By ANNE D’INNOCENZIO and CLAIRE SAVAGE
NEW YORK (AP) — To understand the impact of rising inflation on back-to-school spending this year, look no further than frog-and-ladybug-themed children’s wellies made by Washington Shoe Co.
Spending held steady for these evergreens even after the Kent, Washington-based company was forced to pass on 15% price increases in January to its retail customers due to rising transportation costs. But in May, when gas and food prices also rose, shoppers abruptly switched from the $35 high-end rain boots to the $5 to $10 cheaper plain versions, CEO Karl Moehring said. .
“We’re seeing consumers shift lower,” Moehring said, noting drastic 20% shifts in sales in opposite directions for both types of products. “Wages don’t keep 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 shopping for cheaper stores amid rising inflation, which hit a new high of 40 years in June.
In the past week, walmart He noted that higher gas and food prices are forcing shoppers to make fewer purchases of discretionary items, especially clothing. Best Buy, the nation’s largest consumer electronics chain, cited that inflation has reduced consumer spending on gadgets. As a result, both companies cut their earnings forecasts.
Such financial struggles amid the industry’s second-biggest buying season after the winter holidays make a big difference from a year ago, when many low-income shoppers, buoyed by government stimulus and encouraged by wage increases, they spent freely.
Matt Priest, chief executive of trade group Footwear Distributors & Retailers of America, noted that last year, the group’s retail members saw a notable increase in online sales in the middle of the month when shoppers received their monthly tax credit checks for children that amounted to a couple of hundred dollars. . This season, without that bump, he hopes shoppers will buy fewer shoes for their kids and rely on private labels.
Inflation has squeezed the finances of the household of Jessica Reyes, 34, who took her daughters Jalysa, 7, and Jenesis, 5, to a “Back to School” event last month on Chicago’s North Side. which offered free backpacks filled with supplies for students.
“I feel like everything is going up these days,” he said at the event. “We’re a single-income household right now…so I think it’s hit us hard in all areas, bills and home needs and school needs.”
While shopping, her daughters have been drawn to school supplies with TV characters and animals they love, but she will focus on the simple versions.
“They want the cute ones, you know, the kittens. And those are always more expensive than the simple ones. And the same with folders, or notebooks, or pencils,” Reyes said.
Earlier, Manny Colon and his daughters Jubilee, 8, and Audrey, 5, stopped by the back-to-school event to pick out backpacks.
Colón, 38, works at her daughters’ primary school. He said her spouse has had to do extra work because of high prices for school supplies, groceries and gasoline.
“I think it has definitely impacted us,” he said.
Multiple forecasts point to a strong back-to-school shopping season.
Mastercard SpendingPulse, which tracks spending across all forms of payment, including cash, forecasts back-to-school spending to rise 7.5% from July 14 to September 5 compared to the same period of the previous year, when sales increased by 11%. For the 2020 back-to-school period, sales fell 0.8% as the pandemic wreaked havoc with plans to reopen schools and back-to-school purchases.
Still, higher prices are underpinning much of the numbers.
A basket of about a dozen supply items showed a nearly 15% price increase on average for this back-to-school season compared to a year ago, according to retail analytics firm DataWeave. The price of backpacks rose nearly 12% to an average of $70, for example.
Back 2 School America, an Illinois-based nonprofit that distributes back-to-school kits to children from low-income families, has seen “a significant increase in the costs of supplies,” including a 10 percent increase % of its supplier with another possible brand – on the way, said the organization’s CEO, Matthew Kurtzman. And shipping costs have also gone up.
Thanks to increased support this year, Back 2 School America will be able to cover the new costs and is on track to distribute more kits than ever: 12,000 so far and more than 30,000 by the end of August, Kurtzman said. But funding is not guaranteed in the future as recession concerns mount.
Retailers face big challenges in getting shoppers to spend, particularly on clothing.
Walmart said last week that it was taking additional discounts on clothing to clear inventory. Analysts believe those sales will put more pressure on other rivals to discount more and remain competitive. However, Walmart said it is encouraged by the first signs of school supply sales.
Meanwhile, Gap’s low-priced Old Navy division is granting a price freeze on its denim from July 29 through the end of September.
As for Washington Shoe, Moehring said it will shift production from higher-priced children’s boots to higher-value products in the coming months. The company still sees higher annual sales than last year, but is being cautious.
“I think it’s a cloudy prospect,” he said.
Claire Savage reported from Chicago and is a staff member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercover issues.
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