Despite inflation hitting a 40-year high, consumer spending during the back-to-school season is projected to increase 7.5%, excluding automotive sales, from 2021 levels, according to Mastercard Inc.’s SpendingPulse, which measures in-store and online retail sales across all forms of payment, not adjusted for inflation.
Department stores are expected to be a prime beneficiary of the increased sales during the traditional back-to-school season, which runs mid-July through Labor Day. After taking a big hit during the Covid-19 pandemic, department-store sales are projected to be up 13% over the period, compared to the same period a year ago. Compared to pre-Covid 19 pandemic levels, back-to-school sales are forecast to increase 18.3% from the same period in 2019.
One factor aiding department stores is that they serve as a one-stop shop with a range of options for families at a variety of price points, Mastercard says.
Overall, in-store sales are projected to increase 8.2% during the season from a year earlier, and 9.9% from the same period in 2019. Online sales will increase 4.3% from the same period in 2021 and a robust 89.3% from 2019.
Apparel is expected to be one product that will drive department-store sales, which have posted 15 consecutive months of gains, according to Mastercard. With consumers having weddings and vacations calendared for the foreseeable future, the in-store and online demand for apparel is forecast to increase 8.7% this year, from the same period a year ago.
“Back-to-school is the second-biggest season for retailers and is often looked at as an early indicator of retail momentum ahead of the traditional holiday season,” Steve Sadove, senior advisor for Mastercard and former chief executive and chairman of retailer Saks Inc., says in prepared statement.
Rising inflation will have an impact, however. “While Mastercard SpendingPulse anticipates growth across sectors, retailers will need to find innovative ways to entice shoppers as discretionary spending potentially stretches thin as a result of increasing prices,” Sadove adds.
The forecast comes on the heels of total retail sales in the United States increasing 10.5% year-over-year in May, and 21.4% from May 2019, Mastercard says. The growth in May outpaced monthly year-over-year growth rates for each previous month in 2022. In-store sales were a key driver, up 13.7% compared to pre-pandemic levels, according to Mastercard.
“The continued retail-sales momentum in May aligns with the sustained growth rates we’ve seen so far this year,” Michelle Meyer, U.S. chief economist, Mastercard Economics Institute, says in prepared statement. “The consumer has been resilient, spending on goods and increasingly services as the economy continues to rebalance. That said, headwinds have become stronger—including gains in prices for necessities like gas and food, as well as higher interest rates.”