Hot Barbie summer saw retailers rush toward hot pink, but now top CEOs in the sector are watching back-to-school spending for an indication that sales will continue to be vibrant.
The National Retail Federation predicted that an "unparalleled" $41.5 billion will be spent by households on back-to-school shopping and that back-to-college spending will hit $94 billion.
"Back-to-class shopping is one of the most important consumer shopping occasions of the year. Our research for 2023 shows American consumers are eager to jumpstart their back-to-school and college purchases early," said NRF President and CEO Matthew Shay.
Target is 'cautious'
As e-commerce summer deal days served as an inflation hedge for households and pulled forward demand, Target (TGT) expects that this back-to-school season will extend throughout the month of September.
During the company’s earnings call, executives were quick to remind analysts that back-to-school and back-to-college seasons create the "biggest seasonal moment for us, only next to the holiday season."
"We'll be cautious as we plan for the back half of the year, but we'll lean into those big seasonal moments," Target CEO Brian Cornell said on the second quarter earnings call.
It's worth noting Target also lowered its full-year guidance to reflect its cautious tenor for the back half of the year.
TJX Companies benefiting from consumers trading down
Affordability is a common theme emerging among retailers as inflation-cognizant consumers increasingly prioritize value and search across sale items and promotions.
TJX Companies (TJX), whose brands include T.J. Maxx, Marshalls, Sierra, and HomeGoods, are known as places where deals can be found, so much so that CEO and President Ernie Herrman said on the recent quarterly call that the deal-seeking behavior will add to their market share.
Customer traffic into TJX-operated stores powered a 6% overall comparable sales increase during its quarter, leading the T.J. Maxx and Marshalls parent company to increase its full-year profit guidance.
Tanger Outlets again seeks to benefit from the trade-down
Elsewhere in retail, Tanger Outlets (SKT) CEO Stephen Yalof knows that outlets are hotbeds for sales that consumers can bank on.
"Outlet centers are value shopping experiences for people that are looking to buy brands at the best possible price. And in this environment right now," Yalof told Yahoo Finance Live, adding: "What we're seeing, and particularly in our portfolio, is that the retailers that are discounting a little bit more are the ones that are seeing a lot more foot traffic into their stores."
Tanger Factory Outlet Centers has grown its occupancy to 97.2% as of June, with even more shoppers expected to hit the outlets this month for back-to-school shopping.
Low-cost retailers like Walmart attempt to go lower
E-commerce discount events pulled forward some back-to-school demand, according to Walmart (WMT), the largest US retailer, who also weighed in on back-to-school shopping.
Walmart created a back-to-school basket in an effort to keep classroom essentials under $13 and discussed the measure following the release of its quarterly financial performance metrics.
"Although general merchandise sales declined low single digits versus last year, these results were 300 basis points better than Q1, aided by outperformance from early back-to-school shopping in our Walmart+ savings event," Walmart CFO John David Rainey says.
Walmart CEO Doug McMillon reminded listeners during the second quarter earnings call that "typically, when back-to-school is strong, it bodes well for what happens with Halloween and Christmas."
Right now, this is the standard thinking for what back-to-school represents.
"Back-to-school shopping is a bellwether of what's ahead for Christmas and holiday shopping," Unity Marketing President and founder Pamela Danziger told Yahoo Finance. "So we're really looking at, I think, a very potentially contracted environment for retailers coming up the last half of the year."
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