Wal-Mart Stores, Inc. (WMT), Target Corporation (TGT): Back to School Brings Success for Retailers

The smoke from July 4th has barely cleared and already commercials are letting us know it’s back to school season. With many schools starting in early to mid-August, retailers are gearing up for the late-July rush that comes as students stock up on electronics, supplies, and clothing.

Stocking up on pencils

The first places most parents hit, school supply list in hand, are department stores like Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT). This year the company is going after college students, launching a campaign featuring YouTube personalities touring dorm rooms that have been decorated using Target products. It might be a wise idea. Research shows college-related spending increased 41% between 2011 and 2013, with parents of college students increasing their spending 12% from 2011 to 2012.

The latest quarter was rough for Target Corporation (NYSE:TGT), with earnings down 29%. The company also lowered its forecast for the upcoming quarter, blaming weak sales in its Canadian market and unseasonal weather conditions. And the company recently reduced its outlook for the year, adjusting earnings from $4.85-$5.05 per share to $4.70-$4.90 per share.

Apparel sales

American Eagle Outfitters (NYSE:AEO) stock peaked last September, just after families hit stores to stock up on shirts and pants. With many schools now implementing uniforms, parents are looking for items like khaki pants and plain button down shirts–items in which American Eagle specializes.

Last year, it peaked in its back-to-school months, (so if that performance is any indication), this upcoming quarter should be a good one. Currently, American Eagle Outfitters (NYSE:AEO) is 17% below that peak, but it’s extremely popular with teens and college students, making back-to-school time a big deal for the company.

Unfortunately, its net sales dropped 4.1%, with sales at its stores falling 6% in its most recent quarter. The company’s aerie stores, which carry lingerie and other intimates, were up 4%. Company earnings overall are down 34% from its 2008 peak but revenue is up 15%. As the economy begins to recover, it may be able to make its way to 2008 levels, with parents and teens once again filling bare closets with more than school uniforms.