Jennifer Glasgow bought a $35 shirt at Abercrombie & Fitch last year for her 10-year-old son, Kurt. This year, she's buying shirts at Target that sell for around $12 in preparation for the start of school.
"With the gas prices … you have to cut back on everything else," the 39-year-old Glasgow said. "We're cutting back wherever possible."
And this weekend, there's another way consumers can trim expenses. More parents, including Glasgow, said they intend to take advantage of additional savings during this fall's tax-free holiday, which starts today and ends Sunday.
The state's three-day sales tax holiday, a practice that started here in 2006, allows shoppers to buy many items of clothing and other supplies free of state and local sales taxes. After this weekend, the next scheduled tax holiday is August 2009.
"The holiday offers Tennessee families savings on supplies to prepare their children for the upcoming school year, even as they feel effects of the national downturn on our state's economy," said Sara Jo Houghland, a state Revenue Department spokeswoman.
For some shoppers, like 37-year-old Dana Fletcher, the sales tax savings is worth it. Fletcher, a child support researcher, scoured the shelves at discount store Fred's in Nashville earlier this week, mentally noting the prices on binder paper, folders and other supplies. She plans to return to buy this weekend.
"For me, it's really necessary," Fletcher said, adding that the cost of filling up her gas-guzzling SUV has risen 50 percent since last year. "It makes up for that."
About 90 percent of households say they plan to shop at discount stores this year, compared to 56 percent just two years ago, according to a survey by the New York-based International Council of Shopping Centers.
That suggests "the middle-income spending squeeze is likely to force shoppers to seek out value destinations in order to stretch their budgets," said Neil Currie, U.S. food, drug and discount retail analyst for UBS.
A poor summer job market for teenagers has also fueled sales at many discount outlets, said Britt Beemer, chairman and founder of Charleston, S.C.-based America's Research Group. While teenagers will still have a say in back-to-school purchases, they may be forced to seek cheaper places to shop because now they're spending mom and dad's money instead of their own, Beemer said.
He expects back-to-school spending to drop 1.5 percent because "parents are only buying what … kids have to have."
Parents scrimp, saveFifth-grader Kurt Glasgow, 10, the son of Jennifer Glasgow, can relate. He knows the high cost of gasoline means he can't buy everything he likes.
"When I try to buy stuff…it's too much," he said.
To appeal to cost-conscious consumers, some retailers like Memphis-based Fred's Inc., and Goodlettsville-based Dollar General, said they'd offer a wider selection of store-owned brands or private-label items, generally sold at a lower price to consumers, and often a higher profit margin for retailers, analysts said.
"We believe the current economic climate is bringing more consumers toward discount retail," said Jerry A. Shore, Fred's executive vice president and chief financial officer.
He said private-label merchandise is a bigger percentage of Fred's sales this year as well.
Dollar General said it would add 112 items, such as snacks and crackers, to its private-label merchandise, making a total of more than 800 private label items by the end of 2008.
The products can be sold at a lower price compared to national brands because the company deals directly with the manufacturers, said Victoria Kopyar, senior director of product development.
Meanwhile, retail store managers say they're confident this weekend's tax-free holiday will generate business at a time when fewer customers are in many malls. Jennifer Glasgow, who has a 28-item back-to-school shopping list, said saving money is a must.
"Prices here are fairly cheap," Glasgow said as she pushed a shopping cart through a Fred's store earlier this week.
The tax-free holiday will end a minute before midnight on Sunday.
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