Back to School Brings Success for Retailers

Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

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 and Target (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, 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 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.

Electronics for campus

Laptops aren't just for college classrooms anymore. As high schools receive an injection of technology, Best Buy (NYSE: BBY) is beefing up its mobile offerings to appeal to younger consumers. To reach out to younger shoppers, Best Buy has already put in place its "Back to School Techfitter," allowing students to choose their identity and see products that match.

Same-store-sales were down 1.3% in its most-recent quarter as the company shifted attention toward its Best Buy Mobile locations. But back-to-schoolers will likely be primarily visiting traditional Best Buy locations, where they'll be able to shop for laptops, printers, tablets, and accessories.

It should be noted, however, that Best Buy's stock is up 115% this year, giving the retailer a sunny outlook for the remainder of 2013. It also means the market is viewing it as being more than just a showroom for Amazon. As college students outfit dorm rooms with TVs, DVD players, and other electronics, Best Buy could see an even more profitable quarter.

Foolish final thoughts

Best Buy has asked investors to have patience, since 2013 is its "transition year." American Eagle Outfitters and Target, meanwhile, are both hoping for an improvement that can be brought only with an influx of parents and their children, stocking up for the first day of school. If recent trends hold, both should enjoy a very profitable back to school season.

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Stephanie Faris has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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