Can Back-to-School Season Lift Target (TGT), Staples (SPLS)? - Analyst Blog


The back-to-school season is regarded as one of the important sales season for the U.S. retailing companies just next to Christmas holiday, and with the economy is still in a recovery phase and the job market has just started to show improvement, it is obvious that consumers will be extra cautious when it comes to purchase. Total spending for back to school and college is estimated to touch $74.9 billion according to National Retail Federation (NRF).

The data from NRF revealed that total spending on back to school will slide marginally to $26.5 billion due to lower number of students in households this summer. The survey also highlighted that 25.4% of shoppers, up from 21.8% last year, are likely to postpone their purchases for the last minute to get those extra discounts from retailers at the cost of margins. To make the most of the season, the retailers have geared themselves with promotional strategies and are efficiently using the marketing tools to alert consumers of best deals.

In an attempt to capture incremental revenue, Staples, Inc. ( SPLS ) is offering a 110% price match for the back-to-school season. This is in sync with its new tagline "Make More Happen for Less." The company will match prices of other retailers including online giant Inc. ( AMZN ) and will give an additional 10% off on the difference between its price and the competitor's price. The offer is available both online as well as in stores, and will provide Staples' customers with the best bargain possible. In addition to 110% price match, Staples will continue to offer weekly deals.  

Staples has been battling declining revenues and shrinking margins for some time now. Stiff competition from online giants has seized a large share of its profits. Moreover, the secular and cyclical headwinds in the office supplies industry have considerably reduced the demand for big ticket items. We believe that the company's endeavors this back-to-school season may help it to remove the drag.

On the other hand, for Target Corp. ( TGT ) this back-to-school season is a challenge to uplift its brand image that was battered by massive data breach last holiday season, when information related to credit and debit card data of approximately 70 million customers was hacked. Apart from the security infringement, the company's tepid entry into the Canadian market, weak e-commerce sales and subsequent dismal quarterly performances have put it on the back foot. Moreover, the breach has shaken consumer confidence, resulting in lesser footfall and a public relations nightmare for the company.

Keeping these in mind, Target has launched its back-to-school campaign, which involves some amount of social responsibility. The company stated that for each select up & up school supply bought at stores from Jul 13 to Aug 2, it will donate one school supply item to a needy student. The company through this approach intends to contribute up to $25 million in supplies to the Kids In Need Foundation.

This season Target assures of unbeatable prices, including savings through Cartwheel, REDcard Rewards, and Price Match. However, its wait-and-see story how far Target will succeed in removing the dust from its image but its sure the company is leaving no stone unturned to win consumer back.

Both Staples and Target currently carry a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: NRF , SPLS , TGT , AMZN

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