How Tax Refund Delays Are Impacting Sneaker Sales

Riley Jones

For many Americans, getting their tax returns back means a chance to make purchases they’ve been mulling over, often leading to a spike in first-quarter footwear sales. But according to some retailers, a new law that affects low-income taxpayers took a considerable chunk out of February sneaker sales.

In Foot Locker’s Q1 earnings report Thursday, CEO Richard Johnson said that the delayed tax returns impacted sales, specifically around the NBA All-Star Game.

“We believe the delay in the issuance of the vast majority of income tax refund checks until after the NBA All-Star Game significantly affected our February comparable store sales,” Johnson said. “March sales rebounded well, up high single digits; however, the strength we experienced once income tax refund checks started flowing into our customers’ hands did not fully offset the slow start to the quarter.”

Retailer Finish Line echoed these concerns during its Q4 earnings report in March. “February sales were severely impacted by the IRS’ decision to delay income tax refunds compared with last year,” said Ed Wilhelm, Finish Line chief financial officer. “We did not begin to see a meaningful sales lift until February 22 which was a couple of days before the end of our fiscal year.”

Our comp performance reflects [a delay in tax returns] combined with our continued work to reduce the penetration of soft goods to a smaller, more profitable percentage of our overall mix,” added Sam Sato, Finish Line CEO.

The delay in question is related to the Earned Income and Additional Child tax credits, which are under closer scrutiny this year than in years prior. A law passed in 2015 requires the IRS to delay refunds using these credits — which are traditionally issued in January — until February 15 at the earliest in attempt to combat fraud.

But this year’s returns were pushed back even further to February 27, which, according to the IRS, was done to “ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent tax fraud.”

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