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Child-Care Credits to Fuel Second-Half Home, Apparel Sales: Week Ahead

Elevated savings rates, along with upcoming payments for child care tax credits, could fuel apparel and home sales for a robust second half of 2021.

Many U.S. consumers have boosted their savings accounts during the pandemic as they ate home-cooked meals and cut back on transportation costs working remotely during the pandemic. Others are expecting an advance on half of their 2021 child care tax credits in the form of monthly payments beginning July 15.

The enhanced child care tax credit was signed into law by President Biden as part of the American Rescue Plan. The plan ups the credit to $3,000 from $2,000 per child under age 17 and provides an additional $600 benefit to each child under 6. Families can claim the balance of the tax credit when they file their 2021 taxes next year. They also can opt out now and take the entire credit when they file their taxes.

A recent Cowen & Co. CEO expert call with RetailNext’s Alexei Agratchev and Impact Analytics’ Prashant Agrawal indicates that back-to-school and back-to-college could be the big beneficiaries of consumer spending. This fall will coincide with the first time students will be heading back to the classroom since the pandemic began in March 2020.

Cowen retail analyst Oliver Chen said that both CEOs expect 2021 to deliver the best back-to-school (BTS) season the country has seen in a long time, with potentially fewer promotions and less inventory. They also expect healthy holiday sales, since it will be the first time people will be able to host a traditional gathering as many missed Christmas events last year.

Retailers will need to be sure they get their assortment and allocation right for BTS and holiday, according to Chen.

The athletic footwear category has gone from 23 percent in promos down to 19 percent, he added. Inventory has also significantly dropped as well, and for the “next six to nine months, this could be a risk factor if strong demand continues,” he said.

The number of markdowns is “likely to trend lower” in general, Chen said, adding that “markdowns are low in the 30 percent range,” compared to the past when as much as 50 percent or more of the assortment mix was typically marked down. And, so far, he’s optimistic about the apparel sector, which could continue to rebound as demand returns and shoppers have the wherewithal to spend.

Mall stores “significantly” underperformed street stores in late spring, but over the past three months the trend has reversed as mall traffic has risen and outperformed non-mall traffic, he said.