Discount inferno

Abercrombie is out, T.J. Maxx is in. Shoppers snub high-priced retailers in their search for value.

Published online on Thursday, Aug. 14, 2008

Forget about buying that $69 pair of Hollister jeans at the mall. This year's back-to-school shoppers are heading to discount stores like Target and T.J. Maxx for their clothes.

They're bypassing traditional department stores and high-priced retailers on the yearly trek to buy jeans, sneakers and notebooks. Instead, discount and off-price stores are reveling in sales increases, with Wal-Mart, for instance, posting a whopping 17% rise in second-quarter earnings Thursday.

Also Thursday, Nordstrom reported a 21% decline and Kohl's a more than 12% drop.

Overall, back-to-school spending is expected to rise by 1%, the smallest increase since the recession in 2001, according to the International Council of Shopping Centers.

Shoppers are still spending, but they are shopping at lower-priced stores instead of pricier places like department stores, said National Retail Federation spokesman Scott Krugman.

In a survey of shoppers by the council, 90% of participants said they planned to shop at discount stores, up from 49% just three years ago.

This is particularly true of teens, Krugman said.

"More and more teens are using their own money," he said. "They might be looking for better deals."

Erin Alexander, 14, of Fresno says her friends have changed how they shop. Instead of looking for an Abercrombie & Fitch top at an Abercrombie store, they search thrift stores first. If they can't find a particular brand, they'll buy it at Abercrombie, but go to Target for basics, she said.

"All of my friends used to go to Abercrombie," she said. "[Now] their parents don’t have as much money to spend.”

Wal-Mart and Target are increasingly producing trendy clothes to capture that market, Krugman said, such as Target's low-cost lines created by up-and-coming designers like Stella McCartney.

Sonya Morgan, manager of the Target on West Shaw Avenue in Fresno, said their pieces make up a good percentage of teens' outfits.

"The kids like to layer T-shirts and tank tops," she said. "You put the name brand one on top."

And shoppers bought back-to-school items earlier this year, when merchandise tends to be less expensive, said Erin Hershkowitz, spokeswoman for the International Council of Shopping Centers.

Aside from Wal-Mart, others reporting positive financial news included TJX Cos., which owns off-price retailers T.J. Maxx and Marshalls. The Framingham, Mass.-based company reported that its second-quarter earnings rose 7%, more than triple the same period a year earlier. It also raised its profit outlook for the year.

Pleasanton-based Ross Stores, which owns Ross Dress for Less and dd's Discounts, hasn't released its second-quarter earnings yet, but July same-store sales-- or those at stores open at least a year-- rose 4% from the prior year period. Target's rose 4.7%.

Their more expensive counterparts didn't do nearly as well in July, with same-store sales falling 2.1% at Gottschalks, 6.5% at J.C. Penney and 10.4% at Kohl's.

Bobbi Chaville, spokeswoman for Ross, said her stores, which sell many brand names found in department stores at a 20% to 60% discount, attribute their recent success simply to more transactions.

"The consumer has fewer dollars to spend on discretionary items, and she knows she can find great value and really good brand names at Ross," she said.

Leanne Mitchell of Fresno and her 10-year-old daughter, Melanie, bought a backpack at dd's Discounts on West Avenue south of Ashlan Avenue earlier this week. They were headed to Payless ShoeSource next for a pair of dress shoes and a pair of sneakers.