Back-to-School Shopping Is Off to a Rough Start
Date: Tuesday, July 21, 2020
Source: The Wall Street Journal
Uncertainty over reopening because of Covid-19 quashes demand for new clothes and dorm decorations; ‘we’ll spend almost nothing this year’
The jeans, hoodies and other back-to-school clothes had just arrived in American Eagle stores when California Gov. Gavin Newsom ordered a halt to indoor activities, forcing the retailer to close roughly 30 locations in malls across the state.
It was an ominous start to the most important summer for retailers in years.
Retailers spent the past few months clearing out dresses, jackets and other unsold spring merchandise that sat on shelves while their stores were closed during lockdowns in March and April.
As they began to reopen in May, many geared up for a buying burst this summer, preparing for parents and children to stock up on back-to-school gear in the hopes that life would be closer to normal by the fall.
Instead, retailers are facing the prospect of another disappointing season as more schools dial back reopening plans.
“There’s a lot of uncertainty as to whether kids will be going back to school full time,” said Chad Kessler, American Eagle’s global brand president. The retailer, which is owned by American Eagle Outfitters Inc., AEO +2.50% has reduced capacity limits of stores in states with rising virus counts and requires shoppers to wear masks in all locations.
Its back-to-school collection focuses on items more suitable for the couch than a classroom. “We’re pushing leggings and doubling down on sweats,” Mr. Kessler said. He added that the brand’s denim, known for its four-way-stretch, has continued to sell well throughout the pandemic, and that the retailer is expecting a strong back-to-school season.
Back-to-school is the second-biggest shopping period for retailers after the holidays, and it usually sets the tone for the all-important year-end season. While some shoppers say they are pulling back this year, the industry association is still hopeful that the need for electronics will drive spending.
The National Retail Federation projects parents with children in elementary school through college will spend a combined $101.6 billion this year, up from $80.7 billion last year, as they snap up laptops and other technology to enable their kids to learn from home.
Other forecasts are more dire. Neil Saunders, managing director of research firm GlobalData PLC.’s retail division, expects $26.4 billion in spending for elementary and high school, down 6.4% from 2019 and the lowest level since 2015.
Mr. Saunders projects back-to-college spending to be hit even harder, down 37.8% from last year. “A lot of the lucrative spending on kitting out dorm rooms, buying collegiate-branded gear and buying food and other essentials for student living just won’t happen,” he said.
When 20-year-old Cori Vosburgh heads back to Radford University in Radford, Va., for her sophomore year in August, she will be decorating her off-campus apartment mostly with items from her parents’ home.
“To spend a lot of money furnishing an apartment doesn’t seem financially wise because it’s unclear whether school will be open for the full semester,” said her mother, Scottie Vosburgh, of Round Hill, Va.
Ms. Vosburgh doesn’t plan to buy much for her two children in elementary school, ages 10 and 11, who will be studying from home.
“We’ll spend almost nothing this year,” she said.
Bed Bath & Beyond Inc., which does a significant back-to-college business, is hoping low prices will attract budget-conscious shoppers. It is cutting prices on a variety of household goods, including a Keurig K-Mini Plus coffee maker that it is selling for $60 this year, down from $79 last year.
The chain has created a one-stop college shop near the entrances to its stores, stocked with everything from bedding to tech gadgets, so shoppers nervous about spending too much time in enclosed spaces won’t have to wind their way through the aisles.
“We wanted people to be able to get in and out quickly,” said Joe Hartsig, the company’s chief merchandising officer.
Other chains are adding new categories to woo shoppers. Staples Inc. is showcasing cleaning supplies and protective equipment as part of its back-to-school roster. J.C. Penney Co., JCPNQ +5.98% which filed for chapter 11 bankruptcy protection in May, is promoting masks and the idea that kids who aren’t decorating dorm rooms can redecorate their bedrooms at home instead.
Macy’s Inc. M +7.80% has added room decor and backpacks to its apparel offerings. “We don’t anticipate seeing the typical spike in sales, since many consumers are still waiting to see if, when and in what format their children will return to school,” said Cheryl Heinonen, Macy’s senior vice president of corporate communications.
David Bakke’s 12-year-old son is supposed to start school in mid-August, but he is still waiting to learn what form classes will take.
“We’re a month away from the school opening, and a million things could change between now and then, so it doesn’t make sense to go out and buy a bunch of stuff that he might not use,” said Mr. Bakke, who lives in Norcross, Ga.
As shoppers delay purchases, retailers are more likely to start discounting, which would eat into profits, analysts said. Even though many chains canceled shipments throughout the spring, they still may wind up with too many goods.
“Retailers had to make bets on what to stock for back-to-school before the full impact of Covid-19 was understood,” said Howard Meitiner, managing director of Carl Marks Advisors, an investment bank.
He added that many parents already bought their children laptops and other technology to enable them to learn from home this spring, so there may not be as much demand for those items now. “How many computers or iPads do you need?” he said.
Melissa Hunnicutt of Huntington Beach, Calif., planned to start shopping for school supplies and uniforms this week after she was notified in June that her three children would be returning to school full time. In recent days, the school has started to rethink its reopening decision as the state’s virus-case count has surged.
“With the Covid situation changing, they are asking parents if they are comfortable sending their kids to school,” Ms. Hunnicutt said. She is in favor of sending her kids back.