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Walmart, Target, Amazon, Wingstop and Nike are some of the names that will benefit when consumers start receiving Child Tax Credit funds this Thursday, according to Cowen.
The Child Tax Credit, which will be paid in monthly installments of up to $300 for children under age 6 and up to $250 for children between 6 and 17 through the end of the year, will benefit about 39 million Americans.
Cowen’s Washington Research Group calls the program an “underappreciated stimulus” that will boost spending across a variety of sectors and consumer companies.
The launch of the program coincides with the start of back-to-school shopping and the end of other COVID-related programs.
“The timing of this stimulus is particularly helpful as enhanced unemployment benefits begin to roll off in some (mostly red) states and at the federal level in September,” Cowen wrote.
Walmart Inc.
WMT,
and Target Corp.
TGT,
stand to benefit due to their grocery offerings, as well as the diverse merchandise categories that they sell in. Walmart’s price gaps should give the company a leg up as customers become more price sensitive about their grocery budgets.
“[W]e expect Walmart will also benefit from the child tax credits across other departments including apparel and hardlines. Walmart is one of the top back-to-school destinations in the U.S., and we expect child tax credits will only fuel its business in the coming months,” analysts said.
“Target’s grocery business outperformed during the pandemic as the retailer’s category portfolio positioned it to be a one-stop shop as customers consolidated trips.”
The Child Tax Credit is designed to help families that struggle to meet their needs. A Cowen poll found an acceleration in the use of food stamps in 2020, up 11.4% year-over-year to 19.1% penetration.
“The pandemic and high unemployment gave rise to heightened food insecurity among the U.S. population, and was likely a driving force behind the increased usage in 2020,” the report said.
The shift to online shopping means Amazon.com Inc.
AMZN,
made gains, with many of those eligible for the Child Tax Credit heading to the e-commerce giant for items like toys, clothing, food and sporting goods.
“Most notably, they were highly engaged with Amazon, as they over indexed in terms of Prime membership, visit rates, and purchase frequency, among other key metrics,” the report said.
EBay Inc.
EBAY,
should also get a bump from the program.
Analysts estimate that the Child Tax Credit will benefit the entire restaurant industry. But for the income demographic impacted directly by the program — single consumers with household incomes of less than $75,000 and married consumers household incomes of less than $150,000 — Wingstop Inc.
WING,
Papa John’s International Inc.
PZZA,
and Jack in the Box Inc.
JACK,
are among the chains that stand to gain the most.
And with back-to-school shopping and the holiday season still to come, off-price retailers like Burlington Stores Inc.
BURL,
and athletic names like Nike Inc.
NKE,
and Dick’s Sporting Goods Inc.
DKS,
are favored by Cowen analysts.
“Along with a return to in-school learning and team sports, we believe the setup for this back-to-school season is the strongest we can recall over the last several years,” according to the report.
“With inventory levels at historically low levels heading into back-to-school, this should favor vendor gross margin as businesses largely planned conservatively.”
The Consumer Discretionary Select Sector SPDR Fund
XLY,
has gained 13.1% for the year to date. The SPDR S&P Retail ETF
XRT,
is up 48.7%. And the benchmark S&P 500 index
SPX,
has rallied 16.7% for the period.
Additional reporting by Victor Reklaitis
