Taxpayers spending refunds, and retailers don't mind a bit

Many are planning a major purchase

March 18, 2004|By Sarah Hale Meitner | Sarah Hale Meitner,ORLANDO SENTINEL

Call it Uncle Sam's retail boost - some retailers say they expect a 20 percent or more bump in sales this spring, thanks to cash-happy Americans willing to unload their tax refund checks.

Nearly 12 percent of consumers, and almost 20 percent of Americans between 25 and 34 years old, plan to use some or part of their tax refunds to make a major purchase, according to a new study by the National Retail Federation.

That means furniture stores, auto dealerships and appliance warehouses, where consumers can snap up those pricey big screen televisions or new cars, could stand to benefit the most. Capitalizing on the season, some auto dealerships have even hired in-house accountants who can help customers with their taxes in the hopes that a hefty refund will go toward a down payment on a new car.

Given that the average tax return as of earlier this month was $2,182 - 4.4 percent more than last year at this time, according to the Internal Revenue Service - odds are some or much of that will be spent, experts say.

"Even if some consumers use that money to take a vacation, pay off debt or put in their savings, ultimately they're going to be in a better frame of mind about their money," said Ellen Tolley, a spokeswoman with the National Retail Federation. "They may not spend it immediately, but eventually, they will. ... The consensus is that the effects of the refund checks could last into the summer."

Forget the summer. For now, retailers are banking on a March and April boost.

Retail sales rebounded last week, climbing 0.5 percent, due in part to Americans who have filed their taxes early and already have the money in their pocket, the International Council of Shopping Centers reported. Compared with this time a year ago, retail sales are up 7 percent.

Other industry experts warn that retailers shouldn't get too comfy; predicting Americans' buying patterns is difficult, at best, and consumers can be fickle.

"A buying frenzy now could lead to a spending drop-off later when consumers realize they're overextended," said Eli Portnoy, president of The Portnoy Group, a retail and branding consulting firm in Orlando and Los Angeles.

"Retailers seeing double-digit growth are excited now, but there's still a lot of uncertainty." Many Americans are still worried about the economy and their jobs, and that could mean they use their refunds for other purposes, Portnoy added.

Nearly half of consumers surveyed said they would use part or all of their refund check to pay down debt, while another third said they would put some in their savings, the National Retail Federation said.

Bart Weitz, executive director at the University of Florida Center for Retailing, agreed that some Americans might be reluctant to spend their entire refund check, whereas, in previous years, they would have splurged.

"Who knows though," he said. "People want instant gratification. They may just spend the whole check, even if they can't afford it."

The Orlando Sentinel is a Tribune Publishing newspaper.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.