Retailers count on back-to-school sales more than ever

Retailers in Maryland and elsewhere count on back-to-school sales to drive business.

With his four children in tow, Michael Mason arrived at the shoe department at Sears at White Marsh Mall with two clear goals: buy sneakers for his soon-to-be first-grade daughter and save money.

The Middle River stay-at-home father said he accomplished both.

Leryah Mason, 5, joined by a baby sister and an older brother and sister, happily boxed up her selection while her father cashed in on points from the department store's loyalty program.

"With a family of six, it's rough," Mason said.

It's an age-old scene being played out in Maryland this month as consumers head to stores for new clothing, shoes, supplies and equipment before the start of classes. Buying is expected to heat up this week during the state's annual sales tax holiday.

Back-to-school spending across the country offers a picture of what's ahead for the holidays, the most important time for retailers. The National Retail Federation expects consumers to stock up on new school supplies and clothing this year, as opposed to making do, as many have done in the years since the recession.

"It's definitely one of our top seasons for sales," said Phillip Keene, a spokesman for Wal-Mart. "Our approach has been how do we both provide the stuff you've got to have but also the cool stuff, and make it affordable for people."

Total spending on back-to-school items, which is typically second to the holidays, is expected to reach $75.8 billion, a 10 percent gain, the National Retail Federation said. That includes the college market.

Sales are expected to grow 9.6 percent in the K-12 segment alone, the retail group said.

But Chris G. Christopher Jr., director of consumer economics for IHS Global Insight, painted a less rosy picture. In a report Friday, he noted that retail sales were down in July as spending on electronics, clothing and sporting and general merchandise slowed. Christopher lowered the firm's back-to-school retail sales outlook from a 4.2 percent increase over last year to 4.1 percent.

This year, as retailers vie for consumer dollars in an increasingly cutthroat environment, the stakes may be even higher than usual. Many stores and malls are struggling, even teetering on bankruptcy, said Charles M. Tatelbaum, a bankruptcy attorney with Tripp Scott in Fort Lauderdale, Fla., who works with troubled retailers and their creditors.

Teen retailer Aeropostale filed for Chapter 11 bankruptcy protection in May after losing money for 13 straight quarters, while teen jewelry chain Claire's, heavily in debt, is counting on strong back-to-school sales to keep it out of bankruptcy. Sports Authority announced in May that it would close all of its 450 stores across the U.S. after the bankrupt company failed to find a buyer.

On Thursday, Macy's announced that it will close about 100 stores next year, about 15 percent of all locations, and invest more in its online channel.

The chain runs seven Macy's in the Baltimore region, and at least two, those in Marley Station and Security Square malls, are likely candidates for closure, according to Mark Millman, president and CEO of Millman Search Group, a retail consulting an executive search firm.

As a result of retail business failures, Tatelbaum said, vendors have become stingier in extending credit to retailers. Some retailers, he said, are giving discounts to get customers in the door, sacrificing profit margins.

"Back-to-school for a lot of retailers is where cash comes in, and they have the cash to pay for part or all of holiday goods," Tatelbaum said. "If cash doesn't come in ... they're going to have less opportunities to fill shelves with holiday inventory."

In addition, many shopping centers that had refinanced mortgages at low interest rates after the recession have loans that are maturing and will find it difficult to refinance, especially if the centers have a high rate of vacancies.

Tatelbaum expects further consolidation of the retail industry at the end of the holiday season.

Online shopping also continues to shake up the industry.

"Certainly, one of the major concerns in the industry right now is the impact that online retail is having on brick and mortar," said Cailey Locklair Tolle, president of the Maryland Retailers Association. "The fact of the matter is the industry is changing very dramatically. And people are shopping a lot more online."

The state's tax-free week, which starts Sunday and runs through Aug. 20, brings shoppers out, Tolle said.

"The middle of the summer when they really are down, it's much needed," she said. "It holds a lot of the smaller retailers over and allows them to keep their doors open for the year."

Maryland Comptroller Peter Franchot stopped at Mondawmin Mall on Tuesday to urge consumers to take advantage of the week and shop local. During the week, consumers will be exempt from the state's 6 percent sales tax on any single, qualifying article of clothing or footwear priced at $100 or less. The exemption applies regardless of the number of items purchased.

Maryland's tax-free week, authorized by state lawmakers in 2007, takes place each August, timed to spur back-to-school shopping. Franchot said the state is counting on getting an economic boost from this week because sales tax revenues show consumer spending has been weak.

"The economy is not hitting on all cylinders," Franchot said. "Retail sales continue to be sluggish. We're not sure whether consumers don't have money or they aren't willing to spend money."

No matter how much of a break they get from such promotions, some consumers simply can't afford to stock up. Shelly White, an East Baltimore resident, was out at Mondawmin Mall on Tuesday but reluctant to spend.

For the coming school year, she has bought new tennis shoes for each of her three children, a 13-year-old and 7-year-old twins. But White, who is unemployed and looking for work, said she won't be able to afford to buy new school uniforms and play clothes until next month.

"I still gotta pay rent," she said.

Retailers need to rethink how to build a more loyal customer base, said Dianne Inniss, the principal over retail customer experience and innovation for ThoughtWorks Retail, a consulting and software development firm that works with retailers. The back-to-school season gives them a chance to do that, she said.

"The key is to find opportunities to build trust, to build affinity and to create habits," so that shoppers count on a particular retailer for particular products, she said.

"Back-to-school is one of those opportunities to create triggers for habits," she added. "If we can get people in the store at a time when it's needs-driven — they need supplies and clothing — and deliver a superior experience, this gives the retailer an opportunity to capture them so the customer returns."

At the Sears in White Marsh, manager Tierra Taylor-Ba is preparing for back-to-school promotions each week this month and hopes that shoppers think of Sears for uniforms, plus-sized clothing for girls and boys, belts, socks and dorm room furnishings. Already, she said, uniform pants and shirts have been selling fast.

"We have all the necessities," she said.

lorraine.mirabella@baltsun.com

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