NEW YORK — As tax checks are mailed to consumers, apparel firms and retailers are hoping their fashion offerings in cotton candy pinks, sunburst oranges and minty greens will take a share of those refund dollars.
But there are other expenditures — such as down payments on cars and houses — that consumers may be earmarking for their tax refunds. Still, retailers may see more refund-related money being spent in their stores this year.
“Retailers are going to see an immediate benefit,” said Ellen Tolley, a spokeswoman for the National Retail Federation. She noted that while big-ticket items such as home improvement goods and consumer electronics should reap the biggest rewards this year, apparel retailers could see an impact. “Because the spring merchandise has been received favorably by most consumers, retailers could see a pickup from consumers who have been waiting to purchase once their tax refund arrives,” she said.
According to Internal Revenue Service statistics, as of March 12, the average tax return was $2,151, up 4.9 percent from the $2,050 refunded in 2003. And according to the NRF, 145.7 million people, or 67.6 percent of U.S. consumers, expect to receive a tax refund this year.
Analysts and consumer-behavior experts say stores, from luxury retailers such as Neiman Marcus to mass merchants such as Wal-Mart, can expect to see a share of the refund expenditures.
However, with more consumers filing earlier (65.1 percent of consumers already filed in January or February, with another 20.9 percent planning to file this month), Tolley said retailers need to promote tax-related sales earlier than April to capture consumers’ refunded tax dollars.
Evidence of consumers’ spending sprees can be found throughout the retail world. Wal-Mart, the world’s largest retailer, said same-store sales for March were heading to the upper end of its 4 to 6 percent target.
With the economy benefiting from the one-two punch of a tax stimulus and the conclusion of the Iraq war, Citigroup retail analyst Deborah Weinswig expects tax returns to bolster retail sales, although she said forecasting the precise percentage gains from tax refunds is not possible at this point.
Citigroup estimated that consumers’ total tax liability will drop about $170 billion, annualized, in the first half of 2004, raising disposable personal income by about 2 percentage points. Overall, in 2004 the tax liability per household should fall by about $1,300, with roughly $800 dropping in the first half.So how will consumers spend this year’s refund?
Marshal Cohen, chief apparel analyst at NPD Group, the Port Washington, N.Y.-based market research firm, said unlike other years, when apparel was the sole reward for a year’s hard work, today’s refunds are being spent across the board on items like new kitchens, digital cameras, flat-panel television sets, front-loading washers and dryers, as well as apparel.
Calling it the “almost-there syndrome,” Cohen noted retailers and brands such as Coach and Nieman Marcus stand to gain the most this tax season. He explained that most consumers want to reward themselves with a $200 handbag, but not necessarily with one costing $1,200. “Consumers are going to buy something that puts them into the designer mind-set, but not the top of it,” Cohen observed.
He suggested that, in order for retailers to capture a greater share of tax refunds, companies could incorporate “tax refund days.” This also would bolster an already strong comparable-sales environment.
But analysts and economists are warning that the spending spree may subside. These heady times may not last forever.
John Lonski, an economist with Moody’s Investors Service, asked rhetorically what would happen to consumer spending after refund-related spending dries up.
J.P. Morgan Chase & Co. senior economist James Glassman also put a damper on the hopes of retailers. “Idon’t think people in the retail business will be overwhelmed,” he predicted. He explained that, for many consumers, the tax refunds will be used to add to their savings accounts, or for a down payment on a car or a house. In addition, he said, because of the extremely cold winter, consumers have had large energy bills, which could divert their refund dollars.
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)