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Back-to-School Shopping Should Turn Apparel’s Fortunes Around: Mastercard

Apparel stands to benefit the most across categories as the back-to-school season kicks in halfway through the summer. According to a report from Mastercard SpendingPulse, which tracks retail sales across all channels and forms of payment, apparel is set to soar 78.2 percent year over year from the period of July 15 through Sept. 6.

More good news for apparel is that there is still a jump of 11.3 percent during the seven-week stretch on a two-year basis, indicating healthy growth for the segment even when accounting beyond the demand speed bump it hit during the pandemic.

The positive momentum within the category comes after a May that saw robust growth as well, with sales rising 75.9 percent over last year and 14.7 percent over two years ago. Teen apparel retailers Tilly’s and Zumiez already have been beneficiaries of back-to-school sales, with the former seeing backpack and denim sales of nearly $5 million over 2019’s first quarter.

While athleisure and casualwear continue to be hot categories, Mastercard SpendingPulse expects that more social-oriented clothes will also continue to sell, particularly with the return of in-person schooling, reunions and other events that can drive shoppers to buy new apparel and diversify their closets.

Even department stores are joining in on the fun, with 25.3 percent expected growth from 2020 totals, and a respectable 9.5 percent growth over 2019 sales. SpendingPulse highlights buy online, pickup in store and contactless technologies as key sales drivers going forward, particularly as shoppers seek more low-contact experiences.

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In May, the segment saw a 212 percent increase in year-over-year sales as many department stores remained closed in May 2020. On a two-year basis, department store sales jumped 4.2 percent.

Across all categories, U.S. retail sales are expected to grow 5.5 percent when excluding automotive and gas during the back-to-school period compared to 2020. Compared to 2019, sales are expected to grow 6.7 percent. SpendingPulse also measured electronics ahead of the season, with the expectation that the category would be up 13 percent year over year and 9.6 percent over 2019.

“Back-to-school has always been a prime season for retailers. This year, the broader reopening brings an exciting wave of optimism as children prepare for another school year, and the grown-ups in their lives approach a similar ‘return to office’ scenario,” said Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Incorporated. “This back-to-school season will be defined by choice as online sales remain robust, brick and mortar browsing regains momentum and strong promotions help retailers compete for shoppers’ wallets.”

May marked the eighth consecutive month of total retail sales growth, Mastercard said. According to SpendingPulse, U.S. retail sales (excluding automotive and gasoline) increased 12.2 percent year-over-year in May, and 10.2 percent compared to May 2019. The numbers are solid, but fall behind April’s U.S. retail sales boom, which drove 23.3 percent year-over-year growth versus a 10.8 percent improvement when compared to April 2019.

Online sales in May grew 1.1 percent and 94.8 percent respectively, when compared to the same periods. E-commerce sales for back-to-school tell a bit of a different story due to the channel’s explosion in 2020 as the pandemic caused store closures and brought unprecedented movement to online shopping. E-commerce sales are expected to drop 6.6 percent year over year in the measured period, but still would be a 53.2 percent improvement over 2019 totals, indicating that much of consumer’s online spending habits could still stick even as more shoppers get vaccinated.

The Mastercard SpendingPulse report also tallies furniture and home furnishings on a month-by-month basis, with the categories growing a combined 22.5 percent in May from the year-ago period, as well as 20.2 percent above the same month in 2019.

And corresponding with the “going out” buyer trends seen in apparel and department stores, jewelry sales saw a very healthy jump of 203.4 percent from May 2020 as more shoppers aim to complete their overall look. The lift would total 44.7 percent growth over two years ago, illustrating that pent-up demand for this fashion category exceeds that of even apparel.

Mastercard SpendingPulse’s findings are based on aggregate sales activity in the Mastercard payments network, coupled with survey-based estimates for certain other payment forms, such as cash and check.

The back-to-school prediction came soon after the National Retail Federation (NRF) raised its raised its forecast for 2021 retail sales, now anticipating sales to jump between 10.5 percent and 13.5 percent, a significant upgrade from the initial projected growth range of 6.5 percent to 8.2 percent.