It may be the beginning of the year for students, but for retailers, it's report-card time. Analysts expect the early grades on the back-to-school selling season to be weak when retailers report August results Thursday.The results will give insight into whether consumers opened their wallets after months of keeping them closed amid the recession, and how well back-to-school offerings such as trendy jeans, dresses, T-shirts and kids shoes are being received.
Analysts say poor sales would raise already-high fears about the crucial holiday selling season.
Labor Day falls a week later this year and several states' tax-free shopping weeks occurred in August this year rather than July, both making comparisons from a year ago difficult.
Thus, retailers and analysts said August and September taken together will likely paint a more complete portrait of back-to-school sales, crucial for kid and teen retailers. The back-to-school season can make up about 20 percent of their annual revenue.
Back-to-school selling picked-up later in the month, concurrent with more school openings, and helped by weather that was drier and more seasonable than last year. Encouragingly, mall traffic was flat for the month, versus down 4 percent a year ago.
Companies that focus on low prices will beat expectations, while higher-priced companies will miss expectations.
Sales likely built toward the end of August driven by pre-Labor Day sales and promotions as well as by some newness and pent up demand in certain categories, such as outerwear, sweaters and kid's shoes.
Outside of the kid and teen stores, August results are expected to continue weak sales seen in the second quarter as consumers continue to cut back amid the recession.
Inventory at retailers remains lean, potentially holding back sales, but possibly contributing to better margins. Consumers, facing unprecedented economic uncertainty, continue to behave frugally, spending cautiously and saving vociferously, while contributing to sales weakness among apparel retailers.
Still there have been a few encouraging indicators the economy may be stabilizing. On Tuesday, the Institute for Supply Management showed the highest number for its manufacturing index since June 2007. New customer orders jumped to a level not seen since late 2004.
