podcast: confident decision making. Welcome back to another episode of The Decisive podcast brought to you by S&P Global Market Intelligence. I'm your host, Kristen Hallam. And today, we're diving into one of the most critical retail periods of the year, the back-to-school shopping season in the U.S. The back-to-school season is second only to the winter holidays in terms of importance for retailers and their
suppliers. This year, S&P Global Market Intelligence projects that back-to-school retail sales will grow by 2.9%, topping the $1 trillion mark. This growth, while modest, begin to shake off their inflation fatigue. Joining me today are 2 experts from S&P Global Market Intelligence, who have been closely analyzing these trends. Markets; and Chris Rogers, Head of Supply Chain Research. Welcome, Michael and Chris. Let's start with a bit of an icebreaker. Michael, what does
My core pants and a light Keeper, your Starter shoes.
All right. And what
A sense of impending dread more kit. say that's what attracted me to analyzing supply pair British for new starts, let's
Yes. And for me, I'll draw from both of your responses, a also lots of excitement about seeing people over the summer. Michael, let's talk about this growth that we're expecting in the back-to-school season, 2.9%, still below the pre-pandemic average growth in back-to-school sales, which was 3.7%, and it's well below the inflated rates coming out of the pandemic. Should we be concerned about that? Would that count as a failing grade...
Not Yes, current dollar sales be below the second year in a help explain a lot of earnings calls this last quarter. But in our view, the slowdown isn't quite as worrisome as it may first sound because lower retail inflation slows the growth
of current dollar sales. When we look at real sales, which are current dollar sales adjusted for the change in retail prices, we actually see growth this year outpacing sales last year, growing around 3.5%, which is right at the pre-pandemic normal this year than it has in the last couple of years.
Michael, can you give us an overview of what's driving the growth in back-to-school sales
Look, let's forecast for the economy has really stabilized, and it's been consistent that the U.S. is period of below trend growth. But I want to be clear that below trend growth doesn't mean the the still growth. And it's this put the U.S. on a path to a soft landing. And if that can be sustained, it will be good for consumers and retailers heading into the second half of this year..
Now peak shopping seasons require peak shipping seasons. Chris, how does supply chain activity for this year compare with last year's back-to-school season in the U.S.
comes concern that the shape of seasonality during the year would shift. So when we talk about the peak shipping season, there's actually 3 peak shipping seasons. The first one is back-to-school season, particularly around apparel. The second one is around leisure goods, so that's toys and Halloween and
all that kind of stuff. And then the third one is electronics when we we look at that first peak season, seeing an increase in imports of those back-to-school products to we really see that ramp up Firstly, there's a cluster of demand factors. that on the sales side. I think I'd also just note that this time last year, retail generally period of destocking, so reducing inventories, the need for the shipping of seen is quite a significant degree of early shipping.
you're concerned about what's going to happen to your supply chain structurally as going to take a more conservative approach and
Chris, have you seen any supply chain issues or disruptions that have impacted back-to-school shipping compared to previous years? For example, have we seen any impact from the ongoing disruptions in the Red Sea or from weather-related storms...
a supply chain disruption bingo card for what's going to come up each year. We've of the challenges that supply chain networks face, and you touched on a couple there. I think the Red Sea shipping disruptions are a particular challenge. So effectively having into the U.S. East Coast, having to go through days. Now the 10 days, right? So you can build that
for longer. Second, it reduces your flexibility because your ability to respond to changes in demand suddenly takes 2 weeks longer than it would otherwise have done. And so if you want to change what you're shipping during the season, your ability to do that is reduced. Second, potential East Coast labor strikes, potentially. So that's when the current contract between the unions and the ports
ends. Now that's not necessarily an issue for the back-to-school season because we'll all be back leisure goods and consumer electronics into the holiday season. So I think that's why And the thing is if you're shipping early shipping early to early you time. So I think we've that. The one that's not really picked yet is the hurricane got hurricane season. So I can see just how
disruptive that can be. Now NASA that this hurricane season is going to be the strongest we've not seen a lot of evidence of that. We've had Hurricane Beryl, which is a real kind of tragedy for life and was quite disruptive to supply chains down in the Southeast and the Gulf Coast. We haven't yet seen more of those come through. You'd normally expect to see hurricanes get started in August and September. So we'll keep a close
that. But we kind of confluence of events coming the rush back-to-school season was very much driven by wanting to make sure
Yes. We'll season shapes up, as been too bad just yet, but September is specific categories of products that have experienced a surge in demand categories of products that have seen a drop in demand?
Yes. So where we have seen a pickup has been in kids apparel, resolve sometimes within the international trade data sets, kids clothes and what can't differentiate when people and why people are buying those. But we an increase in shipments of around 7% in the April to July peak shipping season that's comparing to a period a year ago a lot of the apparel firms. We have seen slower growth elsewhere in and school actually, new iPads, but that's
of the consumer electronics side. So we've been mapping out in our electronics laptop computers and tablets. The tablet laptops have not industry generally has supply chain for the delivery of AI-enabled laptop computers, tend to be at the higher end, not at the school end. So we're still seeing quite slow development on the consumer electronics side. The differentiation there is fewer computers coming
Yes. front, I did have to go out and buy multiple composition notebooks. And then boring because they were available on
Aw, come on, Mom, get
The supply chain more of the colored ones...
