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Slow Back To School Sales?

Aug 1, 2007

This year's back to school season may not result in sales increases at teen oriented retailers, predicts a research report by Cowen & Co., an investment firm based in New York City. Despite the proliferation of tax free shopping events, increases, "will be modest at best," the report says.

Because of a 53 week fiscal year, chains such as J.C. Penney, American Eagle Outfitters and Guess have predicted that some sales will have shifted into the second quarter. But recent weakness in mall traffic, the slumping housing market, and rising interest rates and energy costs may also suppress sales, especially for retailers with less defined brands.

"We anticipate that the benefit from the fiscal calendar shift will be modest at best," the report says, "even after considering the benefit from more tax-free shopping events." This year will see 23 days of tax free shopping, compared with eight days last year. And because of the calendar shift, a number of markets begin their school year much later.

History isn't helping either. Retailers made a significant miscalculation on spring break's impact on March and April sales, underestimating how much of the sales would be pulled forward into March, say Cowen & Co, analysts. In April, sales were also well below expectations because of bad weather, the report says. Specialty retailers with a large back to school business have underperformed in June and July by an average 8.1 percent in ten of the past fifteen years, it noted. However, sales lost in the second quarter could be recouped in the third.

"While we don't necessarily view this as the most robust environment for the consumer, we think many investors are confused regarding the impact from the fiscal calendar shift," the report says. "This uncertainty, coupled with the potential for near term lackluster data points, may lead many investors to conclude that the health of the consumer is deteriorating."

Topic: Business Strategies

Related Articles: shopping 

Article ID: 291

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