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IBD 50 Retailers Look Great In Back-To-School Fashion

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In the race to wow this back-to-school season, athleticwear is primed to be a front-runner.

If followers are on target, power brands such as IBD 50 stockUnder Armour ( UA ) andNike ( NKE ) should keep up the fast pace as workout attire from leggings to sweat shirts ranks among uniforms of choice for youths heading back to the classroom.

Highly rated casual/dress and athletic footwear outfitSkechers USA ( SKX ) should, according to analysts' forecasts, also be among the top performers this back-to-school season, which runs from the end of July to mid-September. So should action sports retailerZumiez ( ZUMZ ).

Athletic footwear retailers such as IBD 50 companyFoot Locker ( FL ) andFinish Line (FINL) are also looking at the top of their game for this key shopping period.

"Athletic leisurewear is huge," said Ken Perkins, president of Retail Metrics, an industry research firm. "More and more kids are gravitating toward fitness leisurewear to wear in the classroom, whether it's Under Armour or Nike."

Industry Innovates

Perkins says the trend is benefiting sporting-goods stores such asDick's Sporting Goods (DKS) and department stores such asMacy's (M) that carry these types of offerings.

"The whole athletic footwear and activewear segment has been on fire," adds B. Riley & Co. analyst Jeff Van Sinderen. "You have to give credit to Nike. They have an amazing machine that comes up with phenomenal products, and that keeps demand high. It's all about product innovation, which is the biggest driver of this business."

Overall, retailers should fare better this back-to-school season than they did last year when factors such as heavy competition and economic and job concerns led to weak back-to-school spending.

"I continue to be optimistic on this back-to-school season," said Michael Niemira, principal of the Retail Economist.

He forecasts a 4.7% rise vs. a year earlier in back-to-school sales for electronics, family clothing, books and shoe store categories for July, August and September. That would be up from the paltry 0.9% rise in 2013 and the biggest gain since 2010, he says.

The drivers? "There's an underlying improvement in the economy that is finally helping to lift consumer demand, especially for back-to-school items," he said.

Niemira says that retailers have moved beyond the weather-related "soft patch" earlier in the year, and are getting a "broader-based lift" triggered by pent-up demand.

Adds Brian Sozzi, CEO of Belus Capital Advisors: "I think back-to-school is shaping up better than the stock market may be expecting."

Sozzi expects the "strong momentum" he saw before Labor Day weekend to carry over through the first couple of weeks the kids are back to school and do more buying based on what their classmates are wearing.

The strong momentum, he adds, will be driven by "more exciting" offerings for kids and their parents to buy, such as "jogger" pants. Printed pants for teens and girls and mesh tops for men and young adults are also hot.

Jharonne Martis, director of consumer research for Thomson Reuters, says retail sales have been improving, but at a very slow rate.

"In general, earnings growth and revenue growth (for retailers) have shown improvement from a year ago for this past quarter, and our estimates show a strong third quarter and a healthy back-to-school season," she said.

Analysts polled by Thomson Reuters expect same-store sales for the third quarter -- which includes August, September and October for most retailers -- to rise 1.4% vs. a year earlier. That would be higher than the 1.3% they forecast for the second quarter.

Shoppers kicked their back-to-school spending into high gear in August, says Perkins, leading to a 5% pop in same-store sales for the month, ahead of views for 4.2%.

He says based on his store checks, back-to-school season looks to be "shaping up to be a decent one."

Under Armour Shines

In terms of apparel brands, "the big winner for back-to-school is Under Armour," said Sozzi.

"Under Armour apparel has become the uniform of choice for teens," he said. And Nike, he adds, is the winner on the footwear side.

Shoes, and athletic footwear in particular, continue to be hot sellers for back-to-school.

In the four weeks ended Aug. 17, athletic footwear sales grew 3% vs. a year earlier and children's athletic footwear rose 5%, says an NPD Group report.

Basketball shoes are a slam dunk for back-to-school, with a 70% year-over-year jump in sales in the four-week period, says NPD.

Van Sinderen said that based on his channel checks for late August, Foot Locker, the leader in the basketball footwear category, and Finish Line, which leads in running shoes, were both doing well for the back-to-school season.

Among teen retailers, Perkins cites Zumiez as being well-positioned. He says it's "niche-oriented," with lots of products that you won't find in other stores.

More traditional teen apparel retailers such asAbercrombie & Fitch (ANF),Aeropostale (ARO) andAmerican Eagle Outfitters (AEO) won't make the grade, says Martis. She says teens already have the "basic items" offered by these retailers. "They want unique fashion trends for back-to-school," she adds.

And fast-fashion chains such as Forever 21 and Zara will be the winners on the hot fashion front, according to Martis.

Promotions Expected

Overall, inventories are in "better shape" than in last year's back-to-school season, says Perkins. Retailers are carrying less inventory, so they don't have to run "fire sales."

However, retailers continue to be highly promotional.

"For the lower- and middle-income consumer, price points have to fit into a budget that's not growing," Perkins said. "That leads to promotions. And pressure from online retailers is forcing brick-and-mortar retailers to discount and compete even more."

"Online will continue to erode in-store as retailers haven't yet learned how to compete and get online to complement their in-store business rather then detract from it," added Marshal Cohen, chief industry analyst for NPD, in an email.

Besides activewear and athletic shoes, hot sellers will include smartphone cases and handbags, he says.

Tablets and smartphones, such as the newApple (AAPL) iPhone 6 and the iPhone 6 Plus introduced Tuesday, could also grab plenty of sales.

"Electronics are a must-have for (back-to-school), and when it comes to tablets, Apple iPads are still a favorite," Martis noted.

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


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

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