Back to school shopping season looks depressing

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It can't be a good omen that signs for back-to-school sales popped up in many stores around the 4th of July.

Retailers, however, have little choice but to use every legal means at their disposal to entice shoppers to come to their establishments. That means deals and discounts -- lots and lots of them.

For instance, Wal-Mart Stores Inc. (WMT), the world's largest retailer, is offering futon couches starting at $149 on its web site. School uniforms are available starting at $6 and deals are available on all sorts of children's apparel and footwear. Target Corp. (TGT) is offering free shipping on web orders of $50 or higher. Department store chain Macy's Inc. (M) lists "Kid's Sale and Clearance" on its site with discounts of 20 percent to 75 percent.

"Retailers are basically pulling out the stops to bring people in stores," said Erin Armendinger, director of the Baker Retailing Initiative at the Wharton Business School of the University of Pennsylvania, in an interview with DailyFinance. "This is the toughest retail environment that most have seen in their careers."

The reason for their generosity is obvious: consumers remain skittish. Even Costco Wholesale Corp. (COST), which targets cost-conscious consumers, posted a decline in monthly sales. Wal-Mart, a Wall Street darling last year, whose shares have slumped 15 percent this year, no longer provides monthly sales. For its part, the National Retail Federation argues that the "worst is behind us."

Back to school is the second-most important selling period for retailers behind the December holidays.

There is some reason for optimism, however. Better-than-expected gasoline and auto sales pushed June retail sales up a whopping 0.6 percent, surpassing the 0.4 percent gain economists had expected, according to the Associated Press. Still, Armendinger points out that retailers -- who tend to be optimists -- are not ready to pop champagne corks yet.

"The U.S. consumer is used to spending," she said, adding that some argue that there is "pent-up demand" from consumers forced to be frugal because they were worried about the economy. Armendinger is not sure if she agrees with that sentiment.

In fact, as the AP notes, sales at general merchandise stores fell by 0.4 percent, an improvement from May's 1.7 percent decline. Sales at specialty clothing stores were little changed.

In the coming months, retailers will see if consumers are going to resume their old spending habits or whether the worst economic crisis since the Great Depression has turned us into a nation of cheapskates. For now, frugality is winning.

Looking ahead to December, retailers may see a rebound from last year's disastrous figures but not much of one.

"I don't think anybody thinks it's going to be great," Armendinger said.
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