Will Sluggish Back-To-School Doom The Holidays?

How much do limping back-to-school sales results mean for the upcoming holiday retailing season? Conventional wisdom says there's a connection, and this year that's bad news. "Back-to-school so far is anemic at best," analyst Adrienne Tennant told Janney Montgomery Scott clients, according to Businessweek. "That usually has had a high correlation with holiday."

Store traffic fell in 9 of 11 weeks leading up to Labor Day, according to ShopperTrak. Estimates by the National Retail Federation said back-to-school shoppers planned on spending 7.8 percent less than last year. And the litany of mediocre sales for high-profile retailers like Macy's (NYSE:M), Walmart (NYSE:WMT) and Nordstrom (NYSE:JWN) for the period that ended with July is all too familiar by now.

All that said, does back-to-school really prove the holidays will be a disaster? Maybe not.

After all, August same-store sales for a selection of retailers tracked by Retail Metrics were up 3.8 percent. Analysts predicted 3.2 percent. True, Costco (NASDAQ:COST) and Walgreens (NYSE:WAG) had strong sales results, and that doesn't necessarily make department stores and apparel retailers feel any better. And heavy discounting was a big part of the reason sales were up.

But aside from the economy, there were also other things pushing apparel sales down. "We've definitely seen more weakness in the teen space," Lazard analyst Jennifer Davis told Businessweek. "Part of it is due to Mom has less money that she is willing to spend on teens. Part of that is also due to lack of a meaningful fashion trend."

Tracking trends has become much harder as fast-fashion has tended to whipsaw apparel preferences. Retailers used to know they had at least the months between a fashion magazine's photo shoot and the time the glossy magazine hit the newsstands to prepare for the next big thing. Now the combination of fast-fashion and the Internet cuts that lead time to weeks or even days.

The one advantage for the holidays over back-to-school is explicit in the name: Before back-to-school, student shoppers literally don't know what their friends will be wearing when they return to school. Now that they do, retailers might be able to identify and leverage whatever new trends surface—at least, if retailers are paying attention, move fast and get lucky.

For more:

- See this Businessweek story

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