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Analyst Predicts Slower Retail Growth for Back to School Season

Leon Nicholas, principal of the consumer goods and retail group at Global Insight joined CNBC’s “Squawk on the Street” to share his insights on the retail sector in the upcoming back-to-school season.

Leah Ingram and her daughters Annie,left, 9, and Jane, 11, sort through back to school items they purchased on sale in their New Hope, Pa. home Wednesday, Aug. 9, 2006. The back-to-school shopping season can become a tug of war between kids who want the trendiest notebooks and jeans and parents who need to hold to a budget. But experts say that parents can reduce the conflict, and teach important lessons about money, by involving children in budgeting and buying. (AP Photo/Rusty Kennedy)
Rusty Kennedy

“We will see slower growth,” predicted Nicholas, due to inflation concerns, housing mess, volatile gas prices and despair around Iraq. “These will hit consumer confidence.”

Although such factors may not directly impact student and parents’ buying habits, it will still have influence on discretionary matters such as accessories for electronics.

Nicholas said that Wal-Mart’s approach to cut prices by 10-15% on staple products such as pens and notebooks is a tactic they’ve put in place because “other strategies have not been working.”

Back to School

He believed that this was an opportunity for Wal-Mart to fall back on their traditional area of strength -- low prices -- to allow them to use it as a leverage to draw customers into their stores.

The hope of Wal-Mart is that people will buy other products such as backpacks, electronics and apparel while they are there.

Nicholas concluded that although Wal-Mart has always done well with low prices, “this may be a sign that the "Wal-Mart era of efficiency" has run its course.” He wondered if there is anything else they can do, or if "this is the end of "Wal-Mart era retailing.""

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