Mass retailers may have skirted a full-blown spending freeze this year, but trouble is looming on the horizon.

The US moratorium on student loan interest has ended as of Friday, which means 45 million consumers will face a new monthly expense come October — dollars otherwise earmarked for new clothes, vacations and other discretionary purchases.

About 62 percent of people with student loans said they will cut their budgets when payments resume after the three-year pause that began in March 2020, according to Cowen’s consumer survey conducted in June. Of these consumers, 48 percent expect to spend less on clothes, 43 percent on personal care products and 34 percent on luxury goods.

Brands and retailers have already begun to brace themselves for the potential impact. In recent weeks, Gap Inc., Burlington Coat Factory, Ulta Beauty, Foot Locker and Macy’s all pointed to the expiration of student loan forgiveness as at least a potential headwind for the rest of 2023. Foot Locker, in fact, slashed its comparable sales forecast from a 7.5 to 9 percent decline to a 9 to 10 percent.

“The expiration of student loan forgiveness beginning in October, higher interest rate levels, and lower new job creation are all new pressures on the consumer,” Macy’s chief operating officer Adrian Mitchell said in an earnings call on Aug. 22. “It is still unknown how consumers will respond to them, especially after so many months of increased pressures.”

So far this year, consumer spending has remained resilient despite concerns of a possible recession. In July, US retail sales unexpectedly rose 0.7 percent from June amid cooling but persistent inflation. By comparison, in the UK and Europe, sales decelerated in June, the latest data shows.

But, economists say American consumer spending is bound to slow down more significantly at some point in the future, not only because student loan payments will resume this fall but also due to the accumulation of other forms of debt. Americans have racked up more than $1 trillion in credit card debt as of the second quarter of 2023, according to data from the Federal Reserve Bank of New York.

As shoppers cut back, the most vulnerable retailers will be those in the middle of the market in terms of price and lacking a distinct product offering. Case in point, Macy’s and Foot Locker are particularly wary of consumer pressures because, as multi-brand retailers, they compete with a number of similar stores as well as the brands they stock.

Both mall chains, however, already have been struggling in recent months while top players like Lululemon and TJX continue to thrive. From $100 leggings to $10 T-shirts, the key to surviving the ups and downs of economic trends comes down to how value is conveyed. Lululemon sees enduring demand for its pricey workout gear because of its unparalleled quality. TJMaxx and Marshalls, on the other hand, offer consumers a bargain but also an exciting shopping experience — one that changes every week as products quickly turn over.

By providing a differentiated product, price, experience or some combination of the three, retailers stand a chance to weather the return of student loan payments and perhaps even a spending turndown at large.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Tremaine Emory exits Supreme, alleging ‘systematic racism’. Emory’s decision to leave Supreme centred around management’s “inability to communicate” with him about the “cancellation” of a long-planned fashion collaboration with major Black American artist Arthur Jafa, according to his resignation letter, seen by BoF. Emory was Supreme’s first-ever creative director.

François-Henri Pinault nears $7 billion deal for CAA. The French billionaire sees the talent agency as a way to invest in the value of celebrities and may be able to use some of the Hollywood talent giant’s famous faces to bolster luxury group Kering.

Brunello Cucinelli lifts full-year sales guidance once again. This was the Italian luxury group’s third increase this year, after posting a 31.9 percent jump in net profit for the first half of the year.

Lululemon raises sales forecast for the second time on buoyant demand. The company now expects full-year 2023 revenue between $9.51 billion and $9.570 billion, compared with its prior estimate of $9.44 billion to $9.51 billion.

Lanvin Group ekes out growth in the first half. The company grew revenue 6.4 percent to €215 million ($235 million) in the first half of the year, dragged down by a 10.8 percent dip at its namesake brand Lanvin. Its loss for the period was €61.5 million.

Paris Fashion Week to include guest shows by Marni and Peter Do; Carven’s comeback. Mugler and Maison Margiela are also returning to the womenswear calendar after years of online shows and events during the menswear season.

Superdry reports annual loss after UK’s FCA temporarily suspended its shares. The company reported an adjusted pretax loss of £21.7 million ($27.46 million) for the year ended April 29, compared with a profit of £21.6 million. Superdry had previously delayed its annual results and requested the suspension of trading in its shares.

US states asked the SEC to check if Shein complies with forced labour rules. Republican attorneys general from 16 US states sent a letter urging the SEC to ensure that Shein and other foreign companies listed on US exchanges verify that they comply with US laws that prohibit imports made with any forced labour.

