The pandemic-era pause on student-loan repayments ends this fall, and Amazon.com Inc., Walmart Inc. and Target Corp. are the retailers most exposed to the fallout on consumer spending, according to an analysis by Jefferies.
Customers who took out student loans spend nearly a fifth of their discretionary cash on Amazon
AMZN,
+1.68%
and around 12% at Walmart
WMT,
-0.16%,
the analysts said. At Target
TGT,
-0.85%,
that figure stands at around 6%. Costco Wholesale Corp.
COST,
+1.47%
and TJX Cos.
TJX,
+1.43%,
which runs TJ Maxx and Marshalls, round out the top five.
Interest on student-loan payments will resume on Sept. 1, with payments due starting in October. The pause on payments began in 2020, when COVID-19 shut down much of the economy. After multiple extensions, the payments are resuming as part of the deal to raise the U.S. debt ceiling signed by President Joe Biden earlier this month.
BofA analysts have said the return of the student-loan repayments could lead to “serious delinquencies” on other bills. JPMorgan analysts, in a note on Monday, said the restart could become a $10 billion-a-month headwind. Nearly 44 million people have federal student-loan debt in the U.S., for a total amount of nearly $1.8 trillion, according to the Education Data Initiative.
“The impending resumption of student loan payments could be a headwind to consumer spending ahead,” the Jefferies analysts said on Tuesday.
The repayments will resume on top of the inflation that has squeezed consumers for the past two years, and after pandemic-related disruptions to the economy led to a flood of stimulus cash and backups in the world’s supply chains and the war in Ukraine pushed up food costs. Wall Street analysts, for now, expect a rebound in corporate profit in the second half of the year.
Wall Street analysts also expect Amazon to swing to a profit this year, after its investment in electric-vehicle maker Rivian Automotive Inc.
RIVN,
+2.12%
drove it to a loss last year and after rising prices for essentials forced a slowdown in e-commerce demand. Analysts expect per-share profit growth for Target, with more muted sales gains, while for Walmart, they see a slight dip in per-share profit, with sales still up by the end of the year.
Shares of Amazon were up 1.2% on Tuesday. Walmart stock slipped 0.1%, while Target was 0.3% lower.
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