Kids across the country may be cringing at the thought that it’s time hit the books again, but retailers are hoping the key back-to-school shopping season could give them boost they need after a ho-hum second quarter earnings season.
Target (TGT) which is still feeling the aftershocks of last year’s massive data breach reported earnings fell 62% last quarter, missing analysts' estimates. The company also lowered its full year outlook.
However, the retailer said it does see signs that sales trends improved in recent weeks. "While results from the quarter didn't meet our expectations, we are seeing some early signs of progress as we work to improve results in the U.S. and Canada," Chief Financial Officer John Mulligan said in a news release. "In the U.S., traffic trends continue to recover and monthly sales are improving. Better U.S. sales have continued into August, driven by early back-to-school results."
Mewanwhile, Staples (SPLS) is pulling all stops this season as it tries to ward off competition from big box and online retailers. The office supplies retailer is running a huge promotion offering a 110% price match guarantee on school supplies. The company posted second quarter earnings today of $0.12 a share, beating analysts' estimate by a penny. Revenue also came in slightly better than expected, but was down nearly 2% compared to a year earlier. The company warned that sales could fall in the current quarter as it continues to struggle with competition from the likes of Wal-Mart and Amazon. Staples is also going ahead with plans to shut-down underperforming stores. It said it will close about 140 stores in North America this year.
"We're accelerating growth in our delivery businesses as customers turn to Staples for more products beyond office supplies," Chairman and Chief Executive Ron Sargent said in a statement. "At the same time, we have more work to do to stabilize our retail business, and we're taking action to improve customer traffic, reduce expenses and close underperforming stores."
“I don’t think back-to-school can save a struggling retailer,” said Yahoo Finance Editor-in-Chief Aaron Task. Staples is going to close stores no matter what, Target is still going to have the hangover from the data breach and some other mistakes they’ve made along the way. Wal-Mart shoppers still feel the retailer falls short on customer service at stores, said Task.
However, Task said there is no denying that back-to-school is a big deal for retailers. It is second only to the holiday season. The National Retail Federation predicts that consumers will spend $74.9 billion on back-to-school items this year, up 3.3% from 2013. The average family with children in grades K-12 will dish out about $670 on apparel, shoes, supplies and electronics, up 5% from last year. Parents will have to cough up even more money for college students. College students and their parents will spend an average of $916.48, that's 10% more than 2013.
Task said retailers also have the cool weather working in their favor this year, which could prompt shoppers to buy Fall items, like clothing, now rather than holding off for when the sales kick in.
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