Outlet malls a big hit for back-to-school shoppers

NEW YORK -- Parents have a new goal this back-to-school shopping season: Buy their children the name brands they want without spending like it's 2007.

After the recession began in late 2007, cost-conscious consumers sought out the cheapest shirts and shoes they could find at merchants like Walmart and Target to keep their budget in check. But these days, value is the name of the game.

Shoppers who are just as concerned about style and quality as price are flocking to factory outlets, where they can snag Gap, Nike, Vans and other designer clothes and accessories for 25 to 70 percent off. In fact, a quarter of parents said they plan to do the bulk of their back-to-school shopping at factory outlets and discount stores, compared with just 16 percent planning to do so at malls, according to the American Express Spending and Saving Tracker.

"I still want the brand names," said Lisa Santa, who took a break from her vacation recently to hit the Jersey Shore Premium Outlets to find a first-day-of-school outfit for her third-grade daughter. "So I came here hoping to get lower prices on quality stuff."

It's a major shopping shift from the recession, when many Americans shunned pricey designer labels in favor of dirt-cheap buys. Now, they're back to shopping for brand names as the economy slowly recovers, but are still unwilling to pay full price for Guess jeans and Oakley sunglasses because of worries about high unemployment and stock market volatility. As a result, clothing sales were up 18 percent year-over-year in July at factory outlets ---- more sales growth than every other retail concept except warehouse stores, according to research firm NDP Group.

Cashing in

During the back-to-school season, which runs roughly from mid-July through mid-September, there's a big opportunity for outlet centers to cash in on the trend. The average family with children in kindergarten through grade 12 plans to shell out $604 for clothes, school supplies and electronics this year, according to the National Retail Federation. For college students, who also need dorm furnishings, the budget is $809. Both figures are a few dollars lower than last year, but combined will still amount to $69 billion for retailers -- and outlet stores are expected to capture a large portion.

Simon Property Group operates regional malls and 57 outlet centers across the country, including Jersey Shore Premium Outlets, which has stores like children' clothing retailer Children's Place and teen clothing chain Aeropostale. The company said its total sales per square foot were up 9.4 percent to $513 for the three months ended June 30 over the same period last year. It is planning major expansions at four of its outlet centers in Seattle, Orlando, Chicago and Southern California, which will add more than 450,000 square feet of space.

Shoppers "are now re-emerging and getting back to normal," said Michele Rothstein, senior vice president of marketing for the Premium Outlets division of Simon. "However, it is a new normal -- one that focuses more on value."

Rival developer Tanger Factory Outlet Centers Inc., which owns or operates 37 outlet shopping centers in the U.S., reported Aug. 2 that its tenants' sales at stores open at least a year -- a key indicator of a retailer's health -- were up 6.8 percent over the previous quarter to $361 per square foot. Tanger's tenants include Cole Haan Outlet, Coach Factory and Old Navy Outlet.

Tanger chief executive Steven Tanger said on the call he's hearing from retailers that outlet stores are "either the most profitable or one of the most profitable business units in their corporation."

Indeed, many apparel brands are relying on outlet divisions for growth. At Ann Taylor, revenue from its namesake stores open at least a year was up just 0.6 percent last quarter, while Ann Taylor Factory stores had a 6.5 percent increase. American Eagle CEO James O'Donnell said on an Aug. 24 call with investors that 90 percent of the company's new locations will be so-called "off-campus" stores, or outlets. And Gap recently said it was upping the number of new stores it plans to open this year from 65 to 75, "driven primarily by additional Outlet store openings in North America."

At Children's Place, the chain is rolling out its first clothing assortment made specifically for its outlet stores for back-to-school this year. When its manufacturing transition is complete, Children's Place expects up to 75 percent of the merchandise in its outlet stores to be made-for-outlet -- a ratio that matches what many other companies are already doing.

One reason the companies are devoting more attention to their outlet stores is that they are more profitable, says Mark Polinski, senior vice president of outlets for the chain. For instance, outlets currently make up 13 percent of Children's Place stores but account for 20 percent of sales.

"The outlet customer typically has a very big list of items to shop for," which translates into a higher average purchase amount, Polinski says. Outlets also can spend less on labor because customers don't expect the same level of customer service, he says.

On a recent Friday at the Jersey Shore Premium Outlets, as families filled the food court with shopping bags piled around their feet, it was clear shoppers were looking to clear their back-to-school shopping lists at the outlet.

Amy Allen, manager of the outlet mall's Sunglass Hut, said transactions at her store are up 40 percent over this time last year. College students have been stopping in to pick up Ray-Ban Wayfarers -- the current Blues Brothers-style fad -- before heading back to campus. Families are hunting for sporty Oakleys for their children' fall sports-team tryouts. "We have a lot of families coming on the weekends and they're here all day," Allen says.

Kimberly Lombardo, of Monmouth County, NJ, was taking a break for lunch with her two daughters, ages 11 and 8. The girls wear uniforms to school, but they still need backpacks, play clothes, socks and other gear. While the eight-year-old is happy to show off her sparkly tutu from Target, the older girl wants trendy, name-brand fashions. But Lombardo says she has no intention of visiting the mall.

"I'd rather come here because of the deals," she says. "They have all the good shops."