U.S. Back To School 2014

Executive Summary

August has traditionally captures the lion’s share of BTS spending (about 60%) and with a buy-now-wear-now mentality getting more and more delayed until seasons ‘cool’ colors and silhouettes. A handful of retailers reporting Q2 results have commented on a recent pick up in BTS categories and are hopeful for an improvement in the category versus a year ago. However, we believe BTS is becoming less relevant for the consumer. Mom is not going into the stores and making one big purchase to get her kids ready for school like they have been doing since the 1960s. According to the NRF, “by mid-August, the average family with children in grades K-12 had completed just half of their back to school shopping. NRF’s latest survey shows that nearly 1/4 of families had not started shopping yet, up from 20% the same time last year.”

On the plus side:

• consumer metrics such as un- employment and housing prices are trending positive;
• about half a million additional students enrolled this fall support increased demand;
• BTS is after all a needs-based spend and consumers are not in dire straits like they have been in the past and going to school with half-used

On the negative side:

• retailers have not aligned supply with demand and they continue to overbuy for BTS leading to excess product on selling floors and unplanned markdowns;
• we believe that Holiday will start off slow as there is no MUST HAVE item ;
• “Christmas Creep” as retailers want to clear the selling floor and put out Holiday items earlier and earlier (think 9/1 versus 11/1), they will  start to clearance BTS items and think about ordering less and less over