NEW YORK – The back-to-school shopping season is off to a promising start, but retailers could be sacrificing profit for sales.
The National Retail Federation expects the average family with school-age children to spend $669.28 for back-to-school items, up 5 percent from last year. That would be the second-highest amount since the industry trade group started tracking spending in 2004.
But major retailers, including Wal-Mart and Macy’s, are discounting merchandise and increasing spending to upgrade their stores and websites just to grab the attention of U.S. shoppers during the second-biggest shopping period of the year. All that discounting and investing has gotten the season off to a strong start, they say, but it also hurts their bottom lines.
“Stores are going to have to invest in price and e-commerce aggressively in order to be competitive,” said Ken Perkins, president of RetailMetrics LLC, a retail research firm. “The pie is not growing, and they’ve got to do everything they can to keep them from losing market share.”
Wal-Mart, the world’s largest retailer, says it’s been investing in several ways to attract shoppers this season. Compared with last year, the company cut prices on 10 percent more back-to-school items and offered 30 percent more back-to-school products online.
The company has made some long-term investments. Wal-Mart said this year it plans to open 270 to 300 small stores during the current fiscal year – double its initial forecast – to compete with dollar chains.
But all that investing has hurt its results. On Thursday, Wal-Mart reported that its profit in the latest quarter was virtually flat during the latest quarter.
Kohl’s Corp. reported flat profit in its latest fiscal quarter Thursday, as it cut prices, revamped its beauty departments and spent on services such as shipping online orders directly to shoppers from its stores.
Macy’s Inc., which owns Macy’s and upscale Bloomingdale’s chains, reported Wednesday that its profit and sales for its latest quarter missed Wall Street estimates because it did so much discounting of merchandise.
The retailer also has been investing in its online business. The company said it just finished rolling out a program that allows shoppers to order on macys.com and pick up their order in stores.
Additionally, the company said that it has sharpened its focus on customers ages 13 to 30, which has re-energized the back-to-school business.