Jefferies, a global investment banking firm, recently conducted a survey revealing significant shifts in consumer spending plans, specifically in categories like apparel, accessories, restaurants, and footwear. More than half of the respondents indicated intentions to cut down spending on apparel and accessories, reflecting potential headwinds for growth in these sectors, especially in the latter half of 2023. This crucial period includes the holiday season.
These findings align with the concerns raised by retailers regarding the resurgence of payments, emphasizing potential impacts on consumer choices. Jefferies suggested that value-focused retailers like Costco, Walmart, and TJX might benefit from this trend as consumers consider trading down in their shopping preferences.
In response to the survey results, Jefferies downgraded major players like Foot Locker, Urban Outfitters, and Nike from Buy to Hold, lowering their respective price targets. Urban Outfitters faced a significant decline in sales within its flagship brand, while Foot Locker grappled with challenges in its turnaround strategy and reported a decrease in sales. Nike, heavily reliant on Foot Locker for sales, could face wholesale issues if consumer spending diminishes.
The impending return of student loan repayments is expected to exacerbate the strain on consumer spending, particularly affecting the apparel and footwear sectors. Jefferies analysts anticipate a pullback in consumer spending, posing additional challenges to specialty apparel coverage and potentially impacting higher-priced segments of Nike’s product range. The survey indicated a preference for cheaper apparel, accessories, and footwear alternatives, hinting at potential headwinds for Nike in premium product categories.
In summary, Jefferies’ survey sheds light on shifting consumer spending patterns and the potential challenges various retail sectors face, prompting strategic adjustments and considerations for the upcoming period.