American parents spend a lot of money on back-to-school shopping. The National Retail Federation forecasts that parents in the U.S. will spend a record $41.5 billion on back-to-school shopping in 2023. Individually, parents will shell out an average of $895 each getting their kids ready to return to the classroom, with clothes and electronics comprising the biggest expenses. For parents who have children heading back to college this autumn, the spending is expected to be even more at $94 billion, which would also be an all-time high.
Clearly back-to-school is big business and a major catalyst for many companies, especially retailers. From computers and smartphones to school books and sneakers, parents nationwide are under pressure to buy it all and send their kids back to school as prepared as possible, whether for first grade or a college. With so much money being spent, we offer seven stocks to buy for a back-to-school boom.
Apple (AAPL)
There’s a reason consumer electronics giant Apple (NASDAQ:AAPL) launches its new products in September. The company aims to capitalize on demand for its iPhones, iPads and Mac computers as people return to school and work after the summer. Of course, Apple also wants to get its devices into the year-end holiday sales cycle. But the whole thing kicks off each year with the launch of new products just after Labor Day, as students head back to the classroom.
On Sept. 12, Apple is widely expected to unveil the new iPhone 15. The newest iPhone is expected to use a different USB-C charging port, and there are rumors that it could be made of titanium metal. The company might also announce new Apple Watch models at this year’s launch event, along with the newest version of its operating system for iPhones. Of course, recent news that China is banning government workers from using Apple’s iPhones has cast a cloud over the upcoming launch event. But long-term, Apple should be just fine.
AAPL stock has risen 43% so far this year and is up nearly 220% over five years.
Dick’s Sporting Goods (DKS)
The third quarter is typically the strongest of the year for Dick’s Sporting Goods (NYSE:DKS). The retailer’s sales tend to spike in August and September as parents stock up on sneakers, backpacks, football equipment, soccer cleats, and just about any other sports equipment their children might need for the new school year. Back-to-school shopping is to Dick’s Sporting Goods what tax season is to accountants — an extremely busy and lucrative stretch of the calendar year.
The flurry of back-to-school purchases should help to ensure that Dick’s Q3 financial results are better than the company’s most recent Q2 print. Unfortunately, Dick’s laid an egg with its Q2 numbers, announcing a 23% drop in profits due mainly to decreased sales of its outdoor category that includes camping gear and equipment. The poor showing has led to a steep selloff in DKS stock, making now an opportune time for investors to take a position in this leading retailer.
Year-to-date, DKS stock is down 8% following the post-earnings drop. But over five years, the share price is up 202%.
Best Buy (BBY)
Best Buy (NYSE:BBY) is another company whose store locations tend to see increased foot traffic during the back-to-school rush as parents and kids turn to the consumer electronics retailer to buy items ranging from the aforementioned iPhones and iPads to laptops computers, monitors, printers, headphones, and the like. Best Buy’s two busiest times of the year tend to be the year-end holidays that include the Black Friday and Cyber Monday sales events, and back-to-school shopping at the end of summer.
To be sure, BBY stock hasn’t been the best performer in recent years. The company’s share price has declined 9% in 2023 and is down 7% over five years. However. Best Buy does offer its shareholders a lucrative quarterly dividend payment of 92 cents a share, which gives it a hefty yield of 5.03%. Currently trading at 12 times future earnings, Best Buy’s stock also looks cheaply valued at current levels. With demand for personal computers and other electronics expected to rebound in the near-term, now might be a good time to consider BBY stock.
Walmart (WMT)
Discount retailer Walmart (NYSE:WMT) is a parent’s dream when it comes to back-to-school shopping. After all, Walmart carries just about everything parents need for back-to-school in one convenient location. From sneakers and backpacks to scribblers, pens and pencils, electronics, and lunch snacks, Walmart has it all. And at affordable prices too. The diversity of the products Walmart sells, and the essential nature of many of the items, helps to explain why Walmart’s sales and stock price continue to trend higher.
The retailer recently announced Q2 financial results that slayed Wall Street expectations across the board. As a result, the company also raised its full-year guidance, signaling out its online, or e-commerce sales, as a particular bright spot for the company. The strong print had investors cheering and led to WMT stock rising to a 52-week high, where it is currently trading. Over the past 12 months, Walmart’s share price has gained 19%, bringing its five year increase to 73%.
Amazon (AMZN)
For parents who are pressed for time and can’t make it to a physical store location, there is e-commerce giant Amazon (NASDAQ:AMZN). The company sells most any item one would want or need to return to the classroom, from notebooks to electronic tablets. Amazon also offers the convenience of shipping right to the front door and most items can be delivered in 48 hours or less. AMZN stock is currently on a rebound, having gained 61% this year following a slump coming out of the Covid-19 pandemic.
The company’s Q2 print this summer was its strongest earnings release since the fourth quarter of 2020 and resulted after aggressive cost-cutting that saw the layoff of thousands of employees. Amazon also revised up its forward guidance for the current third quarter, noting strong sales of its July Prime Day sales event, which the company has said was the biggest and most successful in company history. AMZN stock is up 40% over the last five years.
Scholastic Corp. (SCHL)
For a truly beaten down name that is almost synonymous with education, there is Scholastic Corp. (NASDAQ:SCHL), a leading publisher of text books and educational materials for both students and teachers. Clifford the Big Red Dog, whose books are still the ones many people first learn to read with, is the company’s official mascot. In business since 1920, Scholastic today is the world’s largest publisher and distributor of children’s books and digital educational materials for students in kindergarten through grade 12.
The company also holds the U.S. publishing rights to both the Harry Potter and Hunger Games book series, which are lucrative properties and perennial bestsellers. Despite its dominant role in the education system, SCHL stock has been under pressure in recent years. So far in 2023, the company’s share price has risen only 1%. Through five years, the stock is down 5%. The decline is due to an increasingly fragmented marketplace and move towards more online or digital sources of education materials.
Despite its lackluster performance, SCHL stock offers a quarterly dividend payment of 20 cents a share, which equates to a yield of 2%. The share price recently got a big jump with its latest financial results.
Skechers USA (SKX)
Finally, we have Skechers USA (NYSE:SKX), the popular sneaker maker that was founded in 1992 and is now the third largest footwear brand in the U.S. Skechers sells sneakers that are targeted at and popular with young children, including shoes that are fastened with Velcro and whose bottoms light up in flashing colors. This makes Skechers an ideal choice for any back-to-school boom. Skechers also have a reputation for being rugged and durable, which no doubt makes them popular with parents.
Strong sales and growing market share have propelled SKX stock higher. Since January of this year, the share price has increased 17%, bringing its five year gain to 80%. Despite the run, Skechers stock still looks fairly valued trading at 16 times future earnings. There’s no dividend paid by the company. However, the strong share price appreciation should more than make-up for the lack of a distribution. Analysts continue to praise the company’s growth prospects for both the near and long-term.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
