Retailers relying on back-to-school boost

Weekly Corporate Growth Report, Aug 20, 2001 by Rock, Justin

For retail stores, this year's back-to-school shopping season is going to be the prime indicator of what to expect for the rest of the year. After sluggish sales for the first half of the year, retailers are counting on parents to drum up sales in the next few months to ease the pain.

Back-to-school sales make up about 15 percent of second-half consumer spending. If the season ends up below average, it would be an indicator that retailers will be faced with a terrible fourth quarter.

So far, sales have been off to a good start, especially for discount stores such as Walmart. Industry analysts feel that this trend should continue due to a lower interest rate, payroll deduction changes and the tax rebates that are starting to show up in consumers' mailboxes.

Investors are also optimistic about the retail market for the second half. Currently, retail stocks are up 20 percent year-to-date. That is 29 percentage points better than the Standard & Poor's 500-stock index. Investors are anticipating that retailers are going to finish the year rather strong.

Investors are optimistic for a variety of reasons. A notable move by retailers that is making their stocks more attractive is the fact that the stores themselves are preparing for the worst. Fearing high consumer debt and the slowing economy, stores are running a tight ship with inventories closely in check.

Retailers are not aiming to rake in the dough this season. But, as always, there are some items that are in high demand this year and will give some companies serious profit. Firms such as Skechers USA and Levi Strauss & Co. are poised to do well with sales of denim and open-back slip-in shoes at record levels. Makers and sellers of cellular phones and Palm Pilots are also expected to reap the benefits of the season with demand for high tech gadgets among young people higher than ever.

Source" Business Week, Hoovers.com

By Justin Rock Editor