What’s Your Back-to-School Budget?

by Wall Street Daily
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Submitted by Wall St. Daily as part of our contributors program

The way I see it, you can buy thinner pencils or binders, skimp on gigabytes, find a backpack with fewer pockets – even load up on mix-and-match clothes instead of buying new outfits.

It won’t make a huge difference.

If you have children, you’re about to spend a lot of money between now and September. It’s a fact of life – like football in the fall and Frosty the Snowman blaring in the mall before you even roast the Thanksgiving turkey.

It can’t be avoided, and neither can the pre-back-to-school hype about retail sales and just how much you’re bound to shell out this year.

Ultimately, the National Retail Federation (NRF) calculates that you’re likely to spend $634.78 (on average) on clothes, shoes, basic supplies and electronics for your school-age children. The good news is, that’s down a cool $50, or 7.8% less than last year.

With that said, it doesn’t seem like consumers are slowing down at all. If anything, they’re upping their shopping game…

Wallets Opening Faster Than Ever

The SPDR S&P Retail ETF (XRT) is up 23% year-to-date. This proves that shoppers have unlatched their purses and are making purchases at companies like Macy’s (M), Netflix (NFLX) and Best Buy (BBY), which are all tracked by the ETF.

At the same time, same-store sales rose 4.1% in June from the same period a year earlier, according to Retail Metrics Inc. That represents the largest increase since January.

And online retailers are faring just as well…

Global online retail and travel spending will surpass the $1.2-trillion mark this year, according to eMarketer. And the U.S. e-commerce market alone will generate $395.28 billion in business-to-consumer sales in 2013, with retail accounting for around 66%, or $261 billion. That represents a healthy 16% growth over 2012.

Indeed, be it online or in store, the back-to-school season is second only to the winter holidays when it comes to retail sales.

To prepare your portfolio to profit from the trend, here are some companies that are uniquely positioned to end the season on top.

The Gap Inc. (GPS)

The best aspect of The Gap is that it’s not a one-trick pony. Combined with Old Navy and Banana Republic, shares are trading at 10-year highs.

In June, same-store sales jumped 7% over 2012 and earnings climbed 43%. Not to mention that two interesting events will take place for the company in August…

Quarterly results come out on August 22– and they haven’t missed the mark in five years. Plus, Banana Republic will launch a highly anticipated, limited-edition collection from Issa London (best known for being the designer for the Duchess of Cambridge’s engagement dress in 2010).

Staples (SPLS)

Only time will tell how the upcoming $1.2-billion merger of Office Depot (ODP) and OfficeMax (OMX) will pan out. But don’t count out Staples.

One thing I like about Staples – besides a 3.3% yield – is its huge online retail presence. According to Internet Retailer, it’s the No. 2 internet retailer, worldwide, ranked by sales.

Online sales increased 5% in 2012, to $10.6 billion, even as brick-and-mortar store sales fell. That’s $3.6 billion in total revenue more than OfficeMax.

Wal-Mart (WMT)

You probably thought you knew all you needed to about Wal-Mart, considering it has more than 10,800 stores visited each week by 245 million customers. But what I like about the company is a unique online approach to back-to-school shopping called “Classrooms by Walmart.”

You see, about 35,000 parents registered for the site last year, which included perks like 4% cash back, free shipping and a teacher/school search for lists. You get the drift.

Last year, about 16,000 schools submitted supply lists to the shopping site. That’s up to 40,000 so far in 2013.

The Finish Line Inc. (FINL)

What might be most interesting about this shoe retailer is its recent agreement with Macy’s to sell its athletic shoes in Finish Line-branded shops in more than 450 Macy’s stores and on Macys.com.

Finish Line expects the Macy’s business to generate revenue of $250 million by 2017 and total sales projections of $2.2 billion.

The company always seems to have something in its pipeline for improving customer experiences. This year involves a streamlined in-store pick-up process and better product search filtering on its website.

Bottom line: As consumers dive into the back-to-school season, it might be a good idea to load up on retail stocks ahead of time.


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