Back-To-School 2008 A Drag on Retailers

October 1, 2008 Updated: October 1, 2015

The Benevides family shops for school bags and back to school clothes at Cookies in the Brooklyn borough of New York City.    (Stephen Chernin/Getty Images )
The Benevides family shops for school bags and back to school clothes at Cookies in the Brooklyn borough of New York City. (Stephen Chernin/Getty Images )
WASHINGTON—Aeropostale, Inc., a popular teenager clothing and accessories retailer reported record back-to-school sales for August. The store has found itself a niche that appeals to the younger crowd.

Sales of $207.9 million were 24 percent higher than during August of 2007.

“Our back-to-school merchandise assortments have been positively received by our customers and we believe that we are well positioned as we head into the second half of the year,” said Julian R. Geiger, Chairman and CEO of Aeropostale in a recent press release.

At the same time, Abercrombie and Fitch Co. reported a 5 percent decrease in overall sales during August and an about 2.5 percent decline in its teen sections, when compared to August 2007. Analysts claim that weakening European economy and increased price reductions are to blame.

Due to lower than expected financial results, Citigroup Investment Research downgraded Abercrombie’s stock from “Buy” to “Sell” on September 4.

JC Penny Company, Inc.’s sales also took a 4.9 percent nosedive in August despite a lot of additional promotions. JCPenney launched the “Dorm Life,” a comprehensive modern lifestyle brand for today’s design-savvy young adults, according to a company release.

Dorm Life, as suggested by JCPenney VP Karolyn Wangstad, features the trendy, preppy, nostalgic, and sporty look and for those on a tight budget.

“We entered the ‘back to school’ season with the most exciting assortment in our history, including such new brands as Decree, Fabulosity and Dorm Life,” announced Myron E. Ullman II, Chairman and CEO of JCPenney in a release.

Gap Inc. was not spared by declining sales and reported a 5 percent annual decrease in August sales figures. The numbers look even more dismal when comparing Gap divisions—Gap declined 5 percent, Banana Republic down 14 percent and Old Navy down 9 percent.

Looking at the Sales Numbers

Back-to-college retail sales were expected to have dropped at lease 7 percent in August 2008 over last year, according to the NRF 2008 Back to College Consumer Intentions and Actions Survey sponsored by the National Retail Federation (NRF), a global retail trade association.

“College students are learning a hard lesson that when economic times are tough, fun purchases take a back seat,” said Tracy Mullin, President and CEO of NRF.

Many students will live at home instead of the dorm, go to the computer lab instead of buying a new computer, try to keep the wardrobe spending to a minimum and be thriftier than any first-year college student in prior years. Shoppers went the extra mile to find that bargain and favor discount stores to the boutique for the kids.

“This year’s back-to-school shopper is a bargain hunter at the core,” said Phil Rist, Vice President at Big Research, according to the NRF press release.

A survey by Deloitte & Touche showed that the majority of shoppers will buy only what is needed, go for those bargains, use store coupons, look for those discount stores, hit the Internet to find bargains and stick to the basics. Deloitte suggests that retailers should foster loyalty to keep this year’s shoppers from going to the competition.

Tough Sell

Aeropostale was doing everything right to draw in those youngsters, despite a declining economy and less money to throw around, said University of Pennsylvania professors in a Knowledge @ Wharton (KW) report titled “Hot Today, Not Tomorrow: Retailers Face the Terrible Teens.”

Early on, jeans were 50 percent off regular prices, selling for between $20 and $30. The professors suggest that Aeropostale management knew exactly which items’ prices had to be lowered.

“Aeropostale has gotten better about its product offering and what’s playing with teens. It’s not just about being cheap; the clothes have to be something they want to buy,” said Erin Armendinger in the KW article.

On the other hand, Abercombie was not willing to lower prices, despite the economic downturn. The Abercombie brands that suffered the most were Hollister, which targets teens, Ruehl, which targets 20-somethings, and Abercrombie Kids, which targets parents of young children.

“Abercombie has thumbed its nose at price reductions when other retailers are saying, ‘we understand that you need to spend less.’ That is a risky strategy,” suggested Armendinger.