"Back To School" Staples and Stocks To Target

Back-to-School 2015 Cheat Sheet from National Retail Federation

• Total back-to-school spending is expected to reach $68 billion.
• US retail sales expected to grow 4.6% in July and August 2015.
• XRT retail ETF has been up 5 of past 6 "July 31-October 30" periods.

Good investment ideas can often be hiding in plain sight. In fact, they might be in your hand right now. Last month we talked about investing in the beer that has been keeping you cool during this long, hot summer. What's in your hand today? If you're the parent of a student, it's probably a 3-foot-long receipt for school supplies.

Jackson, a student in New Hampshire, reaches for a binder at Staples.
Photo used with permission. Credit: Amy Maness  

Actual Staples receipt from an actual friend of mine, as posted on Facebook.
Photo used with permission. Photo credit: Carolyn Komerska. 

Back-to-School is Big Business

Is there really an uptick in sales in August for back-to-school shopping? The answer is a resounding yes. After the holiday season, back-to-school shopping is the 2nd biggest sales driver of the year for retailers. According to eMarketer, US retail sales will grow a "relatively strong" 4.6% in the core back-to-school shopping months of July and August 2015. The National Retail Federation reports that shoppers, after "splurging" in previous years, plan to spend 6% less this year on clothing, shoes, supplies, and electronics for their K-12 students, about $630 overall. No matter though, because the trend-line is still up -- over the past 10 years, families have spent 42% more on school items. Total back-to-school spending is expected to reach a whopping $68 billion.

Does all this spending translate into a seasonal stock price trend you can leverage with good timing? Let's go to the blackboard. Since 2009, according to data from Seasonal Investor Database, the SPDR S&P Retail ETF (XRT) has been up 5 of past 6 quarters for the "July 31-October 30" period. Now, let's look at four popular retailers: Staples, Target, Wal-Mart, and Amazon.com.

Getting Your Staples at Staples

In the process of gaining approval to absorb rival Office Depot, Staples a popular choice for parents, students, and teachers alike. SPLS is closer to its 52-week low of $10.82 than its high of $19.40, so there's upside from its current position, even at its size and rather uninspiring chart. On the sales floor, the Framingham-based retailer, aware of the stiff competition for back-to-school dollars, is answering the bell this year with a 110% price match guarantee through September 19.

But perhaps surprisingly, according to the Seasonal Investment Database (SID), Staples is only a coin-flip as a seasonal play, with 5 of past 10 "August 1-October 30th" periods coming back positive.

Targeting Target

If you're a college student, or the parent of one, you may also have a long receipt from Target. Whether its cheap dorm-room fixings or spiffy new clothes to impress classmates, Target is a popular target for younger shoppers and their parents. The Minneapolis retailer's chart looks good and the company just beat market expectations for Q2. For the Back-to-School season, Target is offering a BOGO deal -- buy one, get one 50% off -- on kids clothing, shoes, and accessories.

According to SID, Target is up 5 of the past 6 "August 1-October 30th" periods, with a median return of +5.19% over the past 10.

Welcome to Wally World 

Many students and parents just go straight to Wal-Mart for all their back-to-school needs. In a lot of the country, they may not even have a choice, as Wal-Mart is the only superstore option in the area. They're as likely to get 3-ring binders there as they are clothes or calculators there. So it's a nice feature then that they offer a database to which schools can upload their requirements lists: Parents can enter the school name and zip code here to see a list of all the supplies they need, school uniform guidelines, etc.

SID has Wal-Mart up 5 of past 6 "August 1-October 30th" periods, with a median of +2.83% over the last 10. The

The Amazon in the Room

While back-to-school sales signs and banners seem to appear in obnoxiously earlier and earlier in the summer every year, actual buying tends to be compressed in a narrow window just before -- and for the procrastinators among us, just after -- the first day of school. While studies show that Amazon.com remains the go-to search, research, and price-checking tool for shoppers, back-to-school shoppers mainly go to the bricks-and-mortar of retail stores for just-in-time items -- good news for Staples, Wal-Mart, and Target. Yet, Amazon may have the edge on bigger ticket items, like laptop computers, that students can order ahead of time. eMarketer reports than online back-to-school shopping sales are expected to rise 14.4% year over year, topping $56 billion, which would represent 16.5% of retail e-commerce sales for the year. For its part, AMZN comes in at a strong +6.67% median for the past 10 "August 1-October 30th" periods, albeit with 5 up and 5 down.

Beat the Rush?

So while these retailers may not go to the head of the class as a seasonal play for this quarter, they remain solid investment options overall. Of course, you can looking at timing these stocks in different way... By buying and holding near-term, you'll be beating the Christmas rush!