School shopping isn’t all fun and games … unless you’re a nerd like me who counted down to color-coordinating three-ring binders and spiral notebooks. Either way, school supplies are another prominent part of the back-to-school shopping ritual.
A prime destination: Staples (SPLS). Most years, the third quarter contributes more than a third of the company’s unadjusted earnings … although that trend took an ugly reversal last year. The company posted a profit in every quarter of 2012 except the third, where it posted a big-enough loss for the full year to sink into the red thanks in part to restructuring and impairment charges.
Luckily, the back-to-school season is expected to return to its normal contribution level this year — around 35% of total earnings. And school supplies seem more of a necessity than a new T-shirt or pair of shoes.
Still, higher temperatures could push more shoppers to grab bargain notebooks at Dollar Tree (DLTR), Five Below (FIVE) or somewhere online. That’s a big red flag considering sales are already expected to again fall year-over-year, and the slightest slowdown could take earnings — now slated to be flat — with them.