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Drop in orders as sellers play it safe after a damp spring
Aggregated Source: Shanghai Daily: Business

STUNG by leftover inventory because of a wet, cold spring and unsure about consumer spending, many US retailers are ordering conservatively for the second busiest selling season of the year behind the end of the year holiday period, according to executives in shipping, banking and manufacturing.

"I don't think this is going to be a blowout year. I think this is going to be a little bit of a tough year," John Barbour, CEO of educational products maker LeapFrog Enterprises Inc said. "People have less money in their pockets."

While the US economy has recovered modestly since the financial crisis, median household income is still below where it was before the 2007-2009 recession began, a recent report from Sentier Research showed.

Better inventory tracking tools also enable retailers to wait longer than usual to place back-to-school orders. That could mean higher profit margins in the second half of the year as retailers will likely not have to offer as many discounts to get rid of excess inventory. But they also risk not having enough stock if consumers spend more than anticipated.

"From their perspective, it is better to have missed sales than to end up having too much inventory, which you have to mark down," BB&T Capital Markets analyst Anthony Chukumba said.

Market research firm NPD Group expects consumers to start shopping later but spend more this year, especially online. NPD sees a 3 percent rise in back-to-school sales from last year.

Orders shrinking

Many retailers declined to provide details of the size and timing of back-to-school orders. But figures on shipments, factory orders and credit are down or flat with last year.

Data from China, where US retailers get electronics, garments, toys and many other products made, showed new export orders shrinking in June at their fastest pace since September 2012.

A ho-hum first half "has brought some caution in for sure," said Craig Errington, vice president of marketing at Wrangler, a unit of VF Corp. He declined to comment on the size of orders for the upcoming season.

Working capital lines of credit that stores tap to buy inventory are "at historically low levels" and not showing the usual peak before the back-to-school season, said Keith Vercauteren, who works in the capital finance arm of Wells Fargo.

Unlike years past, when retailers would buy 15 to 20 percent more than what they sold the previous season, they played safe this time and bought the same amount of backpacks and school supplies as they sold last year, said Steve Russo, owner of FAB Starpoint, which makes "Hello Kitty" and other licensed goods.

Some retailers can order less or later because they are able to better manage inventory with smarter tracking tools and buying strategies.

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