BTS challenging, but opportunity remains

Target is a formidable back-to-school competitor in its own right, but it faces several considerable challenges this year that could hinder seasonal sales grow. Obviously, an overall reduction in demand as a result of the recessionary economy is a big factor. The National Retail Federation has forecasted back-to-school spending per student for kids in grades K-12 will decline 7.7% to $548 this year compared with $594. With market participants left to divvy up a smaller pie, another other big challenge revealed itself last week when Walmart declared it is gaining share in a market NRF values at $47.5 billion.

“Based on the industry reports on back-to-school, we believe we are gaining significant share of this sizable business,” said Walmart vice chairman Eduardo Castro-Wright last Thursday during a recorded call to describe the company’s second quarter results. “Although it is a tough sales environment, we are pleased with the initial response to our back-to-school and back-to-college offerings.”

If there is a bright spot this back-to-school season it is in the back-to-college area. NRF forecasts sales to that segment will increase modestly to $618 per student from last year’s $599 per student average. Walmart said its back-to-college same-store sales were running in the mid-single digits. Those gains didn’t necessarily come at Target’s expense though, as the company has been aggressive in targeting college kids who are likely more receptive to Target’s “expect more” proposition. And with NRF surveys indicating 42% of college students had not begun shopping as of Aug. 11, there is a lot of spending yet to take place.