“Child tax credits an ‘underappreciated’ stimulus that could boost retail: Cowen” by Ben Unglesbee via Retail Dive

“Child tax credits an ‘underappreciated’ stimulus that could boost retail: Cowen” by  Ben Unglesbee via Retail Dive

Dive Brief:

  • This month, some 39 million households will begin receiving tax credit payments for each child under 18, a new relief program Cowen analysts called an “underappreciated catalyst for consumer spend” in a report this week.  
  • The program, part of President Joe Biden and congressional Democrats’ American Rescue Plan passed earlier this year, comes as the back-to-school shopping season ramps up and could benefit numerous retailers.
  • Aimed at reducing child poverty, the checks could boost spending at food retailers, including Walmart and Target, according to Cowen. Also in line to benefit are Amazon and other e-commerce players, off-price retailers, and apparel and footwear sellers, analysts said.

Dive Insight:

The nearly $2 trillion American Rescue Plan has already helped prop up retail sales with checks that went out to more than 160 million Americans earlier this year. Together with the COVID-19 vaccine rollout, the stimulus helped retailers across numerous sectors recover from the crisis year of 2020 when stores closed, the economy stumbled and customers avoided physical stores.

The $150 billion child tax credit program that begins in July will add more cash to consumers’ pocketbooks. The payments total out to $3,600 per child under six per year, and $3,000 per child over age six for couples making up to $150,000 and single parents making up to $112,500. That sum is dispersed in monthly payments throughout the year. Chris Krueger of Cowen’s Washington Research Group called it a “huge policy change” that is “universal basic income for low-middle income parents.”

The checks start rolling out as the back-to-school season ramps up. That could lift sales at softlines retailers, among others. Cowen analyst John Kernan said in the report that if 3% to 4% of the stimulus is spent on the clothing and footwear category, that translates into $4.5 billion to $6 billion additional spending in the sector, and could support “a robust Back-To-School/Holiday environment.”

Among those softline retailers covered by Cowen that could benefit are off-pricers TJX, Ross Stores and Burlington; footwear sellers Foot Locker, Nike and Dick’s Sporting Goods; and apparel destinations American Eagle Outfitters, Kohl’s and Target.

Online retail also stands to benefit. Cowen analyst John Blackledge said that Amazon “is particularly well positioned given strong Prime penetration, visitor and purchaser rates, and purchase frequency among the households that are expected to benefit from the [Child Tax Credit].”

For more retail related news and resources, be sure to bookmark the following link:

If you are not yet a BRA Retail Member, you can easily opt in to either Regular (no cost) or Distinguished ($99/yr.) Membership via this super simple join form