Shoppers Show Up for Back to School

Discounts, Tax-Free Holidays Attract Consumers, but So Do New Products

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NEW YORK ( -- Steep discounts lured shoppers in August, contributing to a surprisingly strong performance from the nation's retailers.

The Gap is among the retailers that have been aggressively discounting back-to-school must-haves like jeans and leggings.
The Gap is among the retailers that have been aggressively discounting back-to-school must-haves like jeans and leggings. Credit: AP
Shoppers found that, in some cases, the deals were just too good to pass up. Tax-free holidays in 17 states encouraged nervous shoppers to open their wallets. And retailers have been aggressively discounting back-to-school must-haves such as jeans and leggings. For example, Gap offered consumers a second pair of jeans for $20 when they bought one pair at full price, and Abercrombie & Fitch has been promoting all jeans and jeggings (leggings that resemble jeans) at 40% off.

Those efforts paid off for Abercrombie & Fitch, which posted a 6% rise in sales at stores open at least a year. Now that the retailer has changed tack and begun to promote its wares, it's gaining ground on rivals such as Aeropostale and American Eagle. Aeropostale saw sales fall 1%, while American Eagle reported a 1% gain.

Same-store sales were suprisingly good in August
Limited 10%
Zumiez 9.1%
Stein Mart 8.5%
Costco 7%
Nordstrom 6.3%
Abercrombie & Fitch 6%
Ross Stores 5%
Kohl's 4.5%
Macy's 4.3%
BJ's 2.4%
JCPenney 2.3%
TJX Companies 2%
Target 1.8%
Wet Seal 1.1%
American Eagle 1%
Saks Fifth Avenue 1%
Aeropostale 1%
Buckle 3.5%
Hot Topic 3.7%

Gap's promotional efforts didn't resonate quite as well, with the retailer posting a 1% decline in sales. Efforts like its Groupon promotion, which offered consumers a $50 credit for $25, are expected to drive traffic in the coming months, however. The Groupon deal expires Nov. 19.

Some retailers moved away from promotion, however. Limited Brands, which posted a 10% same-store sales gain, said it would not be holding a fall sale in September, unlike last year. Instead, the brand has been focused on product introductions. The Victoria's Secret brand benefited from marketing surrounding the August launch of the "Incredible" bra and is planning to introduce another bra line this month. The Pink brand, meanwhile, introduced an NFL line.

"This supports our theory that, in this economy, the consumer is still seeking newness, and she shows little resistance to price when the product is compelling," wrote Richard Jaffe, an analyst with Stifel Nicolaus.

In a back-to-school consumer survey, Mr. Jaffe also found that, surprisingly, one in 20 consumers said they planned to buy an iPad. If even just a third of those shoppers bought the device, that would lead to the sale of about 1 million iPads.

"There could be a material lift in iPad sales for Apple as a result of back-to-school shopping this season," Mr. Jaffe concluded.

Still, intentions to purchase expensive, discretionary items are lower this year. And many consumers remain focused primarily on items they need. Industry watchers have reasoned that consumers who pulled back on school shopping a year ago would need to replace worn-out items this year. Last August, overall retail sales fell 4.3% year-over-year, while sales in September declined 1.5% year-over-year, according to the National Retail Federation. This August, same-store sales rose 3.2%, according to the International Council of Shopping Centers. The group expects same-store sales to rise 3% in September.

"Most companies beat expectations, as 'need-based' spending was a catalyst to get consumers to the malls," wrote Randal Konik, an analyst with Jefferies & Co. "When August/September results are tallied in a month, we expect the theme to be a 'good' back to school season."

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