Back to school spending fell 8.6% YoY at key retailers* for the 8 weeks ended September 14, 2022. This is an improvement from the 10.0% YoY decline at the start of the season (four weeks ending August 17th) in states where class had begun. Most notably, spending was materially slower than the largely flat growth during the pre-pandemic 2019 season.
Back to school spending in states where class is back in session** fell 10% YoY at key retailers* for the 4 weeks ended August 17, 2022 as schools reopened in a challenging inflationary environment. The decline comes after the initial shock of pandemic-driven remote learning in 2020 drove a similar 10% YoY decline, while assistance in the form of child tax credit payments in 2021 pushed growth near 25% YoY. Growth during this key spending period in August 2022 is a full 30 points slower than in 2021. Pre-pandemic back to school spending was largely flat during the same period in 2019.
Earnest data exhibited supermarket spending growth of 5.3% YoY in July, boosted by 7.1% growth in average ticket, offset by a 1.7% decrease in the number of transactions. Ticket growth was yet another acceleration from the 6.2% YoY growth in June; similarly, the transaction decline was another slowdown from -0.9% in June. With price levels on the grocery shelf not seen since March 1979 (Food at Home prices increased 13.1% in July, up from 12.2% in June according to the latest BLS figures) forcing some to trade down into value-oriented items, shoppers may find a better deal by switching to more budget-friendly grocers
Earnest Research transaction data captures consumer credit and debit card activity across thousands of companies and dozens of categories. As a result the data paints a picture of total consumer spending on most goods and services. See methodology note at the end for wallet share calculation explanation. Consumers spent over 6% of their total monthly wallet at Big Box retailers such as Walmart and Target in June 2022, followed by Supermarkets (Kroger, HEB, Publix, etc.), Online Marketplaces (Amazon, eBay, etc), and Gas Stations.
Inflation grew at a historical 7.9% in February 2022, as manufacturers passed along higher input costs as a result of higher demand and the conflict in Ukraine. However, not all brands increased prices at the same rate, leading to sudden market share changes across CPG and other retail categories, including cereal. General Mills ($GIS) topped major hot and cold cereal brands in price increases in March. Market share by sales shifted towards brands with higher price increases… but share of total units sold favored brands with mid to lower price increases
Annual federal tax refunds have been a reliable source of additional spending cash for American taxpayers. Covid-19 upended the regular February-April cadence of payments as many households received additional stimulus payouts and tax credits that almost doubled the amount normally deposited by the government. This tax season marks a return to more normal refund behavior, which could signal sales declines for retailers who benefited from consumers’ extra cash in 2020 and 2021.
Consumer credit and debit spending grew YoY in February, despite the systemic shock of the Ukraine-Russia War. However spending decelerated 3 points from February to the preliminary period between March 1st and 9th. This suggests that US consumers could already be adjusting their behavior based on the economic outlook of the war. Spending growth across most major subcategories decelerated from February to the preliminary March period (1-9), with one notable exception.
Breakfast spending is back to near pre-pandemic levels at Starbucks, but midday and afternoon are the fastest growing dayparts. Visits to Starbucks locations in suburban, drive-thru formats outperformed downtown visits up to 50% in some New York City locations. Starbucks’ average ticket growth accelerated in 1Q22 sharply as inflation adjustments were passed along to customers. Starbucks North American revenue grew 23% YoY in 1Q22 on a 12% YoY increase in transactions and a 6% YoY increase in average ticket, directionally consistent with Earnest Research transaction data.
Total aggregate consumer spending grew 3% YoY in the week ending Dec 7th according to the Earnest Research Spend Index (ERSI*), a measure of sales growth for 2,500+ U.S. consumer discretionary and staples businesses. This was a deceleration from the 9% YoY growth during the first 10 days of the preliminary holiday season (Nov 1 to 10th). Strong average transaction size growth, possibly due to inflation or reduced discounting, was partially offset by fewer transactions (-1% YoY), a deceleration from the 6% YoY transaction growth in October.
The Earnest First Choice Retailer Rankings are based on the credit and debit card spend of millions of de-identified U.S. consumers. Earnest identifies each shopper’s First Choice Retailer by comparing their spend across 1000 retailers between Thanksgiving and Cyber Monday. For example, if Shopper A spent $70 at Amazon, $50 at Walmart, and $30 at Target, their First Choice Retailer would be Amazon.
