Sep 4, 2008
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More saving than splurging in lean back-to-school

Sep 4, 2008

By Lisa Baertlein and Alexandria Sage

LOS ANGELES/SAN FRANCISCO, Sept 4 (Reuters) - This back-to-school season, high school student Tony Lopez is sticking to basics like jeans and shirts so he has enough money to buy his football equipment and go out on weekends.

"I'm on a budget. I kind of wasted $200 more last year," said Lopez, who bought from beach-inspired mall retailer Hollister with money from a summer restaurant job.

"This year I'm buying just the clothes that I need," said the 16-year-old high school junior from Los Angeles. He saved money by not getting new shoes.

Lopez is not alone in paring back, as consumers find themselves pinched by high food and fuel prices, falling home values and mounting job losses.

Los Angeles mom Lisa Adams said she's spending about $500 less this year on school clothes for her 9-year-old daughter Ashley: "Everything is so expensive."

Industry forecasters expect 2008 to be the worst back-to-school shopping season in 7 years, with similar weakness seen for the all-important holiday season.

U.S. retailers reported monthly same-store sales, a key gauge of retail health, on Wednesday and Thursday this week. Overall sales at stores open at least a year rose a slightly better-than-expected 1.6 percent in August, according to results compiled by Thomson Reuters Estimates.

That compared with a 3.1 percent gain in the year-earlier period.

Discounters -- Wal-Mart Stores Inc in particular -- posted some of the strongest results as they were able to lure more shoppers with low prices than department stores and specialty apparel retailers.

U.S. tax rebate checks that boosted spending earlier in the year appear to have dried up, and teens are light in the pockets after the worst summer jobs market in about 20 years.


Maria Larin, a 23-year-old college student shopping at an Old Navy store in downtown San Francisco, said she was looking for a pair of jeans and maybe a blouse.

"Last year I bought more," she said, "50 percent more."

Larin also shops at department stores J.C. Penney and Macy's where she's noticed more sales recently.

As consumers turn their attention to value, a few companies have outperformed peers. They include off-price clothing seller Ross Stores and teen retailer Aeropostale Inc , whose prices are lower than rivals Abercrombie & Fitch Co and American Eagle .

But most companies, anxious to avoid the discounting that pressures profit margins, have trimmed their inventory amid lowered foot traffic at stores.

It isn't just apparel expenses that are hitting American wallets hard.

John Lopez stood in front of a wall of folders and pens in the office supply section of a New York City Kmart , grousing about the burdensome list of school supplies his daughter is required to have when she starts first grade.

"It's too much! I think they ask for too much," Lopez said, as he scanned the list of pens, paper, markers and other items. "I can't afford it, but what are you going to do?" said the 39-year-old dad, estimating he'll spend about $70.

Price-consciousness is now the norm, especially for parents who wouldn't think of skimping on their children.

"I rarely buy full price," said Cindy Nolan, 49, who shopped in Los Angeles this week with her seventh- and fifth-grade daughters Casey and Molly. "I can't cut back."

Still, others are splurging despite the leaner times.

Jessica Vohar, 21, lives with her parents, so feels better about spending what she earns from her part-time job.

"I'm actually spending more on clothes -- I'm obsessed with clothes," said Vohar, who was looking for jeans and trendy shirts at a San Francisco Old Navy.

Meanwhile, Londoner Phoebe Lowndes, 19, said she is doing all of her college shopping in the United States, where a weaker dollar has essentially put the entire country on sale.

Lowndes, shopping at a Forever 21 store in San Francisco, couldn't believe the bargains.

"It's incredible! I can't believe this leather jacket is $34!" she said, holding up her next purchase. (Additional reporting by Sarah Coffey in New York; Editing by Brian Moss)

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