The back-to-shopping season, a crucial time of the year for retailers, is being muddied by tariffs and budget-conscious consumers. That backdrop has forced retailers to get creative to protect margins while shoppers hunt for deals on clothes, dorm-room decor and more. Tariffs are front and center. Just over half of respondents to UBS’s back-to-school survey last month cited elevated import duties as a top economic concern, behind only inflation. The result is “lackluster” consumer spending intentions, according to UBS. Based on its survey data, the firm estimated that spending on clothing, shoes, and accessories will decline 2.3% year over year. That’s in line with a forecast from the National Retail Federation . The trade group predicted that families with students in elementary through high school will spend an average of $858.07 on clothing, shoes, school supplies and electronics — about 2% less than 2024’s $874.68. Parents started their shopping earlier than normal, the NRF’s survey found, with a majority of those saying they are doing so specifically out of concern that prices would rise due to tariffs. The behaviors described in these surveys don’t necessarily signal that the U.S. consumer is collapsing. In an interview, Morgan Stanley retail analyst Michelle Weaver said she is “seeing the health of the consumer weaken but it’s not outright weak,” pointing to mixed data points. The July retail sales report showed “pretty robust” spending activity, Weaver said, rising 0.5% for the month after an upwardly revised 0.9% gain in June. At the same time, during the latest earnings season, Weaver noted many consumer-exposed companies in the restaurants and staples industries reported poor sales growth and value-seeking behavior. This dynamic is occurring against a backdrop of creeping inflation, albeit at a slower pace. Consumer sentiment in August fell for the first time since April as inflation expectations rose, the University of Michigan’s closely watched monthly survey found. However, for value-oriented players like Club names TJX Companies , Costco and Amazon — all known for their pricing flexibility — the tariff and inflation picture could drive traffic as consumers seek ways to stretch their budgets. For retailers more broadly, though, this dynamic may mean tighter profits if they avoid passing through costs to already-pressured consumers. Many retailers are reporting earnings this week, including TJX and Target on Wednesday and bellwether Walmart on Thursday. Tariffs are beginning to show up in consumer prices, even if the overall headline inflation numbers haven’t deterred Wall Street from betting on a Federal Reserve rate cut next month. The June inflation data “clearly showed the start of tariff-driven inflation,” Weaver said. For example, apparel prices rose 0.4% in that month’s consumer price index report, while household furnishings were up 1%. In the July CPI report, which was released last week, household furnishings saw…
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