August is here, and it’s time for parents and students to start thinking about going back to school. For Americans consumers, this means shelling out big bucks for new clothes and supplies.
For retailers, it means big business. What about investors?
August and September have been slow months for the S&P 500 over the past five years, as the index is averaging a 1.0 percent overall decline during those two months. A handful of retail stocks have been able to ride the “back to school” wave for some big outperformance over the past five years.
Here’s a basket of retailers to play the trend:
Foot Locker Inc (NYSE: FL): What kid doesn’t want a brand new pair of shoes on the first day of school? Michael Niemira, chief economist at The Retail Economist, recently predicted that shoe stores will see a 4.5 percent year-over-year sales increase this back to school season. Foot Locker’s stock has already averaged a 2.2 percent return during August and September since 2010.
Visa Inc (NYSE: V): It’s not just retailers that benefit from back to school shopping. How are parents and students paying for all of their school shopping? They are all swiping their Visa credit cards, and the company’s stock has averaged a 3.1 percent return. Visa also recently expanded its online payments business by investing in a payment company called Stripe, although 2015 may be a bit soon to expect much of an impact from the investment.
American Eagle Outfitters Inc (NYSE: AEO): If you’re looking for volatility this back to school season, look no further than teen retailer American Eagle. Overall, the stock has averaged a 4.3 percent return during August and September, but that average includes wild swings of +17.8 percent in 2010, -29.8 percent in 2013 and +40.2 percent in 2014. The company is hoping that its recent efforts to reduce its reliance on deep discounts and keep a more fluid inventory will continue to pay off this back to school season.
Apple Inc (NASDAQ: AAPL): If Staples represents a past era of back to school shopping, Apple may be one of the best representatives of modern back to school shopping. Why aren’t students buying pencils and pens and paper and anymore? Here’s why: they all have iPads instead. The stock has risen an average of 4.7 percent over the two-month back to school season each of the past five years.
The TJX Companies Inc (NYSE: TJX): The traditional school supplies market may be losing steam, but the trend of buying new clothes for the first day of school is alive and well. TJX shares are averaging a more than 5.3 percent gain in August and September, including an 11.4 percent gain in 2014. Sometime during the fallout from the Great Recession, bargain hunting became fashionable, and TJX’s stores offer brand name clothing at discounted prices.
Under Armour Inc (NYSE: UA): Within the back to school clothing retailers group, athletic apparel has been white-hot in recent years. Under Armour’s stock has skyrocketed 919.6 percent in the past five years, including averaging a 6.0 percent gain during back to school season. This year, Under Armour has already been capitalizing on its endorsement deal with NBA MVP and world champion Steph Curry by releasing several Curry-branded basketball shoes throughout the month of July.
Nike Inc (NYSE: NKE): Hopefully, you’re starting to notice a trend here. Despite Under Armour’s recent surge, Nike still remains the gold standard and market share leader when it comes to athletic shoes, athletic apparel and athletic casual wear. Shares have risen nearly the same amount — 6.4 percent — as Under Armour each year over this two-month period. This back to school season, Nike will continue its push for more high-margin direct-to-customer sales via its website and its own Nike apparel stores.
Amazon.com Inc (NASDAQ: AMZN): Maybe the least surprising of all the back to school outperformers is the best performer of them all: Amazon. These days, students can get anything imaginable on Amazon, from clothing to textbooks to technology to accessories. Amazon shareholders have gotten all the returns they could need from the stock as well, as it has gained an average of 9.1 percent during back to school season since 2010.
Assuming you’re invested in each equally, this basket of stocks has returned 5.13 percent each August and September since 2010. Compared to the S&P, that’s an average beat of more than 6 percentage points in just 8 weeks and an annualized return of more than 30 percent.
Of course, past performance is no guarantee of future results, but the data doesn’t lie: All investors should take a look at these stocks this fall.
Disclosure: the author holds no positions in any of the stocks mentioned.
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