Holiday retail is up 9% YoY so far according to the Earnest Research Spend Index (ERSI*), a measure of sales growth for 2,500+ U.S. consumer discretionary and staples businesses. Preliminary data reflects sales during the early holiday retail season starting Nov. 1 as defined by the National Retail Federation, to Nov. 10. Growth decelerated from October and remains slightly below the 2020’s holiday retail season levels. ERSI consumer spending growth peaked in early 2021 on a YoY basis as the data lapped Covid-19 related closures.
There was speculation this past summer that, come Labor Day, workers would begin their return back to the office. Fast forward some months, with the Delta variant spreading and the Great Resignation testing the market, the nature of remote work remains top-of-mind: are employees returning back to the office, or will remote work be a sustained new reality in a post-pandemic workforce? We have refreshed our May analysis on measuring workers’ return to the office via consumer foot traffic to dense urban Starbucks locations near large office buildings.*
An analysis of Earnest Research data by Emory professor Dan McCarthy noted that GMV (Gross Merchandise Value) growth on Instacart is slowing faster than other convenience economy brands after peaking in April 2020. Earnest Research data in the report highlights that newly acquired Instacart customers are becoming less active over time—in contrast to restaurant delivery platforms such as DoorDash. The findings suggest that consumers’ switch to online grocery shopping may not have the staying power of other Covid-19 shifts.
When StockX announced a $255 million funding raise in April, valuing the company at $3.8 billion, much was said of StockX’s uniqueness as a company: a “stock market of hype,” many of the goods bought and sold through its marketplace represent Gen-Z consumers’ interest in alternatives to traditional investments. Best known for apparel and accessory resale—primarily sneakers, streetwear, handbags, and watches—products on StockX have broadened to include collectibles and electronics.
While many retailers took a cautious approach to expansion following the COVID outbreak, Dollar General bucked the trend, deciding instead to launch a new concept, Popshelf, mid-pandemic. Courting a new type of customer, it plans to open up to 50 of these locations by the end of the year. Popshelf is attracting higher-income shoppers: 29% of its customer spend in 2021 came from households with annual earnings of more than $150K, while this figure was 22% at its parent, Dollar General.
The Earnest Research Spend Index* was flat compared to the prior month with in-store growth continuing to decelerate and online accelerating slightly. Yo2Y spend accelerated 2pp both in-store and online. Foot traffic to consumer businesses was up slightly versus 2019 levels for the first month since February 2020, a sharp reversal from August suggesting a recovery in consumer activity.
Teen/tween retailer Claire’s, known primarily for its fashion jewelry and ear piercing services, has filed for an IPO—several years after a private equity takeover and emergence from Chapter 11 bankruptcy. In its recent prospectus, Claire’s noted that for the first half of fiscal year 2021, North American sales grew 124.3% compared to 2020 and 23.2% compared to 2019; much of this was driven by ear piercing-related transactions.
The full back-to-school (B2S) season saw no growth relative to 2019 (Yo2Y), an improvement from last year’s stunted season, but still shy of the 4% Yo2Y growth levels pre-pandemic. In-store spending declined 10% Yo2Y while online spending grew 27%. Foot traffic data to malls reflected a 16% decline this season compared to 2019; still a ways towards full recovery. Majority of states saw lower levels of spending relative to pre-pandemic, like D.C. and Louisiana (20+ points lower), California and Texas (10+ points) and New York (6+ points).
September 17, 2021
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Business
Allbirds IPO
Sustainable footwear brand Allbirds has filed for an IPO to trade as $BIRD on the Nasdaq, joining a slew of other DTC brands going public. While Allbirds built its brand on direct e-commerce sales (almost 90% of Allbirds sales happen online), opening physical stores is increasingly important to the brand in attracting new customers, as cited in Allbirds’ S-1. Using Earnest consumer spend data, we analyzed the degree to which Allbirds sales were impacted by new store openings in cities across the U.S.
Warby Parker is the latest direct-to-consumer company planning to go public. We reviewed statements made in the company’s S-1 and compared them with Earnest spend data, analyzing how Warby Parker has performed in the eyewear market among competitors like Lenscrafters, Sunglass Hut, and Zenni. We also looked at which eyewear companies have been most successful in retaining existing customers while attracting new buyers.
