Target’s second quarter just ended and if the dourest of back-to-school spending forecasts proves correct the company’s expectations for same-store sale growth in the range of 2% to 3% could prove optimistic and its third quarter outlook could come under pressure.
Target has a lot at stake during back-to-school season, the bulk of which falls during the company’s third quarter, because discount stores are the most popular of retail venues for commodity products and Target also appeals to the college crowd. Unfortunately, the National Retail Federation early in July indicated that average spending per school age child was expected to decline this year from 2012 levels. NRF said spending per child in grades K-12 would decline to $634 in 2013 compared to $688 last year and spending per college student would decline to $836 from $907. The trade group forecast total K-12 spending of $26.7 billion and total back-to-college spending of $45.8 billion for a combined market size of $72.5 billion.
The forecast represented a meaningful pullback from 2012 when sales benefitted from the combination of pent-up demand unleashed by improved economic conditions and growth in the population of school-age children, according to NRF. The spending forecast is based on a survey of 5,635 consumers conducted for NRF by Prosper Insights & Analytics between July 1 and July 8.
Subsequent forecasts from the International Council of Shopping Centers and Deloitte have painted a rosier picture, but only marginally so, creating the potential for a disappointing back-to-school season if shoppers follow through on their stated intentions to restrain spending.
Target is due to report second quarter financial results on Wednesday, August 21, and in addition to forecasts for reduced or low growth back-to-school spending, the company faces a relatively high hurdle from the prior year when same-store sales increased 3.1%. On a positive note, the second quarter likely got off to a strong start following a wet and cold spring which caused first-quarter comps to decline 0.6% and pushed seasonal spending into the second quarter.