Despite school not starting for two months, we are already being inundated with back-to-school deals. Expectations for this year’s back to school shopping season are high, with retail sales numbers for June coming in strong for several companies.
For back-to-school shopping, money savvy parents armed with their back-to-school checklists head to office supply stores since these retailers historically offer some of the lowest prices, but which retailers are positioned to make the grade with back to school shoppers and what does that mean for investors?
After hitting a new 52-week high of $16.64 on July 11, Staples, Inc. (NASDAQ:SPLS) is going into the back-to-school shopping season with strong momentum. According to Demos Parneros, president of North American and online stores at Staples, Inc. (NASDAQ:SPLS), the company is targeting flashy neon stationery for kids along with headphones and Samsung Electronics Co., Ltd. (KRX:005930) Chromebooks for older students. The company intends to lure shoppers into the stores with their bargains on packs of erasers, index cards and pens for a penny in the hope they will make more expensive purchases like tablets and mobile devices.
The back-to-school shopping season (which runs from the middle of the July through Labor Day) accounts for $84 billion in sales and is retail’s second most important selling period. It is an intensely competitive time for retailers and often sets the tone for the all-important Christmas holiday season. Revenues may be high for many companies, but margins are typically slim. Many shoppers do not care what brand of school supplies they buy, so retailers have to compete on price which squeezes margins.
Staples, Inc. (NASDAQ:SPLS) is taking steps to reduce costs and improve profitability by reducing store sizes to an ideal 12,000 square feet and adding online kiosks in stores. These adjustments are imperative considering that the company continues to see negative growth in its stores. On the upside, Staples, Inc. (NASDAQ:SPLS) is experiencing accelerated growth online which is where the greatest potential lies for retailers. Staples intends on capitalizing on its growth in e-commerce by adding thousands of new products online.
One of Staples, Inc. (NASDAQ:SPLS)’ largest competitors is Amazon.com, Inc. (NASDAQ:AMZN). Coming off strong retail sales numbers in June, same-store sales increased by 30.6%. This was an improvement from 25.6% in May, and an increase of 29% for the quarter. Amazon.com, Inc. (NASDAQ:AMZN) will likely continue its e-commerce domination during the back to school season. The company is already running back to school promotions on everything from backpacks and tablets to cleaning supplies for college students. As with Staples, Inc. (NASDAQ:SPLS), Amazon.com, Inc. (NASDAQ:AMZN) is expecting strong sales on newer technology namely tablets like the Kindle Fire HD and mobile devices. The company’s recent move to slash prices on the Kindle Fire HD by a whopping $30 from $199 to $169 will to help spur this growth.