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Back-to-College Spending to Hit All-Time High: Top 5 Gainers


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As its time for students to head back to schools and colleges after the much-cherished summer break, shopping for essentials is in full swing. This time around, however, the back-to-college and school season is expected to see the highest spending on record.

College spending is likely to touch the highest level ever, while back-to-school outlays are going to be the third highest. The increase in spending can be attributed to an improving economy and growing consumer confidence.

As clear from the projections, retailers have been witnessing an uptick in sales. By this time, retailers are well equipped with everything necessary for a successful start of both college and school year. Banking on such encouraging trends, investing in sound retail stocks won't be a bad proposition.

Get Ready to Splurge: Colleges & Schools to Start Soon

Young lads heading to college are planning to spend an average $942.17, a total of $55.3 billion, per the National Retail Federation's (NRF) annual survey. This turns out to be an all-time high in the history of the survey, surpassing last year's record of $54.1 billion.

College and graduate students are expected to spend the maximum on electronics ($229.21). In addition to electronics, back-to-college shoppers plan to splurge on clothing and accessories ($153.32), apartment furnishings ($109.29), food ($102.82), shoes ($83.41), personal care items such as skin and hair care ($78.70), school supplies such as notebooks and backpacks ($69.46), and gift cards ($62.61). NRF Vice President for Research Mark Mathews added that "college shoppers are prioritizing and increasing their spending budgets in essential categories including clothing, furnishings and shoes."

The top shopping destinations, in the meantime, for back-to-college consumers include online retailers (49%), department stores (40%), discount stores (35%), office supply stores (31%) and college bookstores (30%).

Children in elementary through high school, by the way, plan to expend $684.79 each - a total of $27.5 billion. That's the third highest in the history of the survey following a peak of $30.3 billion in 2012 and last year's $29.5 billion.

Back-to-school shoppers intend to spend the most on clothing ($236.90). Electronics such as computers, calculators or phones ($187.10), shoes ($138.66), and supplies such as notebooks, pencils, backpacks, and lunchboxes ($122.13) also make it to the list. Mathews acknowledged that "the biggest change we are seeing in back-to-school spending this year is coming from electronics."

For those shopping for school items, the top destinations include department stores (57%), online retailers (55%), discount stores (52%), clothing stores (51%) and office supply stores (35%).

Largely, spending for college and K-12 schools combined is projected to reach $82.8 billion, almost as high as last year's $83.6 billion. The survey also pointed out that most of the college shoppers (67%) plan to start at least three weeks before college begins, the same as last year, but definitely more than 51% in 2008. And when it comes to schools, 77% plans to start early, up from last year's 74% and 64% a decade earlier.

What's Behind the Upbeat Projections?

NRF President and CEO Matthew Shay said that "with the economy thriving thanks to tax reform and growing consumer confidence, we expect to see a very strong season." The economy is in good shape with the simulative fiscal policies such as tax cuts providing the much-needed wherewithal to corporates. Wages and salaries grew in the second quarter at the fastest pace in almost a decade, while the overall economic output expanded at a 4.1% annual rate in the said quarter, the fastest in almost four years.

Perhaps a better reading of economic strength that excludes trade and inventories rose a solid 3.9% in the second quarter. Personal consumption powered second-quarter economic growth, with consumer spending accelerating to a 4% annual pace after a sharp pullback in the first quarter.

And as Americans grew more upbeat about the economy, the measure of consumer confidence continues to hover around a 17-year high. The Conference Board's confidence index increased to 127.4 in July from 127.1 in June.

Winners From Back-to-College & School Shopping Spree

Back-to-college spending is expected to hit an all-time high, offering bright prospects for retailers and leading to a ramp up in sales. For now, retail stocks are on a rally, which is definitely encouraging amid speculations of a decline in foot traffic, store closures and bankruptcies.

We have, thus, selected five fundamentally sound retailers that can make the most of the back-to-college shopping season. Such stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Amazon.com, Inc. AMZN engages in the retail sale of consumer products and subscriptions. Currently, the company has a Zacks Rank #1.

The stock's expected earnings growth for the current year is 279.6%, way higher than the Internet - Commerce industry's rally of 8.3%. In the last 60 days, 18 earnings estimates moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings soared 38.8% in the same period.

Ross Stores, Inc. ROST operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands in the United States. Currently, the stock has a Zacks Rank #2.

The company's expected earnings growth for the current year is 21.3%, more than the Retail - Discount Stores industry's rally of 18.2%. In the last 30 days, one earnings estimate moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings went up 0.1% in the same period.

The TJX Companies, Inc. TJX operates as an off-price apparel and home fashions retailer. Currently, the company has a Zacks Rank #2.

The stock's expected earnings growth for the current year is 20.1%, higher than the Retail - Discount Stores industry's rally of 18.2%. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings increased 0.2% in the same period. You can see  the complete list of today's Zacks #1 Rank stocks here .

Kohl's Corporation KSS operates as an omni-channel retailer in the United States. Its stores and Website offer apparel, footwear, accessories, beauty, and home products. Currently, the stock has a Zacks Rank #2.

The company's expected earnings growth for the current year is 28.6%, higher than the Retail - Regional Department Stores industry's rally of 19.2%. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings advanced 0.2% in the same period.

American Eagle Outfitters, Inc. AEO operates as a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle Outfitters and Aerie brands. Currently, the company has a Zacks Rank #2.

The stock's expected earnings growth for the current year is 3.1%, higher than the Retail - Apparel and Shoes industry's rally of 15.1%. In the last 60 days, five earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings improved 1.3% in the same period.

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: AMZN , AEO , ROST , TJX , KSS



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