Back-to-School Season to Spur Shopping, but What's Next?
Retailers shouldn't worry about back-to-school spending—the shoppers will be there. It's what may come next that's the big the concern.
The need for parents to refresh their children's wardrobe is about as certain as death and taxes, Hitha Prabhakar, a retail analyst at the Style File Group, told CNBC.
"We're going to see spending for back-to-school," Prabhakar said. "Will that translate into holiday? Not at all. It's a fixed cost that parents have."
Leah Hartman, a retail analyst at CRT Capital Group, said consumers are spending reluctantly.
"When you have kids around the table and they haven't had a new pair of jeans in a whole year, and they are up to mid-calf, you have to put a new pair of jeans on them," Hartman said.
Hartman expects back-to-school spending to get off to a slow start.
"Foot traffic is actually up (at retail stores)," she said. "The actual number of transactions is up. I think that's a real positive sign, but it is coming reluctantly out of the consumer dollars. The average dollars per transaction is actually down, and the number of units in a shopping basket are actually down, so it is buying on need, and it's buying for value, and it's buying very close to need."
This isn't necessarily bad news for retailers, as lean inventories and selling at high margins are good news for retail profits, Hartman said.
She likes retailers like Macy's and Bon-Ton —she cited both as managing their business well in a tough economic environment.
Prabhakar said she likes TJ Maxx . The company has managed its inventory well and strikes the right chord with consumers with its off-price merchandise, she said.
Hartman is steering clear of teen retailers, which are facing weak demand as teenage unemployment remains high.
Prabhakar is watching cash-strapped American Apparel closely. The retailer recently reported that Deloitte & Touche resigned as its auditor.
American Apparel has seen its share of turbulence. It has restated its financial reports several times, and has had a number of chief financial officers. The company is now seeking an extension on filing its quarterly report as it works with its new auditor.
Hot Topic is another stock, Prabhakar said she is dodging.
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