Walmart, Target to see sales boost as kids head to school

2/2 © Reuters. FILE PHOTO: A shopping cart is seen in a Target store in the Brooklyn borough of New York, U.S., November 14, 2017. REUTERS/Brendan McDermid 2/2

By Aishwarya Venugopal and Richa Naidu

(Reuters) - U.S. big box retailers Walmart (NYSE:WMT) and Target (NYSE:TGT) are expected to see higher sales when they report quarterly results this week as parents buy clothes and backpacks for kids heading back to classrooms after COVID restrictions.

Industry estimates expect total back-to-school spending to cross $100 billion and rise 6.4% from a year ago when schools, colleges and office meetings were largely confined to computer screens.

"Consumers are flush with cash, savings rates have been elevated throughout the pandemic, and there is meaningful pent-up demand for back to school products ranging from school supplies to sneakers to laptops," said Ken Perkins, founder of research firm Retail Metrics.

Stimulus checks and advance child tax credits from U.S. President Joe Biden's administration are also touted to bump up sales in what analysts characterize as one of the best of back-to-school seasons in retail even as the Delta variant threatens to dampen economic recovery.

And while industry-wide supply chain disruptions, increased costs and labor shortages in the United States are likely to weigh on margins this quarter, analysts add that market share gains made by Target and Walmart during the pandemic is expected to offset some of those pressures.

"I don't think any retailer in their most optimistic moment would have thought that the back-to-school season would have been this strong," said Howard Meitiner, managing director at consulting firm Carl Marks Advisors.

Walmart is in a particularly strong position because it has made huge investments in its online business, but is also ready for the people who want to go back into stores, he added.

The world's biggest retailer saw traffic growth for the first time in 2021, with July visits jumping 2.9% compared to the same time in 2019, while visits at Target stores increased 15.9% for that period, according to data firm Placer.ai.

According to Refinitiv IBES data, the retailer is expected to post a 3.39% rise in U.S. same-stores sales and adjusted profit of $1.57 per share when it reports second-quarter on Tuesday, while analysts consensus for Target's quarterly comparable sales and profit is estimated to be nearly 8% and $3.49 per share, respectively.

Some consultants see strong back-to-school sales as a good omen for the all-important holiday shopping season.

"Everyone - from Walmart to Target - is really trying to use the back-to-school season as a conduit to get people into stores," said Stacy DeBroff, founder of marketing data firm Influence Central, which works with retailers such as JCPenney, Dick's Sporting Goods (NYSE:DKS) and Skechers.