The unpredictable consumer strikes again

This summer, American parents are expected to spend $34.4 billion, or about $661 per child, on back-to-school shopping, according to a Deloitte survey. Much of it goes to fashion: Clothing sales are expected to jump 18% from the same period in 2021. That’s a 180-degree turn from last year, when parents splurged on laptops and other technology, while spending on clothing remained roughly flat. In 2022, their kids might not need another new tablet, but they’ve outgrown last year’s shirts, shorts and sneakers.

The unusually unpredictable back-to-school shopping season is just the latest example of how the pandemic has dramatically changed what people want to buy and when. Last year, consumers abruptly abandoned their obsession with sweatpants for going out wear and work-from-home wardrobes. Now they’re splurging on travel, luxury goods, and children’s clothing.

Retailers are still catching up and preparing for more surprises this fall.

Inflation is a particularly difficult area to predict. A National Retail Federation survey found that 80% of back-to-school shoppers noticed higher prices on clothing, but far fewer said they were reducing their purchases as a result (the reverse may be true; parents are more likely to clean up if they’re worried that those clothes will cost 10% more next year). The NRF found, however, that back-to-school shoppers choose to cut spending in other areas or spend more time bargain-hunting.

Back-to-school shopping could be a last hurray for retailers. Spending tends to peak in late July and early August. After that, the real effects of inflation and a slowing economy could become even more apparent. Walmart warned last week of slowing sales as fall approaches. The same Deloitte survey that found parents were going to spend big on their kids this summer found that 54% were pessimistic about the economy over the next six months. Retailers who have ordered too much bad inventory, or are worried about being stuck with unsold goods and falling demand this fall, are rolling out some of the most aggressive discounts the industry has seen since the pandemic.

What to watch this week

Fashion enters its usual August slump, after closing July with earnings from most major European luxury brands, as well as Walmart, Shopify and Amazon and a slew of key inflation and economic growth data from both sides of the Atlantic.

The week ahead is a lighter one for indicators, with Adidas the biggest fashion company reporting earnings and fewer major economic indicators. Although the official timeline is light, we can probably expect more major retailers to announce layoffs, reduce fall orders and issue profit warnings. Luxury brands are also consolidating their fashion week plans, and the September hype cycle should kick off soon.


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