How Tax Refund Delays Are Impacting Sneaker Sales

IRS Headquarters
The IRS headquarters building in Washington.
J. David Ake/AP/REX/Shutterstock

For many Americans, getting their tax refunds 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 affecting certain taxpayers took a considerable chunk out of February sneaker sales.

In a first-quarter pre-announcement Thursday, Foot Locker CEO Richard Johnson said the delayed tax refunds hurt the retailer’s 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 when it reported Q4 earnings 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 refunds] 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 the past. A 2015 law requires the IRS to delay refunds on returns using these credits until February 15 at the earliest, in an attempt to combat fraud. But the IRS further cautioned taxpayers that refunds likely would not start arriving in bank accounts or on debit cards until the week of Feb. 27.

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