American Eagle And Aeropostale Gear Up For Big Spending This Back-To-School Season

Apparel and accessories businesses are among the fastest growing segments this back-to-school season. According to a recent survey by National Retail Federation (NRF), total spending on apparel and accessories is expected to jump over 30%, from $8.3 billion in 2011 to expected $10.8 billion in 2012. ^[1] The news comes as a positive signal for teen apparel retailers such as American Eagle Outfitters (NYSE:AEO), Aeropostale (NYSE:ARO), Gap Inc. (NYSE:GPS), Abercrombie & Fitch (NYSE:ANF), as back-to-school season holds immense importance for teen retailers,  and is often regarded as a benchmark before the all important holiday season.

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2012 back-to-school sounds promising for teen apparel retailers

A dismal back-to-school season was the primary reason behind the downfall of most of the teen apparel retailers in 2011. While a number of varied factors impacted the apparel companies individually in 2011, a major common factor was a decline in consumer spending due to weak macro-economic conditions. Low consumer spending around the 2011 back-to-school season resulted in apparel market becoming excessively promotional, which eventually took a toll on both the comparable sales and margins of teen apparel retailers. See: Teen Apparel Retailers in 2011: Assessing the Threats & Opportunities Ahead

As the latest survey from NRF suggests, teen retailers can expect to see a rise in total spending on apparel and accessories, which should reflect as an improvement in their store comps. Additionally, the survey also indicates a rise in average spending per buyer which can be looked upon as higher sales of full-priced merchandise, and hence better margins for the apparel retailers. Average spending per buyer is expected to rise by 12%, from $220.6 per buyer in 2011 to $246.1 per buyer in 2012.

Another important indication from the survey is an expected substantial increase in direct business. Compared to 31.7% of the buyers who shopped online in 2011, 39.6% of the buyers are expected to shop online in 2012 back-to-school season. An increase in direct business will not just help teen retailers in increasing their sales but also result in improved margins as direct sales carry higher margins compared to that of retail sales.

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1. NRF survey on 2012 back-to-school season, Source: NRF [↩]