The ongoing back-to-school season serves as a significant test for the retail sector amidst pressure on consumer discretionary spending.

A recent survey conducted by Jefferies among nearly 600 U.S. consumers with children in school or college revealed that this year’s back-to-school shopping is expected to witness increased spending compared to the previous year. Consumers are particularly focusing on categories such as apparel, school/office supplies, and accessories, while private label products continue to gain attention.

Nearly half of U.S. consumers plan to spend more this back-to-school season, with around 70% attributing their increased spending to inflation. According to Jefferies analyst Randal Konik, higher-income consumers show more willingness to spend, which bodes well for Nordstrom (JWN) due to its affluent customer base.

With inflation driving consumers toward private label options, value retailers with strong private label offerings like Walmart (NYSE:WMT), Target (TGT), Costco (COST), and Dollar General (DG) are expected to benefit. Private label share gains are also notable in the food sector, as cost-conscious consumers seek out cheaper alternatives. Jefferies recommends food brands that operate in categories with less exposure to private label, have strong brand equity, and offer better relative volume growth potential, such as Mondelez International (MDLZ), BellRing Brands (BRBR), and Hostess Brands (TWNK).

The trend of consumers seeking deep value is also expected to benefit off-price retailers like TJX Companies (TJX), Ross Stores (ROST), and Burlington Stores (BURL). According to the Jefferies survey, approximately 70% of respondents plan to increase their spending at value retailers, with all three off-price retailers ranking among the top 5 choices.

When it comes to the big winners in the back-to-school season, Jefferies identifies Amazon (AMZN) and Walmart (WMT) as well-positioned to gain market share. Interestingly, 31% of survey respondents named Walmart as their top destination. Jefferies also highlights the potential of Target (TGT), Five Below (FIVE), American Eagle Outfitters (AEO), and Abercrombie & Fitch (ANF) amid macroeconomic pressures.

Noteworthy earnings calls from retailers, such as Shoe Carnival (SCVL), Campbell Soup (CPB), and Academy and Sports Outdoor (ASO), have also mentioned the spending trends related to private label products.