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Department Stores: Why Is Back-to-School So Important?

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Back-to-school sales

The back-to-school season in the United States is an important season for retailers, second only to Christmas. Generally, the back-to-school season lasts from mid-July to early or mid-September.

According to a poll of 6,758 consumers conducted from August 4–11 by Prosper Insights & Analytics for the National Retail Federation (or NRF), the average family with children in kindergarten to grade 12 completed about 50.4% of their back-to-school shopping by August 11.

About 13.3% of the families surveyed indicated they had completed their back-to-school shopping as of August 11.

According to Matthew Shay, NRF’s president and CEO (chief executive officer), the delay in back-to-school shopping this year can be attributed to late summer promotions and sales tax holidays. Retailers also try to attract consumers with last-minute promotions.

According to NRF’s survey results, for consumers who have already started shopping by August 11, about 51.3% of their purchases were influenced by coupons, sales, and promotions offered by retailers. This number is down compared to 58% last year.

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Key shopping destination

In response to a question about the preferred shopping destination for the remaining back-to-school shopping season, 53.4% of consumers chose discount stores as the most preferred destination, and 46.8% chose department stores.

A similar survey for back-to-college shopping also indicated discount stores as the preferred place to finish the back-to-college shopping, followed by department stores.

Impact on department stores

For department stores like Macy’s (M), Kohl’s (KSS), JCPenney (JCP), Nordstrom (JWN), and Dillard’s (DDS), back-to-school and holiday seasons are key sales periods. The back-to-school season has a major impact on department stores’ third-quarter sales.

The third quarter of fiscal 2015 ends on October 31, 2015, for these department stores. Kohl’s derives about 15% of its annual sales from the back-to-school season and 30% from the holiday season. Kohl’s accounts for 0.9% of the portfolio holdings of the First Trust Consumer Discretionary AlphaDEX ETF (FXD) and 0.3% of the iShares Russell Midcap Value ETF (IWS).

In the next part of this series, we’ll look at the expectations for the 2015 back-to-school season.

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