Laptops and cool tops: a strong year for U.S. back-to-school shopping

September 6, 2016 1:04 AM EDT

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By Gayathree Ganesan and Subrat Patnaik

(Reuters) - Along with the perennial run on leggings, students returning to America's classrooms this year are making a beeline for retro sneakers, "cold-shoulder" tops, versatile laptops and USB drives.

Demand for those hot-ticket items is helping to push back-to-school spending to its fastest growth in four years, a boon for retailers in their second most important season.

Outdone only by the post-Thanksgiving holiday bonanza, back-to-school shopping for clothing, shoes, electronics and backpacks spans most of the third quarter, from July to September, and is a key driver in the sector's sales and profits.

But while demand is on the rise, retailers still need to work hard to get shoppers in the door with coupons and promotions like special shopping days. An increasing share of parents are Millennials, adept at using technology to find the best deals.

Good weather is playing its part too by coaxing shoppers to malls and department stores such as J.C. Penney (NYSE: JCP) and Macy's (NYSE: M), which have endured tough competition from online giant Amazon Inc (NASDAQ: AMZN).

Total back-to-school sales rose 2 percent in July, compared with 1 percent growth in 2015 and 2014 and a 0.2 percent rise in 2013, according to payments technology company First Data.

Spending for back-to-school and college is expected to reach $75.8 billion this year, up from last year's $68 billion, according to retail association National Retail Federation's annual survey.

"They (younger shoppers) are getting mom to buy more for them, because they are agreeing to shop at these less expensive lower priced retailers," NPD Group analyst Marshal Cohen said.

In July, electronics and appliance sales rose 5.5 percent, the biggest increase in four years, according to First Data. Items ranging from tablet computers to USB drives are all doing well, especially when carrying special offers.

ALWAYS APPRECIATING A BARGAIN

Sales of laptops that can double up as tablets like Dell's Inspiron 2-in-1, have been helped by this trend, said Petter Knutrud, spokesman for Office Depot (NASDAQ: ODP). He added that schools were asking students to save their work on USB drives, which had boosted demand for the small devices.

Electronics retailer Best Buy (NYSE: BBY) has tempted students with special coupons for everything from laptops and headphones to college dorm-friendly items like compact refrigerators and microwaves.

J.C. Penney is also using promotions to boost back-to-school sales of apparel, which in turn helped July comparable sales. Its 'Penney Day' promotions, which offer back-to-school staple items such as fashion leggings or tee shirts at a discount every Saturday during the season, are helping drive sales, company spokeswoman Sarah Holland said.

Sales of apparel and accessories have been helped by new trends such as retro sneakers like Stan Smith models from Adidas and shirts for women with cut-out shoulders known as "cold-shoulder" tops.

Good weather so far in the season has also benefited clothing sales at retailers such as Gap Inc's (NYSE: GPS) Old Navy chain or Urban Outfitters (NASDAQ: URBN).

While more jobs and rising stock markets are boosting consumer wealth, customers are still putting value over brand name. Wage gains for middle-income consumers remain insufficient to encourage discretionary spending, some analysts caution.

Lower-priced stores like Old Navy, off-price retailer TJ Maxx (NYSE: TJX) and Kohl's (NYSE: KSS) are 2016's top back-to-school shopping destinations, RBC Capital Markets analyst Brian Tunick wrote in a note.

"Income rises faster than frugality changes," NPD's Cohen said, suggesting that bargain-hunting is hard to give up even in the best of times.

(Reporting by Gayathree Ganesan and Subrat Patnaik in Bengaluru; Additional reporting by Sruthi Ramakrishan; Editing by Jo Winterbottom and Mary Milliken)



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