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Why Did Children’s Footwear Sales Just Take a Major Hit?

Children constantly outgrow their shoes, so why did footwear sales just drop?

According to a recent Market Watch report, footwear sales dropped 22 percent to $334.6 million, compared to $430.7 million the year before, due to a delayed tax refund.

As Matt Powell, VP, industry analyst, sports for NPD Group, predicted last month, the sports-side of the footwear industry took a major hit due to the Protecting Americans from Tax Hikes (PATH) Act. According to Powell, one of the main reasons of PATH was slow down taxpayer refunds for the Earned Income Tax Credit (EITC) and/or the Additional Child Tax Credit. The slowdown meant to give the Internal Revenue Source (IRS) more time to look into fraud claims, and the analyst estimated around 28 million taxpayers filed for EITC in recent years.

Many low to middle income parents use the money from tax refunds to purchase new shoes for their children, therefore a delayed refund would mean a delay in purchase.

“The timing of the refund has a profound impact on sports retail, particularly sneaker sales. In years past, processing glitches have delayed refunds and the industry suffered until the refunds hit,” wrote Powell. “We can expect a soft February for sales of athletic footwear and apparel due to this new law. While the industry will make up these sales in March, it will make trending difficult and retailers and brands anxious. Coupled with a late Easter this year, Q1 will be a challenging one for the sports industry.”

According to the data, Powell’s predictions have so far come true, meaning despite a sales drop in February, March should soon pick up.