The supermarket industry should see some benefit from the $105 billion economic stimulus tax rebate package, though the impact is likely to vary according to the income level of customers, two separate research reports explained.
Goldman Sachs, New York, said consumers intend to spend 25% to 30% of their rebates outright, with the rest going into savings or to pay down debt. Of those who intend to spend part of the money, roughly 7% of what they spend — about $2 billion — will go to supermarkets, the report indicated.
The amount spent at supermarkets could be higher than $2 billion if cost pressures on essentials like food and gas drive a higher proportion of spending into non-discretionary outlets, “or if the percentage of tax check dollars spent is greater than expected,” Goldman Sachs wrote in the report.
Several supermarket companies, including Kroger, Supervalu and Roundy's, have unveiled plans to incentivize consumers to spend their rebates at their stores by offering to add 10% to the value of gift cards purchased using the checks. Other retailers, including Sears, Kmart and Meijer, are offering a similar incentive.
According to TNS Retail Forward, Columbus, Ohio, 23% of respondents to its survey said they would use the money for “everyday expenses,” encompassing food, gas and other retail spending, which could result in a pickup for all retail of about 3.5% in the second quarter and 6% in the third.
According to Goldman Sachs, “Although $2 billion is only about 0.3% of overall supermarket consumption, it could bolster comparable-store sales at a time when food inflation is dampening demand.”
Frank Badillo, senior economist at TNS Retail Forward, said he does not think the rebates will lead to a sustained economic rebound, “[so] retailers and suppliers should maximize their efforts to benefit from the tax rebates, because growth prospects otherwise look bleak through the end of the year.”
Retail Forward said discount department stores, supercenters, warehouse clubs “and other value-focused retailers” will fare best in terms of consumer spending, though the amount shoppers spend will vary by income segment.
While estimating that 23% of all shoppers will use the rebates for everyday expenses like food, Retail Forward said that number will rise to 31% among consumers who earn less than $22,500 a year. Twenty-four percent of those with annual incomes between $22,500 and $84,999 will spend the rebates for everyday expenses, but only 16% of shoppers with incomes above $85,000 a year will do so.
Goldman Sachs said Kroger Co. is likely to be the biggest beneficiary of the stimulus package, noting that consumers in the Southeast and Midwest — Kroger strongholds — will receive checks in larger amounts than those in the Southwest and Northeast.
The Goldman Sachs report was based on interviews with 2,500 U.S. consumers, while TNS Retail Forward polled 4,000 U.S. shoppers.
Consumers who will spend their tax rebate checks on everyday expenses like food.
Source: TNS Retail Forward