U.S. back-to-school shoppers in no mood to splurge
REUTERS - Teenager Fanta Bagayoko personifies U.S. retailers' worst nightmare this back-to-school season.
"I feel like the economy is messed up," the 18-year-old said while shopping at a Walmart (WMT.N) in New Jersey, for herself and her niece. "Money wise, I still feel like we are in a recession."
It has been more than three years since the official end of the brutal U.S. recession, but Bagayoko and several other U.S. shoppers said they are not feeling better about the economy or their own finances, and are spending only on essential items.
That does not bode well for U.S. retailers that are hoping for a much-needed sales boost after posting lackluster results in the first half of the year. Back-to-school is the second-biggest selling time of the year for U.S. retailers, behind the winter holiday season.
With parts of the country such as Atlanta already sending children back to class, the back-to-school season is in full swing and retailers remain hopeful that shoppers will turn out heading into the final stretch.
Kohl's Corp (KSS.N) Chief Executive Kevin Mansell said the back-to-school season "has been more and more bridging August and September" based on his chain's research and other data.
"We used to see people starting in late July and I don't see that as much anymore," said Maureen Bausch, executive vice president of business development at the Mall of America, in Bloomington, Minnesota.
She expects people to finish their back-to-school shopping in September once kids see what is cool in the classroom.
Total back-to-college spending is expected to reach $53.5 billion this year, while total spending by families with children in kindergarten through 12th grade is expected to be $30.3 billion, the National Retail Federation said.
While the trade group expects the average American family to spend $688.62 on back-to-school shopping this year, a 14.1 percent increase from 2011, conversations with about a dozen shoppers across the country indicate a different story.
Some on Wall Street, such as Anthony Chukumba with BB&T Capital Markets, already worry NRF's sales forecast is "likely aggressive" given the uncertain U.S. economic environment.
"Consumers have undoubtedly showed tentativeness in their spending habits," said Rikard Bandebo, vice president and economist of payment processor First Data. "Consumers' moods will remain relatively downbeat until clearer signals emerge that the economy is stabilizing again."
Weak income and employment growth are weighing heavily on Americans, especially younger shoppers.
Teen employment is at its lowest level since 1964, making more teenagers reliant on their parents to fund their back-to-school shopping, said Jharonne Martis-Olivo, director of consumer research at Thomson Reuters.
Many parents are not feeling good about the economy and the uncertainty in an election year, and are taking precautionary steps in case the economy deteriorates further, she said.
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READING, WRITING AND REELING IN SPENDING
Shoppers from New Jersey to Arizona said they were shopping for basics and making do with last year's supplies if possible.
"Unless the teacher says it is necessary, I am not going to get it," said Bagayoko, the 18-year-old, who headed to Secaucus, New Jersey from Harlem, New York, to save money on sales tax. Her shopping cart held only pens, pencils, folders and other basics.
She is not alone in being frugal.
"I am not buying the swankiest of anything," said Ann Miller, 47, while shopping for her son Zachary, 8, at the same Walmart store. "I am feeling worse about the economy."
As school districts with strained budgets ask parents to buy more items that in the past would have been supplied by the schools, many parents push kids to make do with old items, shop at discounters or buy only what they really need.
"The school list is longer, but I am trying to get (just) the basics," said Yamila Pichardo, 35, mother of three school-going kids, who said she plans to reuse her kids' backpacks.
Some teenagers decided they would be more careful with their parents' money.
"I just go shopping when there is a good sale," said Laine Vasquez, 16, who lives in Phoenix, Arizona.
Vasquez, who did most of her shopping at Kmart (SHLD.O) and Target (TGT.N), said she spent a lot less on makeup this year.
Sandy Johnston, a 55-year old accountant from West Seattle, said s h e was pleasantly surprised when h e r 18-year old daughter opted to buy clothes at second-hand stores ahead of her freshman year at college. Johnston could use some help, especially as she w il l now be sending two kids to college instead of just one.
"We are borrowing this year to fund a lot of things that we normally would not have borrowed to do. It makes me nervous, we are selling our second home to help pay for things," sh e s aid.
Even those who feel a little better about their finances are changing their shopping habits to get more bang for their buck.
Susan Crew, 46, of Charlotte, North Carolina, expects to spend a little more this year because she's been making more in commissions in her architectural products sales job. But she is doing more online research before she makes purchases.
Crew, who has two school-going sons, said she was looking online for L.L. Bean backpacks and made a trip to the Belk department store to buy shoes for her eighth-grader after she scored a coupon through a Facebook advertisement.
Some shoppers said the back-to-school discounts so far were about the same as last year.
"I have seen a lot of ads, but not necessarily discounts," said Lisa Mishkin of Chicago, who is shopping for three girls.
That might change later in the season as retailers get a better read of the state of the U.S. consumer, experts said.
Chris Donnelly, the global head of Accenture's retail practice, was among those who predicted there would be more aggressive promotions in the rest of August and September this year versus 2011.
Many stores and mall owners are not waiting to woo shoppers. Department store chain Macy's (M.N) is holding a "Spelling Bee" contest in some stores, while rival J.C. Penney (JCP.N) is offering free haircuts for children this month at many stores.
"A unique challenge for retailers with back-to-school is the fact that it doesn't have one particular day around which retailers can plan their promotions," said Catherine Moellering, head of global retail consulting firm Tobe.
That might be addressed after chains such as Aeropostale (ARO.N), Gap (GPS.N), American Eagle (AEO.N), Pacific Sunwear (PSUN.O) and Guess (GES.N) took part in Teen Vogue's first "Back-to-school Saturday" initiative on August 11.
"I think it is a win-win" for both shoppers and retailers, Moellering said.
Several stores at Mall of America also offered 20 percent discounts on Back-to-school Saturday, which coincided with the giant Minnesota mall's 20th anniversary, noted Bausch. (Reporting By Dhanya Skariachan in New York, Jessica Wohl in Chicago, Karen Jacobs in Atlanta, Bill Rigby in Seattle, Lisa Baertlein in Los Angeles and Rick Rothacker in Charlotte; Editing by Vicki Allen)
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