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Will Consumers Shop Now that Back-to-school’s in Full Swing? Week Ahead

With remote learning seemingly in the rearview mirror, retailers just might eke out a healthy back-to-school (BTS) season.

Back-to-school is often considered a harbinger for fourth quarter holiday sales. This year, that could change if inflation continues to force consumers to choose between fashion, food and fuel. Just days ago the Federal Reserve issued a 75-basis-point rate hike, making borrowing money costlier for both consumers and businesses.

Most consumers with children see BTS as a necessity and will purchase new clothing and supplies now that they’re back in the classrooms.

The National Retail Federation expects shoppers to match last year’s record high $37 billion spend on products for school-age pupils, with back-to-college spending coming in at $3 billion above 2021’s $71 billion haul.

Cowen and Co.’s retail analyst John Kernan on Monday noted that foot traffic has been slowing since May. He believes that with BTS and holiday still ahead to meet earnings guidance projections, companies that issued estimates in May may not feel compelled to provide any revisions.

In some ways, that puts more pressure on BTS sales. That’s particularly true for retailers still trying to clear out aged inventory that came in late, but consumers no longer want.

A really healthy BTS selling season could give retailers and even vendors some financial breathing room, potentially in the form of improved margins. chief marketing officer Ethan Chernofsky suggests that retailers will benefit from this year’s BTS selling season. He expects Walmart and Target will be the big winners, despite rising inflation and a consumer spending slowdown.

“So while these brands’ performances in 2022 may not reach the foot traffic heights of last year’s Back-to-School season, Walmart and Target are both well-positioned to benefit from consumers looking to stock up on essentials without breaking the bank,” he wrote in a blog post. “In addition, the one-stop-shop advantage they provide could be an especially strong draw,” he said.

Dollar stores should also thrive as consumers look for ways to stretch their budgets, he pointed out, adding that Goodwill’s pre-owned goods appeal could interest consumers focused on sustainability and value.

“Brands that cater to consumers’ current value orientation while offering an appropriate and diversified product mix are those most likely to thrive,” Chernofsky said.