With Independence Day over, the back-to-school shopping season is fast approaching. That’s good news for retailers, says Piper Sandler.
Like so much else last year, back to school (BTS) in 2020 was not a normal season, given that so many schools remained virtual, although plenty of stores still saw a benefit.
This year, analyst Erinn Murphy writes that she’s upbeat about BTS: Not only is in-person learning returning for many students, but the enhanced child tax credit and high savings rates means that consumers have the means to spend. Moreover, retailers have been operating with lean inventories—meaning less need to discount to move old merchandise—and are enjoying strong pricing power.
Nonetheless, the rising tide won’t necessarily lift all boats to the same degree. Her research indicates that mall-based retailers—
American Eagle Outfitters
Abercrombie & Fitch
(LULU)—and off-price retailers—
(ROST)—“are all on pace to exceed 2019 sales levels.” By contrast, department stores—
(JWN)—and more-traditional vendors—
(TPR)—may fall short of that mark.
Still, Murphy sees winners across categories. Under Armour will get a boost from a return of organized sports, while a shift in denim styles will benefit Kontoor Brands. Renewed consumer interest in outdoor activities, and trends that favor Vans sneakers are a boon for
(VFC), while the Versace brand will bolster Capri.
(CROX) has been seeing both brand momentum and pricing power, notably pulling back on promotions in recent months. She has Overweight ratings on all five stocks.
That said, while BTS may be robust this year, plenty of unknowns remain for early 2022, as retailers must lap a stimulus benefit this year and rising input costs. She argues that brands that have the best pricing power and direct-to-consumer models will continue to see an outsized benefit, highlighting Nike, VF,
(EL), lululemon, and Crox.
Write to Teresa Rivas at [email protected]