CGP: Back-to-school sales to slow but still hit new record, buoyed by inflation

Back-to-school sales are expected to slow “sharply” compared to a banner 2021.

That’s according to veteran retail forecasters Customer Growth Partners, which predicted that BTS sales will slow from 2021’s torrid 13.1% pace — the highest ever seen — and grow by 5.5%   to a record $812 billion. That’s up from $769 billion in 2021. (The traditional BTS season starts after the 4^th of July and extends through Labor Day.)

The nominal retail growth the industry is seeing is buoyed by today’s near 9% inflation, which accounts for most of the 5.5% back-to-school sales growth forecast, noted CGP president Craig Johnson.

“In fact, unit demand growth may be close to flat if not negative, as price elasticity effects curtail purchasing at the margin—especially for discretionary goods such as apparel and home furnishings,” he added.  

Highlights of CGP’s 21^st annual Back-to-School forecast for 2022 are below.

• Apparel and accessories will outpace all other major merchandise sectors, with year-over-year growth forecast at 5.9%, down from a stratospheric post-COVID rebound of 33% in 2021.

• Department stores will ease from their torrid 41% BTS growth in 2021, but will still enjoy solid 4% growth this year
• Health and personal care stores will rise by 3.5%, down from 8.5% last year.
• Discounters and Clubs will rise barely 2%, down from 10% last year.
• Lagging sectors will include consumer electronics and appliance stores, down over 4%, which are lapping last year’s work-from-home and remote schooling trends.

“Defying both fears of a recession and raging inflation the solid-but-not stellar [BTS] growth signals a turning point in the post-Covid era as shopping behaviors normalize,” said Johnson. “Buffeted by cross-winds from record gasoline prices, rising inflation in food and household essentials, spiking interest rates and COVID after-effects, households could well have been expected to trim their spending sails this BTS season. But even though we may be in a shallow recession even now, the American consumer is a plucky sort—and she may well weather this storm at the mall as well as at the beach.”

Forty-year high Inflation—whether from higher raw material costs, supply chain bottlenecks or record Federal spending—continues to reshape the retail landscape.

“Inflation has long been a two-edged sword for retailers, boosting comps on the one hand, but reducing shopper spending power—especially on non-essential goods,” Johnson explained. “For consumers, the 9% inflation has been an unvarnished disaster, eroding real incomes since wages and salaries are up barely 5%—with the inflation “tax” falling most heavily on lower-income and fixed-income households.”

Looking down the road, Johnson said that consumer fundamentals—job growth, rising incomes and healthy household balance sheets—are still strong, but not quite so strong. Consequently, the risk in CGP’s 5.5% forecast is to the downside.

“The American consumer is remarkably resilient—but she is not infinitely resilient,” he said.

Customer Growth Partners is a research and consulting firm serving the retail industry.