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Retailers miss out as tax returns pay debt

Wal-Mart, Target and Best Buy can't count on tax returns to give a bump in consumer spending this year.

By TheStreet Staff Mar 2, 2010 6:15PM

TheStreetBy Joe Mont, TheStreet

 

Wal-Mart (WMT), Target (TGT), Best Buy (BBY) and other retailers shouldn't expect a bump in spending during tax-return season as Americans keep paying down debt.

 

Among those expecting a refund, 44% will use it to reduce debt, according to the National Retail Federation's 2010 Tax Returns Consumer Intentions and Actions Survey conducted by BIGresearch, a consumer market-intelligence firm. In 2009, 48% said they would use the money to lower debt. Sixty-six percent of tax payers are expecting a refund, down from 68.4% last year.

 

For those no longer in scrimp-and-save mode, 12.5% of those getting a refund plan a major purchase, up from 11% last year. Ten percent said they plan to use their refund for a vacation. Tax refunds are potentially massive sources of income for retailers. Last year, 238 million tax refunds were distributed, or about $426 billion.

 

 

Consumers' attitudes improved from last year, when the country was stuck in the deepest recession in 80 years.

 

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"After spending the last year paying down debt or building up a nest egg, Americans are relishing the idea of spending their tax returns," added Phil Rist, executive vice president for strategic initiatives at BIGresearch. "Consumers focused solely on essential purchases during this economic downturn, and many are ready to treat themselves to something nice for a change."

 

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