It’s back-to-school basics for some
Walmart says higher prices on gas and food are forcing shoppers to make fewer purchases
To understand the impact of surging inflation on this year’s back-to-school spending, look no further than children’s rain boots with motifs like frogs and ladybugs made by Washington Shoe Co.
Spending held steady for these evergreen items even after the Kent, Wash.-based business was forced to pass along 15% price increases in January to its retail clients because of soaring transportation costs. But by May, as gas and food prices also surged, shoppers abruptly shifted away from the $35 higher-end rain boots to the no-frills versions that run $5 to $10 cheaper, its CEO Karl Moehring said.
“We are seeing consumers shift down,” said Moehring, noting dramatic 20% sales swings in opposite directions for both types of products. “Wages are not keeping up with inflation.”
This back-to-school shopping season, parents — particularly in the low to middle-income bracket — are focusing on the basics while also trading down to cheaper stores amid surging inflation, which hit a new 40-year high in June.
Last week, Walmart noted higher prices on gas and food are forcing shoppers to make fewer purchases of discretionary items, particularly clothing. Best Buy, the nation’s largest consumer electronics chain, cited that inflation has dampened consumer spending on gadgets. Both companies cut their profit forecasts as a result.
Such financial struggles amid the industry’s second-most important shopping season behind the winter holidays mark a big difference from a year ago when many low-income shoppers, flush with government stimulus and buoyed by wage increases, spent freely.
Matt Priest, CEO of trade group Footwear Distributors & Retailers of America, noted that last year, the group’s retail members saw a noticeable uptick in online sales midmonth when shoppers received their monthly child tax credit checks that amounted to a couple of hundred dollars. This season, without that bump, he expects shoppers will buy fewer shoes for their children and rely on private label brands.
Multiple forecasts point to a solid back-to-school shopping season.
Mastercard SpendingPulse, which tracks spending across all payment forms including cash, forecasts back-to-school spending will be up 7.5% from July 14 through Sept. 5 compared with the year-ago period when sales rose 11%. For the 2020 back-toschool period, sales fell 0.8% as the pandemic wreaked havoc on schools’ reopening plans and back-to-school shopping.
Still, higher prices are propping up much of the numbers.
A basket of roughly a dozen supply items showed a price increase of nearly 15% on average for this back-to-school season compared with a year ago, according to retail analytics firm DataWeave. The price of backpacks is up nearly 12% to an average of $70, for example.
Retailers face big challenges to get shoppers to spend, particularly on clothing.
Walmart said last week it was taking extra discounts on clothing to clear out inventory. Analysts believe those sales will exert more pressure on other rivals to discount more to stay competitive. However, Walmart said it’s encouraged by the early signs for sales of school supplies.
Meanwhile, Gap’s low-price Old Navy division is guaranteeing a price freeze on its denim from July 29 through the end of September.
As for Washington Shoe, Moehring said he’s shifting production away from higher-priced children’s boots to more value-priced products in the months ahead. The company still sees annual sales ahead of last year, but he’s being cautious.
“I believe it is a muddy outlook, “he said.