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If you’re like me, an army of nine- and 10-year-old kids wearing backpacks and new sneakers have suddenly appeared on the corner of your street every morning.
My first thought every time I pass them? Someone is making a killing from all those new backpacks and sneakers this time of year.
Several someones, in fact. There are a number of companies that cash in when it’s time for the kids to go back to school in late August and early September. Some are obvious: Staples and Office Depot are hot spots this time of year for parents to buy Junior Steno Pads or a box of No. 2 pencils. But there are some less obvious back-to-school stores that clean up this time of year.
This year, those companies should clean up more than ever before.
According to the National Retail Federation, total spending this back-to-school season is expected to reach an all-time record of $74.9 billion, 3% higher than last year’s tally. The average family with children in grades kindergarten through 12th grade will spend $669.28. For families with college-aged kids, that spending will be even higher at $916.48.
Those numbers make the back-to-school period the second-biggest selling season of the year, trailing only the holidays. As in the holiday period, certain companies benefit more than others from the back-to-school bonanza.
Some of them even make for good investments.
Here are three back to school stocks that stand out:
Dick’s Sporting Goods (NYSE: DKS)
Well before the first day of school starts, there are two-a-days – twice-daily summer practices for all those athletes in high school and middle school.
Before two-a-days start, you’ve got to have the best and hippest gear. You don’t want to look lame in front of all your friends out on the practice field. So you ask Mom to take you to Dick’s Sporting Goods to buy the latest trendy soccer cleats or running shoes.
In the last three years, earnings per share have doubled for Dick’s Sporting Goods during its June-through-August quarter – faster growth than the company has seen in its holiday quarter. Perhaps not coincidentally, the stock has risen by an average of 13.4% from the third week of August until the third week of September the last four years.
Dick’s shares haven’t performed well year to date, down 22%. But at just 14 times forward earnings, the company could be a nice bargain short-term buy in time for back-to-school season.
Skechers (NYSE: SKX)
Skechers is one of the top retailers of children’s shoes. And back-to-school season is definitely the company’s most profitable time of year. In each of the last three years, Skechers’ third-quarter EPS has been greater than its other three quarters combined. And Q3 profits have tripled since 2011.
At 91 cents a share, this is projected to be Skechers’ best third quarter ever by a significant margin.
ACCO Brands (NYSE: ACCO)
This is the company that makes all those spiral notebooks and index cards you load up on at Staples and Office Depot.
The third quarter has been ACCO’s most consistently profitable quarter the last five years, accounting for 40% of the company’s total EPS during that time. This year’s third quarter is expected to be roughly in line with last year’s. But at a paltry 9.6 times 2015 earnings, ACCO can be had at a nice discount right now. If the company beats relatively modest Q3 earnings expectations, it could be worth the low-risk investment.
Bottom Line
Nothing in retail is ever certain these days. Chances are, not all three of these stocks will net you a big gain in the coming months.
But if even one of them gets a major boost from back-to-school sales – something that’s not far-fetched, given their history – it could at least help you earn back that $916 you just spent on books, pencils and sneakers.
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