Back-to-School Season Expected to Hit $83.8B

'Desperation Is Gone' as Retailers See Double-Digit Gains, Turn to Upbeat Marketing With a Little Less Price Promotion

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Parents aren't the only ones happy kids are headed back to classrooms -- so are retailers. That's because after several years of lackluster results, back-to-school spending is rebounding in a big way.

Combined back-to-school and back-to-college spending is expected to hit $83.8 billion, up double digits from a year ago, according to the National Retail Federation. Last year the NRF estimated spending to be $68.8 billion.

Target offers an upbeat campaign highlighting staples such as denim.

The spending boost comes even as 85% of consumers say the state of the economy will affect their spending this season. With an eye toward spreading out bills and snagging deals, more shoppers report they were shopping at least two months before school starts. Retailers have obliged with most kicking off campaigns in mid- to late July. And many, like Office Depot, are offering steep discounts -- folders for 1¢ and packs of pens for 25¢ -- to early birds.

Still, Jaime Katz, an analyst with Morningstar, expects this season will be less promotional than last season, thanks to leaner inventory levels and a potentially stronger season overall.

"Versus last year there's a lot less inventory in a number of stores and that , down the road, will promote less discounting year-over-year," Ms. Katz said. "Less inventory, more-cautious ordering and careful merchandising mean a good portion of retailers are in better positions than a year ago at the same time."

That mind-set is translating to advertising as well, with fewer price points and discounts called out in TV and print ads for back-to-school, the industry's most-important selling season after the holidays. Instead, retailers such as JC Penney, Gap and Target are turning to upbeat ad campaigns highlighting staples such as denim and graphic tees.

"The desperation is gone, and it's not as nostalgic as it was a few years ago," said Mike Gatti, a senior VP at the NRF. "Retailers are feeling pretty good and are coming out with new strategies."

Retailers have Mom and Dad to thank for the boost, of course, but more kids are also dipping into their piggy banks this season. According to the NRF survey, 43% of teens and 32% of pre-teens will spend their own money on back-to-school items, compared with 38% and 24%, respectively, a year ago.

A significant decline in teen spending was one of the hallmarks of the recession. Teens account for $125 billion in spending annually, with the average teen shelling out $5,000 a year at favorite stores and restaurants. But tight-fisted teens caused spending on categories from apparel to beauty and food to concerts to fall by double digits in the depths of the recession. Analysts say there are now concrete signs that the lucrative teen category is bouncing back.

Piper Jaffray found that spending is up, in many cases by double digits, across income levels and genders in its recent "Taking Stock With Teens" report. The firm's survey found a 21% increase in fashion spending year-over-year for high-income teens, and a 15% increase for average-income teens. It's the first time in eight years that teens have reported double-digit outlays in fashion spending.

Spending on technology and beauty is also on the upswing, while expenditures on food and restaurants is at or near the highest level since 2000.

"Survey results provide confirmation that we are in the early stages of a clearly defined discretionary-spending cycle," said Jeff Klinefelter, director of research and senior research analyst at Piper Jaffray. "Double-digit increases in spending on a sequential and year-over-year basis for both upper- and average-income teens and similar strength in spending intentions signal improved confidence in the overall environment and a willingness to spend more broadly on key categories of interest."

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