We had actually a very specific for only had prongs in which didn't have prongs. And we are now a week into school, and we still don't know what these folders are for. what
I hope there: Can you tell us where people are going to buy these goods that Chris was just talking about? Are some things or to e-tailers like I did for other things.
image the big box to school. But in our people are increasingly turning to online shopping, not but for the ease prices. go to 5 different websites. And nonstore category. The share of online shopping for back-to-school is going to be over 35% this year, and that's up from 20% a decade ago. With my child's could click and buy those all store.
That's
And it was, of course, online, but simplified the shopping process to experience. But for pretty painless. And as far as growth in the retail sector in general, you can tell a couple of different stories. Online rate like we saw general merchandise is plugging along also at a steady rate, soft but steady.
And the dark the uncertainty has been around the volatility that we've related to most recently, the in August because of that shift in timing of bright ray This has been a sector that's lagged coming out of the traded in category of retail things not
just turn into it. And then the last story you can tell is the sector of retail that's adjacent to housing and because of the fact that the housing market has yet to recover from the interest rate rises couple of years, are
Michael, can you tell us a little bit more about how economic factors influence household purchasing decisions for school supplies? And what does that say about
they've made it very clear that they like neither inflation nor the interest sentiment, if person is at a level that's about halfway between during the pandemic. So people are not afraid to tell you that they don't like the way things are right now. But the economy isn't about wage growth and job growth, U.S. expect that even though consumers are more worried about the level of high prices, they're less concerned about
inflation going forward. We see that in the data and that they are optimistic future, which do matter a lot for spending are that sort of to see small out-of-pocket items like back-to-school sales, they do pretty that drive the headline retail numbers, your autos, your large appliances, your homes. Those are going to continue to lag for a while.
I know I won't be purchasing any homes or cars Chris, how should retailers think about these trends when they're reviewing their supply chains or setting up their supply chains for the peak seasons.
So we've learned a couple of things over the past 5 years or so when the shape of peak season doesn't seem to have normalized. There's just so many areas of variability in there, not just on the demand side, so the issues that of the expectations and interest rates and so on, not just the retail routes available. the store? I like the idea of trying to buy boxes go back anyway, change supply-side shocks or supply-side
worries. -- knowing whether or not you're going to be able to ship strike, whether it is in the U.S. East Coast or the very short-lived Canadian rail strike, for example. All of those uncertainties that we see in logistics think more about where and how they position their inventory. I think in a world could cost you anything. That calculus has changed. Even if interest rates are coming down, they're not going to come down to 0, right, or at least not in the
I
from an inventory perspective, you now have to allow for that That's leading more firms to think about producing in market for market or in adjacencies. Are you going to start making more stuff in Mexico for for Europe, these kind of decisions, think, are becoming more important from a planning perspective. I think one thing to be become so aware now of supply chain risks balance between being reactive, but then losing the ability to be more strategic
in their supply chain thinking. Of course, keep chain that, networks get the job done, even there's
That's certainly been our experience with resilient.
alluded to consumer expectations, how I tell us a lot about where they think the economy is going for retailers raises but demand of the year report.
All right. While we're looking into the future, back-to-school season behind us, as we alluded to earlier. Curious about what research topics you all are looking at or what current events you're analyzing? How about we start with you, Michael?
So on the data front large developments for We got the preliminary benchmark revisions for the payroll survey, which is where we track job gains annually. And those 800,000 less jobs And that's for a lot of people. But what I'd like to remind people about is that for practical purposes and if we look at how demand been jobs effectively ties the short-term surveys that are taken sources that are They actually go back to unemployment insurance data. And so this is the actual
job numbers. Now there are some indications that when we add up all the county end up being a little bit higher, maybe between that were created, but that still means in the last couple of years coming out of the pandemic, we've created around 2 million jobs. not only spending growth
deal with of what happens next. If you believe and Powell likely than not interest rates at the upcoming meeting here in yourself what comes next and how quickly rates will come down and what that means for things like mortgage rates, we've seen starting to drop already and then the interest rates consumers are paying but CDs and high-yield savings accounts.
That sort of touches on in college, but I would right. How particular research topics or current events that you're focused on at the moment?
Yes, deep dives into the future of American trade policy driven by the outcome of the elections, talk about the fundamental need to need to encourage economic growth through the manufacturing industrialization of emerging markets. desktop at the moment, I'm up by nearly 60% year-over-year in July. stuff about that soon. So
I tracker we of our most popular pieces with the media, and I enjoy writing it because I get to get all my bad out in one single piece...
we'll have to podcast talking about, if not Halloween sales, then maybe holiday sales in a broader sense, looking All right. So any final thoughts before we wrap up?
Yes. Going into the second half of this year, we're landing. The odds are good if demand remains strong. And so the Fed's job will be how successful they are in doing that
public service announcement slash reminder that logistics does find a way of things to keep an there. So keep
And can I just say thank you so much for that, Chris. You read so much about supply days that hear that because as questions about you know, current events, and economy? And the answer is often, No, because people underestimate size of the U.S. economy, have national implications. local labor what we're seeing on average. But it often helps explain why those not always jive.
Thank you both for sharing your valuable insights with us today. I'll drop a link to the blog post that we did on back-to-school sales in of the episode. Until next time. Thank you for listening to The Decisive podcast from S&P Global. Please subscribe and join then, stay curious and stay informed.