop: Brick-and-Mortar, But Online Growing
Most back-to-school shopping occurs at physical stores, but online is snagging more of that business, the NDP Group said. From July through September 2015, e-commerce gained $90 million in dollar share versus brick-and-mortar. Stronger consumer confidence in the economy is expected to significantly factor into how much families will shell out, the federation said.
Versus last year, a few more families are shopping for sales, at 43%, up from 41%, or comparing prices online, at 32%, up from 31%. The number who say they’re spending less overall is down at 23% compared with 27% last year. Those who say the economy will have no effect on their plans is at 27%, up from 24% last year and the highest level in the survey’s history.
Where Investors Shop: Big Boxes and Online
The retail sector as a whole is having some problems as online retailers continue to disrupt brick-and-mortar stores. Still, many retailers might likely benefit from this shopping season. Zacks Research said mega-discount retailers like Walmart (WMT) and Target (TGT) remain destinations for back-to-school shoppers.
And Walmart is looking to expand its online retail presence. Look no further than the news in early August, when WMT said it would buy Jet.com in order to better compete with Amazon (AMZN).
John Person, president of NationalFutures.com, said when it comes to apparel retailers, he likes Nike (NKE), which has lagged in the shadow of hot sports retailer Under Armour (UA).
“When you think about fall and back-to-school, parents buy a lot of sports-related gear for their kids. While I like both Nike and Under Armour, Under Armour has already seen a lot of price appreciation,” he said.
Parents who send their teens off to college will spend more money simply because these students need more supplies, such as outfitting a college dorm. In that case, Person said Bed Bath & Beyond (BBBY) is often a destination for those goods. And when it comes to this back-to-school shopping season, investors might use a similar selective approach when researching stocks in the retail sector.
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