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Back-to-School Spending Expected to Rise

11 August 2015 in Trading Ideas

Try as they might to ignore it, the country’s school-age population knows that by the end of this month they’ll either be back in the classroom or down to their last few days of freedom.

It’s not all, bad, however—U.S. students figure to benefit from a boost in back-to-school spending, much of it centered on the latest technology.

Overall, parents anticipate spending an average of $1,239 this season, up 8 percent from 2014, and up 24 percent since 2011.1 Technology for classroom use is a significant contributor to the added costs, with 82 percent of those surveyed saying their children use tech for learning (versus 77 percent in 2014), including 57 percent who use tablets (up from 51 percent a year ago), and 29 percent using smartphones (up from 21 percent a year earlier).

“Today’s parents are managing an ever-growing checklist for back-to-school season,” Jed Scala, senior vice president of consumer lending at American Express, said in a press release put out by the company. “The mass adoption of technology has filtered down to the classroom, changing the way kids learn and the way parents spend.”

Activities outside the classroom are also contributing to the pinch. Parents expect to spend an average of $455 per child on after-school programs in 2015, up 20 percent from 2014.

Several states have also enticed consumers with sales tax holidays that aim to boost state economies by encouraging consumers to spend more when they’ve got their wallets open and credit cards out anyway—like during back-to-school season.

Last Friday, 12 states began offering sales tax holidays letting shoppers save up to 10 percent as they hit back-to-school sales for basic supplies and must-haves—like Minions lunchboxes and Frozen backpacks.2

However, the key is knowing that each state has a different list of allowable items exempted from sales tax and that price caps exist for each category.3

For example, Missouri’s three-day tax holiday that began Friday offered a sales tax waiver on clothing, school supplies, personal computers, software and peripheral devices—with purchase limits in each category. But in Iowa, this past weekend’s tax holiday ran only Friday and Saturday and the sales tax waiver only applied to clothing and footwear, with specific exclusions for items such as watches, handkerchiefs, roller blades, skates and sporting equipment.

Of course, spending on our kids is hardly confined to the nine-month school year. Infants have ‘round-the-clock needs and recreation can make up a significant part of the annual family budget.

Families appear to be budgeting a bit more toward recreational spending, or at least that’s what Walt Disney is seeing. The company’s latest quarterly earnings indicated that its theme park business appears relatively strong.

Disney said last week that quarterly theme park revenue rose 5.1 percent to $4.1 billion, while operating income jumped nearly 9 percent to $922 million.4

The company, which saw record attendance at Walt Disney World for the quarter, attributed the increase at theme parks to higher guest spending and higher resort occupancy.

Walt Disney is one of the 19 different stocks included in the Child’s Play motif. It has had a 7.6 percent return over the past 12 months.

The motif outperformed the Standard & Poor’s 500 and the Dow Jones Industrial Average, which had 12-month returns of 6.86 percent and 4.36 percent, respectively.

Or as those who are heading back to school might say, the Child’s Play motif has been getting better grades.

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1 American Express, “Beyond Backpacks and Books: Back-to-School Spending Increases as Parents Purchase More Gadgets for the Classroom,” MarketWatch, August 7, 2015.
2 Baskas, Harriet “Back-to-School Bonus: Sales Tax Holidays Can Be a Shopping Godsend,” NBC News, August 7, 2015.
3 Ibid.
4 Bilbao, Richard, “Disney Theme Park Biz Up in Q3,” Orlando Business Journal, August 4, 2015.