Temu-owner PDD soars after strong sales defy Chinese gloom. The company saw its revenue rise stronger than expected, by 66 percent. Its US-traded shares climbed 17 percent after the e-commerce platform reported revenue of 52.3 billion yuan ($7.2 billion) in the June quarter, beating the average analyst’s estimate of 43.3 billion yuan. Net income increased a faster-than-projected 47 percent.

Mike Ashley’s Frasers raises stake in Boohoo. The British sportswear group raised its stake in online fashion seller to 9.1 percent from 7.8 percent; a regulatory filing showed on Thursday.

Forward Fashion Holdings sees sales rise in Macau and Hong Kong, but fall in mainland China. The Chinese luxury group generated HKD 505.4 million ($64.4 million) in the six months ended June 30, calling the period “challenging.”

Hong Kong’s July retail sales are up 16.5 percent, boosted by tourism revival. Sales increased to HK $33 billion ($4.21 billion). That compared with a revised 19.5 percent rise in June and 18.5 percent growth in May.

US economic growth trimmed but retains underlying momentum. The US economy grew at a slightly less brisk pace than initially thought in the second quarter as businesses liquidated inventory, but momentum appears to have picked up early this quarter as a tight labour market underpins consumer spending.

UK retailer Next ups stake in Reiss as Warburg Pincus exits. The company increased its stake in the upmarket fashion chain to 72 percent from 51 percent, after the retailer teamed up with the Reiss family to buy Warburg Pincus’s shares for £128 million ($162 million). Following the latest deal, the Reiss family’s holding will rise to 22 percent, and the management team will hold 6 percent.

THE BUSINESS OF BEAUTY

E.l.f. acquires Naturium in a $355 million bet on skin care. The beauty company reported its 18th consecutive quarter of sales growth and raised its fiscal sales outlook. Naturium is expected to hit $90 million in net sales and $17 million in adjusted earnings before interest, taxes, depreciation and amortisation in 2023.

Kylie Jenner is considering buying back Coty’s $600 million stake in her makeup brand. According to Coty, makeup sales at Kylie Cosmetics grew by double-digit percentage in the prior quarter, boosted by a larger presence in Macy’s Inc. stores, entry into the Dubai market and the release of new Kylash mascara.

Brazil’s Natura mulls sale of The Body Shop. The potential move comes after the Brazilian company in April agreed to sell its luxury brand Aesop to French cosmetics group L’Oréal at an enterprise value of $2.53 billion.

J&J lowers annual profit outlook after Kenvue separation. Adjusted earnings per share will rise from 12 percent to 13 percent this year; the company said, up from the earlier forecast that topped out at a 6.5 percent increase. The shares rose 0.3 percent.

Revolution Beauty appoints Walgreens vice president as new CEO. The appointee Lauren Brindley replaces Bob Holt, who stepped down in July as part of a settlement with its top shareholder and online fashion retailer Boohoo, which had called for better management.

PEOPLE

Gucci names Alessio Vannetti chief brand officer. The move comes ahead of new designer Sabato de Sarno’s high-stakes debut at Milan Fashion Week. US-based Gucci marketing veteran Susan Chokachi is set to exit the brand.

Theory taps Chloé executive as new Europe CEO. Marco Gentile’s appointment comes during an expansion of Theory’s UK footprint. He will be based out of the brand’s London office on Regent Street, where it recently opened a joint store with Uniqlo, also owned by Fast Retailing.

Fast Retailing names new Uniqlo COO as it grooms next leaders. Daisuke Tsukagoshi, Fast Retailing Co.’s global business head, begins his new role Sept. 1.

MEDIA AND TECHNOLOGY

Amazon, Shopify strike deal to open Amazon logistics to sellers. The programme started Wednesday for invited Shopify sellers, and will roll out to all Shopify merchants who want to use Amazon’s logistics network by the end of September.

Indian billionaire Ambani’s Reliance Retail is in talks to raise $2.5 billion. The target fundraise of $2.5 billion is part of a combined $3.5 billion target the firm has set for itself, a part of which — $1 billion — came from Qatar Investment Authority (QIA) and was announced last month.

Afterpay pulls out as sponsor of Australian Fashion Week. The move could place many designers, whose fees were waived following Afterpay’s sponsorship announcement, in limbo for the 2024 season.

Compiled by Sarah Elson.