Retail’s tax-refund camouflage starts to wear off
Retailers had a healthy first quarter but fear things may taper off in the spring
The retail sector pulled off a “surprisingly robust” first quarter, but executives and analysts now agree the tax-refund tailwind that propped up spending is fading, CNBC reported.
Target posted a 5.6 percent comparable-sales gain — its first positive print in five quarters — Best Buy’s comps rose 2 percent, Burlington’s grew 6 percent, and Ross posted a 17 percent jump against an expectation of 9 percent, CNBC reported. TJX Companies delivered its largest earnings-per-share beat since August 2021 and a 6 percent same-store gain, nearly two percentage points above Wall Street forecasts. Walmart’s sales rose 7 percent.
Tax refunds, larger in dollar terms and broader in reach than last year, did the heavy lifting. Walmart Chief Financial Officer John David Rainey told CNBC, “I believe higher tax returns alleviated some of the pressure from rising fuel prices.” He warned, “Now that we’re moving into a period where those tax refunds are largely absent, consumers are likely to feel more of the strain from elevated fuel costs.”
Target’s finance chief James Lee acknowledged the boost from refunds would “diminish throughout the remainder of the year.” Burlington said refunds contributed roughly 1.5 to 2 points of its 6 percent same-store gain.
Buy now, pay later to the ‘rescue’
Buy now, pay later (BNPL) picked up the rest of the slack. Adoption hit fresh highs across income brackets in the first quarter, with use among those earning over $150,000 approaching 13 percent, CNBC reported.
Consumer advocates and bankers are both wary of BNPL, fearing that it seems painless and could tempt consumers into taking on more debt than they realize, with unfortunate consequences down the line.
On the other hand, retailers are also fearful that the consumer gold mine days may be behind them.
Tarang Amin, chief executive of e.l.f. Beauty, told CNBC bluntly that “the consumer is suffering” and that the company plans to dial back some tariff-driven price increases, CNBC reported. Ross, even after its blowout quarter, guided to a more normal back half.
The retail second-quarter scoreboard, which begins arriving later this month, will be the cleanest read in months on whether the consumer cracked once the refund check stopped landing.
Trump voters wrestle with $4.34 gas and war in Iran
Five months from the midterms, The New York Times surveyed Trump voters at gas stations across three battleground states with high-profile Senate races and found a coalition under strain.
With pump prices at $4.34 a gallon — “over a dollar more than it was at the same time last year” and just shy of a four-year high — voters who 19 months ago backed the president’s “affordable again” promise and his pledge of “no new conflicts” said they are now “grappling with the financial strain at the pump and whether it should influence their voting choices in the upcoming fall,” The Times reported